This report aims in exploring the operations strategy in two companies that contrast in their operating nature, yet have the same goal to achieve an efficient operations strategy plan. Their practices will be investigated and analyzed to learn how their competitive factors are met or exceeded through their operations management.
One of the companies that will be discussed is Dell, which is a prominent hardware manufacturer. Dell specializes in producing quality personal computers (PCs) under a low cost. This is mainly done by managing its unique supply chain. Today, Dell faces a rising number of rivalries from other vendors.
The other company is Disney Theme Parks, a business element under The Walt Disney Company. They are a massive customer service provider that has been around for centuries. This results in strong brand recognition and devoted customers. However, like Dell, they also tackle various challenges from its own competitors and the evolution of today's technology.
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"Listen. Learn. Deliver." is the slogan Dell uses to describe themselves in their official website (Dell, 2010). Michael Dell founded Dell in 1984 with only US$1,000 as capital (Strategic Direction, 2005). Dell's ingenious idea has been implemented to present - directly selling computer systems to customers to save costs and increase customer satisfaction.
As a top manufacturing company, Dell has 5.4 million customers, shipping 110,000 systems to 180 countries daily (Dell, 2010), with high targets like, producing 2,350 desktops hourly (Kanellos, M. 2004). Evidently, Dell has a vast output volume. Customers can request for systems customization, like a certain colour. Thus, Dell has a medium quantity in varying their products. Variation in demand is also medium because computers are not classified as seasonal products, although some would argue that when the school year starts, students tend to purchase new laptops. Also, between Thanksgiving and New Year, Dell's sales usually rise up. Like in 2009, it multiplied by seven, with one million requests for custom specifications (Glick, 2010). Dell forecasts and targets the demands in market by keeping a solid, advanced database which holds purchasing patterns and budget cycle of each customer (Byrnes, 2003). Dell assembles its systems in ten manufacturing plants worldwide, obscured from customers, so the visibility of production is low.
The Walt Disney Company is a family company that commits in delivering exceptional entertainment experiences from unique imaginations and storytelling (Disney, 2010). Their theme parks are still the most visited since their introduction in 1952. Today, there are five resort locations including eleven theme parks on three different continents globally. These parks are family-oriented, with enjoyable rides, shows, activities and more. People experiences thrills and excitement from the entertainment, hence, the visibility is high. According to 2009 theme park attendance report issued by The Themed Entertainment Association with AECOM Economics, Disney Theme Parks dominated the top 5 spots of the list (Rubin, J. 2010) with Magic Kingdom in America on the top with 17,233,000 visitors. As of February 2010, Disney had US$11 billion in sales (Kostelas, 2010). Noticeably, Disney Theme Parks have a massive volume of output.
Despite the figures, the services supplied are basically similar throughout the years. The company tries to diverge the themes, but the variety is still low as it is not enough. Theme parks are seasonal; they are the busiest during Christmas Day through New Year's Day. Others include Thanksgiving weekend, spring and summer breaks. During these peak times, 92,000 people can turn up daily (Sehlinger, B. & Testa, L. 2010). Thus, Disney's Theme Parks possess high fluctuations in demands.
How a company can succeed and hold a strong position in the market, along with getting customers' loyalty, is by understanding the requirements of its markets, and to satisfy them. This helps in its operations management, which involves the classifications and synchronization of the company's order winners (OW) and qualifiers (OQ), competitive advantages and constraints (Jones, P. & Robinson, P. 2009). At Dell, meetings called Master Sales Plan (MSP/MPP) is done monthly especially for this (Byrnes, 2003).
Dell's OW are price and quality. These factors bring profits, while its OQ are the ones that are "above a particular level just to be considered by the customers" (Slack, N., Chambers, S. & Johnston, R. 2004, p.72). Dell's are range and dependability. Five years ago, Dell was resilient from intimidation by competitors, such as Hewlett-Packard. Dell knew how to deal and co-exist with the competitors (Strategic Direction, 2005). However, the dilemmas increased, mainly from Apple. CNN reported (Elmer-DeWitt, P. 2010) in August 2010, with a research firm called Student Monitor (Student Monitor, 2010), and founded that in 2005, Dell had 47% students purchasing Dell laptops. Five years later, in 2010, Dell swapped places with Apple, who now dominates with exactly 47% student customers. Dell experienced a staggering decrease to 12%.
