Operations Case Studies

Question 1

strategic role of operations management – cost leadership, good/service differentiation

Answer 1

APPLE

Partnerships with Foxconn, based in China, reduces labour costs
Foxconn is the largest contracts manufacturer (outsourcing partner) of electronics in the world and the third largest technology company by revenue, enabling the business to use its economies of scale –> as reported in New York Times, China provided more qualified engineers than the USA
Redesigned and introduced cheaper models of the iPhone

Operating system
Recently, subscription services have been developed to provide more revenue streams and strengthen customer loyalty

Decline in innovations - foldable devices from competition - Apple fell to 3rd in smartphone sales behind Samsung and Huawei

The iPhone has been marketed as a premium product and the price tag is reflective of this perception
The iPhone 5c, which differed minimally from the iPhone 5, apart from the plastic casing, was perceived poorly, and as a compromise to Apple’s commitment to quality
This distaste from consumers was visible through the poor sales

Various Apple accessories and apps are produced to be compatible with each other, creating what is known as the ‘Apple Ecosystem’

Question 2

globalisation (as an influence)

Answer 2

MCDONALD’S

McDonald’s has 39k restaurants across 100 countries
McDonald’s was ranked 10th on Forbes’ list of the most valuable brands
The Russian invasion of Ukraine forced McDonald’s to sell off its operations in Russia at a substantial loss

Question 3

technology (as an influence)

Answer 3

MCDONALD’S

McDonald’s has signed long-term contracts with delivery companies Door Dash, Deliveroo, and Uber Eats, allowing the business to become more accessible to consumers
Experimenting with automated order taking in the Drive Thru using voice-recognition and machine learning

Automated drink dispensers
Systems that extract waste heat from the kitchen air-conditioning to heat the hot water
Digital menu boards and displays that notify customers when orders are ready
Mobile ordering application
“Dynamic Yield”, a technology that suggests products

Question 4

quality expectations (as an influence)

Answer 4

APPLE

Price tag and brand image of Apple creates high quality expectations
The iPhone 5c, which differed minimally from the iPhone 5, apart from the plastic casing, was perceived poorly, and as a compromise to Apple’s commitment to quality.
This distaste from consumers was visible through the poor sales

Question 5

government policies (as an influence)

Answer 5

MCDONALD’S

Mandated by Food Standards Australia New Zealand that fast-food restaurants display calorie counts on their menu

A meat patty goes through 52 checks before arrival in a McDonald’s restaurant

Question 6

legal regulations (as an influence)

Answer 6

MCDONALD’S

Ensure sites are located in commercially zoned areas

State-based laws – Workplace Health and Safety Act 2011 (NSW)
Responsible for enforcing laws and regulations around the COVID-19 pandemic

Federal laws – Australian Consumer Law 2010 (Commonwealth)
Australian Competition and Consumer Commission (ACCC)

Question 7

environmental sustainability

Answer 7

MCDONALD’S

Committed to reducing greenhouse gas emissions to net zero by 2050
Introduction of LED lighting, energy-efficient kitchen equipment, sustainable packaging, and recycling
Support sustainable agricultural practices particularly in the production of beef –> Use of rainwater tanks, instillation of time-flow taps, and water-efficient spray guns
Committed to sourcing 100% of guest packaging from renewable, recycled, or certified sources by 2025 –> paper straws
Partnership with Ford where the husk of the coffee bean, which is unusable in coffee, is sold to Ford, where combined with other substances is moulded into car headlamp housing
Reduction in fuel consumption

Question 8

corporate social responsibility

Answer 8

MCDONALD’S

McDonald’s Australia, together with its logistics partner, Martin Brower, provided Foodbank with 100k+ meals

McDonald’s refers to the following as the 3E’s, to ensure that the materials are produced in a responsible and ethical manner
- Ethical practices
- Environmental protection
- Long-term economic viability
Verified by organisations that McDonald’s coffee production is sustainable

