Operations and Logistics Management of Boarding House Bakery - Case Study Example

OPERATIONS AND LOGISTICS MANAGEMENT Outline: Introduction Corporate strategy and operations strategy Process types and layout design of the bakery Facility design Capacity of the bakery Process design Operations and logistics management Introduction Boarding House Bakery in Ohio is a medium-size enterprise, which makes multi-profile bakery to order. The custom bakery was founded in 1998 by William Harries, who has been at its head for twelve years. Boarding House Bakery has a broad range of items, as it includes bread, desserts, waffles, wedding cakes, pies, cake-breads, puff crackers, cookies, salt-and-sugar crackers, chous etc. Massillon bakery is a trade-marked article of the bakery. Considering current range of customers, it is oriented on the local market and such events as weddings, birthday parties, business meetings, banquets and conferences. Corporate Strategy and Operations Strategy The bakery is located in a large two-stored building with office and industrial premises. The premises cover bakery shop with full production line, a warehouse, a big chilled food storage space, a garage and an industrial site. It employs 50 full-time bakery employees and technical staff such as bakers, confectioners, baking apprentices, shop assistants, engineers, drivers, bakery managers and office staff. Corporate strategy of the enterprise is built upon the following principles: to increase sales and variety of products in accordance with customers’ demands; to meet requirements of Baking Industry Sanitation Standard Committee and safety standards for bakery equipment under OSHA; to involve technical/managerial innovations for welfare of the company and its employees. Boarding House Bakery consists of bakery production line, bakery shop, storage department, sales & marketing department, management and technical departments. Success of the enterprise operations strategy depends on coordinated work and control of all departments and observance of the corporate strategy. For the custom bakery this is “a pattern of choices concerning the operations objectives and the main lines of the operations processes, their interrelationships, their technical infrastructure, and their control systems.” (Akkermans 1992, p. 6) To strengthen efficiency of the strategy special network of cooperation between the departments was created. There is a continuous interdepartmental information exchange, all violations of safety standards, cases of damages and rearrangements are being reported and introduced in the company’s database. In the evening and at the end of every week head of the departments provide Board of Directors with a brief activity report, which contains the work results, recommendations for improvement or requests for raw materials (flour, oil, bakery ingredients). It allows the director to keep production process over control and quickly amend the work of any department, if necessary. High mobility is one of basic requirements of efficient operations strategy and logistics in bakery business. In this case, labor-intensive manual handling can hardly be avoided. Therefore the warehouse and production line are equipped with handling and stock equipment, which meets standards of pick-by-light distribution system, characterized by Peltomaki (2010). This system facilitates work of loaders, crane operator and staff of warehouse, because it consists of innovative pick-and-place loaders and robots, easy-to-use containers and crates of wood and plastic. Containers are clearly marked and located in accordance with a definite principle to accelerate their handling and delivery. “Traditional distribution methods in bakeries are forming a bottleneck to increased production. The physically demanding and repetitive nature of bakery distribution work, along with its unsocial hours, often result in difficulties in recruiting staff and unacceptably high picking errors” (Peltomaki 2010). Thus, the newly introduced distribution system is cost-efficient and strengthens the operations strategy of the bakery. Process Types and Layout Design of the Bakery The bakery departments work without fail and in accordance with an operation plan. For a long time Boarding House Bakery has been successfully working only on the local market, but managerial and technical innovations allow broadening sphere of influence. Range of baked goods is large that affects the production line and number/variety of processes. Standard bakery line consists of such processes as “preparation of ingredients, dough mixing, bulk fermentation, dividing, rounding, moulding, panning, baking, cooling, slicing and packaging” (Rice 1993). Such operations as fermentation, moulding and slicing are labor intensive. On the other hand, dough mixing and baking are mostly automated; thus, one operator is enough to manage bakery equipment. Manual operations