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Disney Theme Parks' OW are quality, originality, comfort, accessibility and reliability. Its OQ include price, speed, customization, location and safety. Disney Theme Parks are still strong because they have achieved a distinctive niche that obviously holds a huge number of loyal customers. Although competitions slowly emerge, Disney remains invincible. This is proven by the figures that were mentioned before confirming Disney's Theme Parks are the most visited. The authenticity of Disney such as in its cartoon characters and shows contributed significantly to this success. Nevertheless, Disney should beware of the new Harry Potter and The Forbidden Journey Theme Park in Florida, which was opened in early 2010. It was awarded' The Best New Attraction for 2010' by Theme Park Insider (Theme Park Insider, 2010). This new attraction is also family-oriented, therefore, a perfect competitor of Disney. It has been forecasted that it can lure people out of Disneyland (Nick, S. 2010).
The core reason for Dell's success is in the management of its supply chain. Dell uses Just-in-Time (JIT) model, famously known as Direct Model. It cuts intermediaries, or the 'middle man' between the manufacturer and the customers. It encourages direct contact with the customers and reduces all costs. These are substantial because they bring revenues to the business. By maintaining direct contact with the customers, they have the opportunity to requests for customization, such as a certain memory size (Jones, P. & Robinson, P. 2009). They can also communicate directly for some feedback by phone calls and the Internet. Once an order is received, Dell systems automatically contact its suppliers, who immediately ships the components needed (Accenture, 2010).
"Dell created a tightly-aligned business model that enabled it to manage away the need for its component inventories" (Byrnes, 2003). Reducing inventories has always been Dell's vision. According to Holzner (2005), Dell's three golden rules in business are: "disdain inventory, listen to the customer, never sell indirect. Note that disdaining inventory is number one." (Holzner, 2005, p. 87). Zero inventories means that unnecessary cost is eschewed, like the overheads cost in storing, the space available, number of systems stockpiled and the likelihood of price rises (McLaney & Atrill, 2010). The cost saved will increase cash on the balance sheet that is to be allocated to shareholders (Holzner, 2005). Dell ensures that it maintains a good relationship with its suppliers, whom Dell advises to warehouse inventories as close to its factories as possible. It is vital that once the components arrived in any plant, they are immediately unloaded onto the assembly line. Dell assemblies their products in a standard manner and the processes are repetitive, sequential and predictable. The components circulate the plant by a web of conveyor belts and are automatically assembled by machines. In completion, Dell's employees will finalize every system. The process takes four to six hours, from the moment the components arrived to when the completed systems are passed to a shipping company (Kanellos, 2004). This process is called mass/line production, and it fits Dell production process as it involves a massive number of products, with a low level of variety. Accordingly, Dell manufacturing plants are designed with 'product layout'. Although some variants can be introduced, the whole process remains consistent and the variants do not affect the process generally. Hence the synchronization of all the components in the assembly line is maintained (Jones, P. & Robinson, P. 2009).
Dell leans majorly towards demand management in handling capacity because of its JIT model. Dell manages demand by selling what they already have (Byrnes, 2003). This is done by only assembling systems that have been ordered by customers. Dell also offers a different type of product to the customer that carries a cheaper overhead cost. One example is offering a flat-screen monitor instead of the large cathode-ray-tube (CRT) ones with about a similar price (Stank & Mentzer, 2007). Dell encourages standardization in producing its products to save costs. Consequently, Dell saved US$38 million just by standardization (Glick, 2010). Additionally, 'chase demand' is chosen as a secondary tactic. This is mainly because Dell wants to reduce its inventories thus they change prices weekly. Dell usually holds about three to four days of inventory, whilst other competitors can hold theirs up to thirty days (Accenture, 2010). According to AMR Supply Chain Top 25 list for 2010, Dell is on the fifth spot. However, this is a downgrade for Dell as it came in second in 2009 (Friscia et al. 2009). The main reason for this is the growing intensity of competition in the PC market, which results in Dell losing revenues (O'Marah & Hofman, 2010).
