Operations Management

SBS/ABS – MBA
Assignment – 2020
STUDENT ID

UNIT TITLE: ___________________________________________________

NAME (in Full): ___________________________________________________

GENERAL INSTRUCTIONS

● All assignments are to be submitted on 3rd September 2020 on

www.atmsstudentportal.com with the login credentials shared before.
● If assignment is not submitted on date, will follow with penalty of 10% deduction
of marks for every day.
● Similarity between students work is strictly not accepted, any student found with
similar work will be graded Zero and fail for the course. However, Plagiarism is
an academic offence and will not be tolerated.
● Any re evaluation request should come in one week of grade release. Any late
request will not be obliged. (Form and other details shall be shared based on
request)
● Any rescheduling request should come and fulfilled within two months after the
actual date of the assessment. Any late request will not be obliged.
● Assignment once submitted to exam board is final for marking.
Total 90 marks. 10 Marks for Class Participation.

GUIDELINES FOR ASSIGNMENT

1. If assignment is Question & Answer based then.

• Introduction is needed for each question.
• Question has to be answered based on the mark allotted for each question
with references if any idea or information is taken from other source.
2. If assignment is case based then,

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 • Executive summary
• Table of content
• Introduction
• Body of assignment (questions related to case need to be answered)
• Conclusion / Recommendation if any
• References (in-text + citation) to be used.

Total Marks / 90

PLAGIARISM

Plagiarism is a form of cheating, by representing someone else's work as your own or using
someone else's work (another student or author) without acknowledging it with a reference.
This is a serious breach of the Academic Regulations and will be dealt with accordingly.
Students found to have plagiarised can be excluded from the program.

Plagiarism occurs whenever you do any of the following things without acknowledging the
original source:

✓ Copy information from any source (including the study guide, books, newspapers, the
internet)
✓ Use another person's concepts or ideas
✓ Summarise or paraphrase another person's work.

How do I avoid plagiarism?

To ensure you are not plagiarising, you must acknowledge with a reference whenever you:
✓ use another person's ideas, opinions or theory
✓ include any statistics, graphs or images that have been compiled or created by another
person or organization
✓ Paraphrase another's written or spoken word.

What are the penalties?

The penalties for plagiarism are:

✓ Deduction of marks,
✓ A mark of zero for the assignment or the unit, or
✓ Exclusion from the program.
Plagiarism is dealt with on a case-by-case basis and the penalties will reflect the seriousness
of the breach.

Please note claiming that you were not aware of need to reference is no excuse.

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 Part A

Answer all the questions:

The following questions require a review of the case study cited in the article (Ho, Daniel, Nadeem,
Garza-Reyes, & Kumar, 2018).
1. Describe the importance of warehouse/ Distribution center operations management

2. Why it is crucial to solve problems that often face 3PL operations?

3. Departing from a relevant information within the article and possibly extending to other
resources of your choice, discuss the value of considering warehouses as a strategic element
within the overall supply chain management.

4. Departing from a relevant information within the article and possibly extending to other
resources of your choice, discuss the critical success factors that improve warehouse
reliability.

5. Describe the main processes of warehouse operations.

6. What are the risks/ issues and challenges often encountered in warehouse operations?

Part B
The Adoption of Lean at Nibbly Bits Bakery
Case
Author: Michael Chandler & Norman Faull
Online Pub Date: January 02, 2019 | Original Pub. Date: 2018
Subject: Employee, Industrial & Labor Relations, Operations Management, Organizational Theory
Level: Basic | Type: Direct case | Length: 4179 words
Copyright: © 2018 Graduate School of Business, University of Cape Town
Organization: Nibbly Bits Bakery | Organization size: Large
Region: Southern Africa | State:
Industry: Manufacture of food products Originally Published in:
Chandler, M. , & Faull, N. (2018). The adoption of lean at Nibbly Bits Bakery. Graduate School of
Business. Cape Town, South Africa: University of Cape Town.