are rather monotonous, because they include carrying over, cutting, visual inspection, pressing arms and buttons. From point of view of logistics, the main purpose of bakers and shop assistants is to avoid faults and follow safety standards required. Technical staff should maintain production line and bakery equipment in proper working order and remove damages in unexpected situations. Bakery managers should coordinate work of production line and warehouse in accordance with current operation plan to prevent overloads and errors/interruptions in work. A strict balance in the work of these departments forms efficiency of the operations and marketing strategies. For example, managers of Archway Cookies, Inc. did not cope with the above balance, trying to enlarge sales volume. “Increased sales volume had created warehouse logistics problems. We needed additional storage capacity and improved order-picking efficiency. Before the addition, we were limited to approximately 500 pallets in the floor-mounted flow storage system” (Rice 1993). Thus, the rival company should follow example of Boarding House Bakery and improve its operations management as to warehouse and volume of baked goods. Facility Design The main advantage of the bakery facility design is location of the whole production line and warehouse on the first floor. Equipment for dough mixing, moulding and diving operations is very high and requires higher ceilings. As the result, there is an arch truss to the second floor, which allows installing mixing machine and hanging overhead logging, conveyer and hand chain hoists. Office area covers the whole second floor. 80% of production line is situated along the walls of a big hall. A close arrangement of the bakery equipment saves occupied industrial area. Besides, it shortens manual and automatic operations that are especially important for pick-by-light distribution system and organizational management in the warehouse. Packaging and delivery of baked goods to the warehouse is the key point in logistic management of the enterprise. Bakery managers suggested introducing an innovative solution of Cimcorp for similar enterprises. As it stated by Peltomaki (2010), the main purpose of Multi-Pick system is to minimize labor costs and provide with full real-time control of the working process in the warehouse. Using Multi-Pick OPS software, it is possible to keep control over the supply chain and rearrange storage area according to the current plan. Robot loaders and inspection devices perform all operations of picking and dispatch. All crates are marked and located in the order specified by the software operator. “The robot travels from storage stack to storage stack picking the required number of crates in one pick sequence, making up a full mixed stack of different products.” (Peltomaki 2010) This system is advantageous for Boarding House Bakery, because they have a large storage area and percentage of orders is steadily growing. The Board of Directors decided to introduce this innovation partially to estimate its efficiency and breakeven point. One robot loader works in the specified part of the storage area and arranges crates with three types of baked goods in the required order. Using PC with Multi-Pick OPS software, the operator keeps control over handling through delivery time windows. They show a degree of the process completion. The innovation will be examined for six months and, then, final decision will be made. Nevertheless, the system under discussion is an efficient instrument of logistic management. It allows keeping balance between the production line and warehouse. All safety and hygiene standards are strictly followed. Delivery schedule will be improved. As for facility design of the enterprise, there is a large variety of bakery equipment, which requires different technical knowledge and qualifications. The whole equipment can be separated in several groups: mixers, cutting machines, conveyer, refrigeration/heating equipment, baking ovens and material handling equipment. Dual speed mixers and front loading mixer are required for dough mixing and include the function bulk fermentation. Gauge rolls are intended to quicken manual operations of workers at the production line. Engraved moulder and cutter are located at the beginning of the line (in the truss arch) as they are very high. Different modes of moulding and cutting can be specified. Production line is provided with a broad conveyer to quicken transfer of semi-prepared and baked goods across the shop. Its speed depends on the daily operations plan and sequence of the required operations. For example, baking of bread usually excludes bulk fermentation. Packaging equipment is located at the end of the line. Paper bags, boxes and plastic bags are applied. There is a large variety of mold boxes and package forms for different kinds of baked products to preserve their intactness and eating