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John Lund, Senior Vice President of the supply management in Walt Disney defines supply chains as "the flow of material, information, and currency between our suppliers and our guests." (Kostelas, 2010). Several supply chains supports various elements in Disney Theme Parks, like costumes, food and drinks, merchandising and shows. They are on-site warehousing to support food and maintenance supplies, linked to other supply chains such as merchandising from Disney Stores. Certain items are replenished daily, like food (Miller, 2002). All these are invisible to the guests to support Disneyland's concept - "Where Dreams Come True". This means that everything is planned and prepared before each day starts. Disney implements a 'demand-driven excellence' model for its supply chain. (Friscia et al. 2009). Their prime focus is to achieve a balance in all its supply chains to operate efficiently. Lund added that a good communication skill is the key element for a successful supply chain (Kostelas, 2010).
Disney practices 'chase demand' in planning and managing its capacity and demands. This is supported by FastPassâ„¢ and e-rides in the parks. FastPassâ„¢ allocates a time slot for guests when less wait are required and let them come back at the designated time. Waiting is more organized and customers can explore other parts of the park. They also have 'Magic Kingdom E-Rides Nights' which is especially for guests accommodating at Disney's hotels or resorts. It comes with a fee but helpful since guests can have the chance to enjoy the rides that were crowded during the day (Cope, Cope & Davis, 2008). Disney also had the idea of adding attractions, but this is unreasonable as it is expensive and time-consuming. The customer processing is classified as 'service shop' because there is a fusion between people and equipment. Both are equally used in Disney's Theme Parks to help interact with customers to enjoy their visit comfortably (Jones, P. & Robinson, P. 2009). All the techniques used by Disney Theme Parks are mainly to fit customers' demand, allowing customers to get into the system and participate. This differs from Dell, where the demand management plan is more likely to control the customers.
Disney Theme Parks are designed with themes inspired by Disney characters, which aims to create an ambience of a different dimension, or in a 'dream' as the concept suggests (Trigg & Trigg, 1995). The rides, shows, cast members, merchandising and attractions are all harmonized and strategically-located (Wylson, 1994) to encourage the 'feel'. It has a 'process/functional layout' as the parks are divided into different segments, carrying their own theme, yet have a similar goal and services.
Due to the constant contact with customers, Dell's employees must have a fast response time to attend to requests. They must be attentive, flexible and experts in the field. They are motivated with ceaseless credit and bonuses for their accomplishment. The best receives a letter and movie passes from the founder himself. Meritocracy is an organizational culture in Dell so every accomplished job is rewarded (Dell, 2010). According to an interview by Stewart and O'Brien (2005) with Michael Dell, the employees are aware of high expectations, teamwork and tight disciplines. Those who get the inventory count low get rewarded. Dell believes in continuous training and presentations to improve their employees' managerial talent. Dell found out that those who were involved in the corporate coaching program is more inclined to get a promotion (Brawley, 2007). Because of the critical prospect Dell requires, they specify whom they want and how far they can be trained. Today, Dell has 96,000 employees (Hoovers, 2010). Since Dell always saves costs, they practice e-HR which uses less human resources, yet increases benefit. Dell first started e-HR in 1996, and saved about US$2.5 million (Lengnick-Hall & Moritz, 2003). A benefits package is also offered that helps to manage the employees' health and financial needs. Other than meritocracy, Dell also practices direct relationship where the employees are free to voice out their opinions, for example, through 'Tell Dell', and empowerment to help boost the employees' confidence with their skills (Dell, 2010).