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 Publisher: Graduate School of Business, University of Cape Town
DOI: http://dx.doi.org/10.4135/9781526478054 | Online ISBN: 9781526478054
Abstract

The case concerns food manufacturer Nibbly Bits, which supplies a retailer (Woolworths) with rusks
and a variety of other baked goods. Despite receiving good orders at fair prices, the company has
battled to turn a profit. In addition, a series of worker-led strikes have plagued the company, which
has led to an uncertain future. The operations department, headed by the main protagonist, Stefan
Drees, endeavours to solve the issues through implementing Lean principles in the factory despite a
lack of support from upper management. Several initiatives are implemented with varying degrees of
success.
There are two main themes that run throughout the case. Firstly, there is a strong emphasis on the
company’s employees and how Lean management practices can assist in improving a poor work
culture. Fostering an inclusive culture helps to improve productivity and employee happiness. The
second theme relates to process improvement. The production processes are described along with
interventions that the operations manager uses to make changes in line with a Lean approach to
problem-solving.
Case

It was late July 2015 and a two-week strike at Nibbly Bits Bakery had just ended with both
management and the employees feeling battered by the experience. This was becoming an annual
event and Stephan Drees, operations manager, sat in his office feeling completely exhausted. He was
responsible for the negotiations and had proposed a wage increase across the board in line with CPI 1
inflation. The union was supported by around 70% of the employees and had demanded an increase of
double the amount on offer, citing that the employees were being paid below the industry average.
The truth of the matter was that the strike was not only about the money, it was also symptomatic of
other softer issues such as the attitude from management that affected the employees daily. However,
these were somewhat difficult to accommodate as a part of the wage talks.

Negotiations between Stephan and the union representative had broken down as neither side was
willing to budge significantly from their position. A general strike was called, which resulted in the
loss of 16 days of production, translating to approximately 120,000 boxes of rusks and other baked
goods. The employees lost out on wages and there was intimidation of the workforce who did not
choose to participate in the strike action. Ultimately neither side gained much after a slightly revised
offer was tabled and accepted after the workers ran short on money and lost faith in the ability of their
union representative to handle the matter. Stephan knew that everything was not well in the company
operations. He was aware that both he as well as his direct report Bernd Strauss, production manager,
had something of a reputation in the factory. They were actively disliked by the shop floor employees.
Labour unrest on its own was bad enough, but the company was also facing major challenges
elsewhere. For the last few years Nibbly Bits had not been able to turn a profit. The operations
department was characterized by excessive costs, mediocre productivity, and continuous metaphorical
firefighting. The gross margin was in line with industry figures; however, high staff turnover, training
costs, inefficient production, and discarded product greatly impacted the finances. The future of the
company was threatened and something needed to change.

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 1. The Company

Nibbly Bits was an industrial bakery based in Wellington, a small town in the heart of the Cape
Winelands District of South Africa. The company functioned as a white-label manufacturer with a
longstanding contract to supply Woolworths (a major South African food and clothing retail chain)
with a range of handmade 2 premium rusks and other baked goods.

The company was founded in 1996 by Pieter Haasbroek who had previously worked for Sasko, a
large commercial bakery that manufactures more than a million loaves of bread a day. Sasko had been
approached by Woolworths to bake their range of rusks but had declined based on the small quantities
requested at the time. After retiring from Sasko, Pieter seized the opportunity and started Nibbly Bits
in a small space that Sasko allocated to him within the Sasko bakery. Pieter later moved to a rented
990m² factory in Paarl with around 60 employees. They began by baking rusks for Woolworths as
well as for Spar (another South African retailer).

After a steep initial learning curve, a strong focus on quality control led to well-received products.
Stephan joined the company as operations manager in 2003.
In 2004, the company’s success meant that it was possible to build their own larger 3,000m² factory in
Wellington to house their growing production and staff contingent of 150 employees. By 2010,
Nibbly Bits had grown to 5,200 m² with 700 employees, of which 400 were permanent staff and 300
were casual employees. Pieter Haasbroek’s son, Andre, joined the company at this time taking on the
role of CEO as Pieter began to step away from the day-to-day running of the company. It was also at
this time when Bernd joined Nibbly Bits in a production management role. The company was
reorganized into three separate divisions, including a biscuit factory, snack factory, and distribution
centre. Nine Nibbly Bits factory shops were subsequently opened around Wellington, Paarl and the
greater Cape Town area.

There they sold broken rusks and other baked goods deemed out of specification for Woolworths.
The company’s strong and consistent growth followed the increased popularity and customer spend
on premium food products. The rapid growth of Woolworths contributed directly to that of Nibbly
Bits. A strong long-term relationship had been built and maintained with Woolworths, and while this
ensured large orders and consistent production, Nibbly Bits was required to sign an exclusivity deal
with Woolworths, the contents of which stated that they could not supply to any other retail chains.
The product range grew significantly over the years. What began as a single rusk contract expanded
into multiple product lines including artisanal biscuits, cakes, rusks, savoury snacks, and popped
snacks. Seasonal orders such as Christmas-themed biscuits or shortcake also accounted for a sizable
portion of the production.