qualities. Crackers and waffles must be packed tightly to prevent crumbling. Capacity of the Bakery Discovering capacity of the bakery through the prism of logistic management, one should pay attention at compliance of monthly and weekly working plans, reduction of labor costs, and organization of the production process. The main goal is to avoid failures and long-term delays with delivery to keep the customers’ trust. Due to forthcoming expansion of production the project of stand-by generator has been accepted, as bakery equipment may be short-circuited or damaged. The generator will provide bakery shop with emergency lightning and feed basic machines in order not to break the production process. Within the last three years average capacity of the bakery makes circa 10,000 – 12,000 units of product per shift. Thus, weekly capacity is approximately 60,000 – 75,000 units of product, as Sunday is a holiday. Monthly capacity depends on year season. For example, number of orders sharply increases on Easter, Thanksgiving Day, Christmas holidays, St. Valentine’s Day, graduations from schools, spring – summer wedding season. Besides, Boarding House Bakery regularly provides two local schools with bread, sweet cakes, pies and rolls. “Shops sell most of that days supply of bread within 24 hours. In-store bakeries also receive their supply of ingredients from the major bakery groups on a short order lead time and hold only 1-2 days stock of these inputs.” (McKinnon 2006) Thus, any break of work will result into large losses. Thus, the stand-by generator will secure the enterprise in the unexpected situation. At the same time, bakery managers developed reserve operations strategy to perform minimum daily quota (for schools, urgent orders). As for innovative solutions in this sphere, Multi-Pick software and pick-and-place distribution system significantly improve the production line. For instance, properly arranged storage area allows increasing volume of extra orders. Considering usual daily/weekly volume of baked goods, high-capacity packaging machines have they are provided with strict status of priority. Everyday orders of schools and weddings are of the highest priority. Business meetings or parties have lower priority. Process Design Steady growth of orders of Boarding House Bakery made the managers to improve operating conditions of white and blue collars. Office workers have to quicker, processing customers’ orders, entering data and executing financial documents. Newly introduced handheld computer system allows saving working time and money. Thus, their number was reduced and labor costs were saved and redirected for innovations. “The bakery discovered that the amount of data entry required was reduced significantly and virtually eradicated with the introduction of e-commerce into the supply chain.” (Robinson & Fernandez 2006, p. 7) At present e-commerce is on the agenda for the bakery under discussion, because it will broaden a range of customers and simplify ordering system. Previously Boarding House Bakery only placed advertising in the Internet, but they did not have their own website. Board of Directors is going to make an order of the website project to a local developer. Local market is highly competitive, that’s why company’s managers should accept orders via Internet, e-mail, phone or fax. “With EDI, The bakery were able to import the orders into their system automatically, this substantially reduced the number of errors and time take to process orders.” (Robinson & Fernandez 2006, p. 8) These innovative solutions and logistic methods improve inventory management among the office staff. They are being supported to participate in training programs and seminars to improve their communication skills and creative thinking. It allows bakery managers to develop efficient communication strategies and models with customers. Bibliography 1. Akkermans, H.A. & Aken, J. E. Van. 1992, ‘Process-Related Problems in Operations Strategy’, International Studies of Management & Organization, vol. 22, no. 4, pp. 6 – 12. 2. McKinnon, A. 2006, ‘Life without Trucks: the Impact of a Temporary Disruption of Road Freight Transport on a National Economy’, Journal of Business Logistics, vol. 27, no. 2, pp. 227 - 240. 3. Peltomaki, 2010, ‘Solutions for the bakery industry’, Cimcorp Corporation website: http://www.cimcorp.com/Cimcorp_and_ToolBox_forge_an_alliance_in_bakery_logistics 4. Rice, J. 1993,’ Automating bakery logistics: Keebler, Archway and Mrs Bairds offer real-life examples of successful projects’, All Business, [Online] Available at: http://www.allbusiness.com/manufacturing/food-manufacturing/388919-1.html 5. Robinson, M. & Fernandez, W. 2006, Strategic supply chain management in a large bakery. Journal of Australian National University, vol. 36, no. 2, pp. 1 – 17. 6. Simpson, L. 2005, ‘Fire-Hit Bakery Is Rising from Ashes’, The Journal, 25 April, p. 31. Read More