Dell's plant workers are on a 10-hr shift on weekdays, but a surprising 12-hr on weekends (Kanellos, 2004). The working condition in a manufacturing plant is always fast and hectic, thus, mishaps happen. June (2009) reported that the situation in Dell's plants in China, Meitai factory, is appalling as the workers are underpaid, worked overtimes, starved, and accommodated in a terrible condition. This also happened in Foxconn, where 11 suicides were recorded due to depression and dissatisfaction (Wilson, 2010).
Employees are Disney's valued assets. Since 1986, Disney runs their Spirit of Disneyland Awards Programme periodically where about fifty employees are rewarded, presented with a silver castle fixed on their nametag and a certificate. Whoever wins thrice receives a gold castle and gets vacation experiences at The Walt Disney World Resort and onboard Disney Cruise Line ships as prizes (Miller, 1997). These are not just a matter of rewarding, but also a way of motivation. Disney offers training sessions (Johannes, 2005) that help employees boost their talent in customer-relation, teamwork and such to increase empowerment (Anh & Kleiner, 2005). Disney organizes its workforce efficiently. Every employee acts as 'cast members', and puts on a 'show' whenever at work. They have the roles of different Disney characters, to create the ambience of another world. All these add to magic and diversity. Cast members have direct contact with customers so thorough training called Traditions Class is necessary, where employees are transferred to various locations for on-site training.
However, Disney's ergonomics can be stressful. For example, during winter the weather is obviously grim and they are still required to dress up as their respective character. Although several attempts like placing woodburning fireplaces have been made, the issue still rises (Trigg & Trigg, 1995).
Being in the IT industry where rapid evolution occurs, innovation is crucial in Dell. Dell's Research and Development (R&D) is powered by a team of leading product designers and engineers. Its mission is to innovate solutions which is cost-effective, yet efficient in co-existing with others. It has constant interaction with the customers and media by holding social events and panels (Maltoni, 2007) to get advices on improvement (Williams & Tapscott, 2007). Dell works with customers like partners (McDonald, 2007). Dell collaborates with Texas University in holding Dell Social Innovation Competition annually to inspire more designers. This is beneficial to Dell as they can find new innovations (RGK, 2010). Dell spends US$600 million a year for its R&D team, and for every dollar, they expect US$6 in return. Although this is less compared to a rival, Sony, who finances US$1 billion, they only get US$200 million in profits. Dell only innovate products that customers would be interested in to buy, rather than risk in exaggerating it (Steward & O'Brien, 2005).
Dell is committed in using green technology. Dell won the InfoWorld Green 15 Awards in 2010, for increasing productivity in innovation whilst reducing environmental problems (Samson, 2010). Some of these included Inspiron 531 desktops and Latitude D630 laptops. Dell modifies their packaging to focus on using less. They predicted that by 2012, £20 million would be saved (Dell, 2010). To encourage modifications, customers can customized their systems. (Williams & Tapscott, 2007). The most recent product by Dell is a combination of a netbook and tablet called Inspiron Duo. However Westaway (2010) reviewed that it is inferior to Apple's iPad despite the innovative design. Dell mostly does modification and extension, and seldom pioneering, though they are experimenting with mobile phones, releasing their own called Dell Venue Pros. Unfortunately, Dell is struggling with its sales (Goldman, 2010).
Innovation is also critical in Disney Theme Parks to keep alive with new and safe entertainments. Disney's innovation team is called Walt Disney Imagineering. They are responsible in revolutionizing new features, like 3-dimensional artworks and interactive playgrounds for children (Frontodo, 2010). The designers must be imaginative and creative to maintain Disney's vision to build dreams for their guests, and to preserve the concept of family-orientation in their designs. Disney pioneers rides such as Space Mountain to add varieties (Norton & Pine, 2009). Disney also cooperate with Verizon, a large communication company, to provide a mobile phone application which helps customers obtain parks' information, like location, shows, restaurants and even find out times when a certain ride is less crowded. This innovative approach is useful as customers can get lost in a big park. Furthermore it helps with handling capacity in the parks (Jablon, 2008). Another example is the fingerprint technology. Its objective is to prevent ticket fraud by recording customers' profile (Bogatin, 2006).