McLibel case

In 2020, McDonald’s Australia announced that all chicken served in its stores is certified by the RSPCA
McDonald’s Australia has been using cage-free eggs since 2017

Question 9

[inputs] - transformed resource

Answer 9

MCDONALD’s

Shift in customer preferences for healthier goods resulted in healthier goods
Negative feedback led to a change in coffee blends and processes
The McVeggie burger was removed due to lack of sales

Question 10

[inputs] - transforming resource

Answer 10

MCDONALD’S

Employs 100K+ employees
In 2021, a large portion of the $2 billion USD invested was designated for facilities and systems

Question 11

the influence of volume, variety, variation in demand and visibility (customer contact)

Answer 11

MCDONALD’S

The MyMaccas App and the self-service kiosks track volume of items sold

Has more variety than ever before

Demand varies for products (ice-cream)

Provides incentives for feedback

Question 12

[transformation processes] - technology, task design and process layout

Answer 12

MCDONALD’S

In the transformation process:
- Automatic drink dispensers
- MyMaccas app or self-serve kiosk
- McD Tech Labs - IBM - speech recognition in Drive-Thru

Question 13

[outputs] - customer service

Answer 13

MCDONALD’S

Goal of QSC&V [Quality, Service, Cleanliness & Value] for each and every customer, each and every time

Question 14

[outputs] - warranties

Answer 14

APPLE

The Australian Federal Court ordered Apple to pay $9 million in penalties for making false or misleading representations to customers with faulty iPhones and iPads about their rights under the Australian Consumer Law (ACL)

Question 15

performance objectives

Answer 15

MCDONALD’S

70% of orders are placed in the drive-thru
Create Your Taste and Gourmet Creations menu provides flexibility and customisation and was a response to Subway’s success

Question 16

new product or service design and development

Answer 16

APPLE

Spending on R&D is increasing at an increasing rate showing efforts

Question 17

supply chain management – logistics, e-commerce, global sourcing

Answer 17

APPLE

A recent report disclosed that Apple has over 750 suppliers in 31 countries. However, 97% of its supply chain is accounted for by approximately 200 suppliers, reflecting Apple’s strategy of having multiple suppliers for each component

The outbreak of Covid-19 led to factory lockdowns that delayed the release of the iPhone 12 series in 2020

The global shortage of semiconductor chips in 2021 led Apple executives to forecast a fall in production of iPhones in the fourth quarter

Question 18

outsourcing – advantages and disadvantages

Answer 18

APPLE

Foxconn
The “China-Plus-One” strategy involves the diversification of business operations beyond China

Question 19

technology – leading edge, established

Answer 19

APPLE

A Foxconn factory reported reducing its number of employees from 110,000 to 50,000 with the introduction of robotics. Considerable cost savings were achieved by the company, which has publicly announced plans to invest heavily in such technology in the near future

Question 20

inventory management – advantages and disadvantages of holding stock, LIFO (last-in-first-out), FIFO (first-in-first-out), JIT (just-in-time)

Answer 20

MCDONALD’s

Use of e-procurement –> Initially, the restaurant manager was responsible for ordering stock; a centralised system with AI is now used

Food products become obsolete in a shorter duration

Question 21

quality management

Answer 21

APPLE

Foxconn - lack of training and quality control issues. Media reports indicated that Apple returned 5 million+ iPhones to Foxconn in 2013 due to some kind of unnamed defect, with a reported cost to Foxconn of $1.6bn to cover the cost of making replacement handsets

Apple Maps was defective on launch
iPhone X’s facial recognition feature was flawed

Question 22

global factors – global sourcing, economies of scale, scanning and learning, research and development

Answer 22

MCDONALD’S

R&D centres in each major market
In 2018, McDonald’s opened a new 250million USD headquarters in Chicago, USA, to replicate any global restaurants
Executive Chef and Vice President of Culinary Innovations ensures R&D