Referring to Professor David Garvin's five approaches of quality (1984), Dell practices value-based and product-based because of its business model. Dell aims to produce products that satisfy customers under a lower cost. This caused Dell to exaggerate in restricting its cost which led to neglects in other areas like customer satisfaction and product quality (Lee, 2005). This resulted in Dell losing US$8 billion from US$61 billion in fiscal 2008 (Veverka, 2010). When Michael Dell regained his position as CEO in 2007, he announced that Dell is shifting to user-based approach to concentrate on a better service to customers, with top-notch consultants and employees. Dell reported to get a lower rate of sales from individual customers (Goldman, 2010). According to Readers' Choice Awards 2010 for laptops, Dell sits on the 10th spot but with an overall score that is much lower than average (PCMag, 2010). Before each product is passed to the shipping company from the plant, Quality Inspection (QI) is run by a couple of Dell employees to ensure that it is ready. Dell provides many kinds of direct communication with customers to aid them with technical problems, such as online chat and forums. Furthermore, Dell is registered to International Organization for Standardization (ISO), or specifically, Quality Management System (ISO 9001) to increase quality evaluation (Dell, 2010).
As a service provider, Disney Theme Parks are dedicated in fulfilling their customers' needs. Therefore, they use user-based approach to quality. The most valuable resource of the parks is showmanship. As explained before, cast members are well-trained and properly-inspected. They have to be hygienic, for example, male cast members are prohibited from wearing earrings and unshaven (Paton, 1997). Customers must be treated as 'guests'. Other than the atmosphere, customers perceive the parks in terms of how they were treated. It is vital that customers must have a positive experience throughout their visit so they will come again. Disney focuses in impressing the secondary customers, like children (Gallo, 2009), who is a major influence in purchasing. Disney controls the quality of its theme parks by continual monitoring and intensive inspection, as well as through Quality Assurance (QA), for example, Permanent Amusement Ride Safety Law in California (Disney, 2010). In maintaining quality, Disney also met its other competitive factors such as comfort, accessibility and reliability.
Dell is focused on cutting costs by being a low cost provider, and simultaneously supports a business strategy that emphasizes on customer service. Just from the supply chain, they have met their OQ. However, as mentioned before, Dell limited their spending unduly which diminished quality. Dell has achieved prize from its OWs, but is behind on quality. Dell is aware of the situation, and is revamping their company by polishing their customer service. This also adds dependability and reliability (Veverka, 2010). Dell also needs to explore more depth in the industry to innovate better and add varieties, to avoid falling behind (Lee, 2005).
Disney's main focus has always been customer-relation. Understandably, their OW are more dedicated to serving customers' needs, such as increasing comfort, accessibility and reliability for example, all theme parks are equipped with babies' changing rooms, wheelchairs and first-aids. Disney Theme Parks' originality in creating ambience has always contributed to quality. There are complaints regarding the price (Peveteaux, 2010), but it is arguably relevant for the quality, so it is just standard. This includes range of services and speed, as waiting is inevitable at peak times. This is followed by parks location and safety rate.
Both companies are strong with their own fortes and flaws, despite being in a challenging industry. Disney uses tactics such as discounts and promotions for example cheaper hotel's rate and free dining provided the customers chose one of Disney's resorts or hotels, to attract customers and for them to survive the recession in 2009 (Garcia, 2010). Disney must keep in mind that they cannot depend on their brand forever. Like Dell, more innovations are expected to stay sturdy and winning. Dell's revenue is strong; an increase is expected for fiscal 2011 from 14% to 19% from the previous year (Meng, 2010). Dell is reaching the media for advertising, such as Twitter where Dell acquired US$3 million from its 600,000 followers in just two years (Dillow, 2009). It is believed that both companies can succeed more if they are more innovative. They will always be around in their own respective industry, but that is not enough if their main vision is to win.
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