2. The Industry

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 The Western Cape is home to most of the niche food producers in South Africa. Nibbly Bits was
among several suppliers to Woolworths in the area and found itself in a situation typical of the
industry. The socio-economic situation in the Cape Winelands, and much of South Africa, meant that
many of the employees had limited education, wealth and job prospects. Each wage earner was
generally supporting an extended family. Overtime pay was highly desirable among the employees,
and this additional income was often a necessity for meeting their monthly expenses. Unemployment
rates of above 30% also meant that there was a high demand for the jobs that were available, despite
the industry’s typically low wages. The social divide in the industry was also significant as it was
normal for management to earn 10 or even 20 times the salary of shop floor employees.

With the low education and skill levels, along with a large amount of manual labour and little
automation, the management system in the company tended to be very hierarchical. There were seven
tiers separating shop floor employees from senior management, meaning there was a significant
disconnect between the parties. Despite jobs being highly valued, the staff turnover rate was also very
high. This generally occurred when staff was dismissed for one of several reasons but most often
absenteeism. In line with South African law, company policy stated that an employee was liable to be
dismissed if they were absent without reason for three days or more, or if they missed several other
days and had exhausted their verbal and written warnings.

Another issue in the factory was the level of diversity among the management and employees. Andre
was Afrikaans, Stephan was French, Bernd was German, and the other employees were mostly of
either Cape Malay or Xhosa descent. Additionally, the official language of the company was English,
which very few employees spoke as a first language. This led to challenging communications at times.
Both Stephan and Bernd were pastry chefs by training. It stood to reason that managers in the industry
had a background in food. Indeed, this strong technical knowledge was an asset when it came to
troubleshooting recipes and optimizing baking processes. Being chefs also meant they were used to
managing a kitchen, typically a high-stress environment, so moving from that to a factory of 700
employees required some adaption and a growth in management experience necessary for larger
workforces.

3. Decision Time

After the strike was over, Andre called Stephan to a meeting. They desperately needed to discuss a
way forward and prevent a reoccurrence. Andre also reiterated to Stephan as he had done many times
before that Stephan really needed to improve his department’s efficiency through reducing operating
costs. Around the same time, Stephan had been offered some company-sponsored training days, in
line with the company policy for staff who had been with Nibbly Bits for an extended tenure. Stephan
had chosen to do an “Introduction to Lean” course at the Lean Institute Africa in Cape Town.
Stephan had become familiar with Lean a couple of years prior and had read several books on Toyota
and the Toyota Production System. His initial understanding of Lean was as a tool for reducing waste
in a company. At the time he found it interesting but had his doubts around how effectively it could be
applied in a bakery environment where batch production was a necessity. Many of the concepts he
had read about seemed rather abstract and he didn’t think he understood the meaning of “capturing the
essence of Lean management” or a “Lean cultural transformation”. However, after the course he felt
that he had picked up some skills and could attempt a “Lean implementation”. He was also now

©Al Tareeqah Management Studies - 2020 6

 desperate and willing to try anything. He reasoned that there were certainly aspects of Lean which
could benefit the factory. Hopefully the factory would run more efficiently leading to increased
profitability, the result being that they would have the option to increase salaries and implement bonus
schemes, leading to happier staff.

Andre felt that the problem was related specifically to the employees and that replacing as many of
them as possible, or even moving the factory elsewhere, was the way forward. Stephan was of a
similar opinion but felt it was worth a try. He also had a sneaking suspicion that management, himself
included, were contributing to the problem. Stephan was also at a stage where he felt that his job as
operations manager was no longer progressing. He needed to either take drastic steps to implement
some changes or resign from his position and move on to something else.

4. Operations at the Bakery

The bakery ran on a three eight-hour shift system, where the employees rotated on a fortnightly basis,
generally taking turns working the night shift. Each shift was overseen by a shift manager, who
worked the same hours as his or her team. Management along with maintenance generally worked
normal office hours, which aligned with the day shift.

4.1 Scaling and Batching

The ingredients were portioned for a batch. Firstly, a production order sheet was received and printed.
This sheet gave the batch’s product name, the proportions of ingredients along with a unique barcode
identifier which followed the batch throughout the factory. Dry ingredients such as flour and sugar
along with butter and milk were placed in large plastic containers on trolleys in preparation for
mixing. A scaling section worker suggested it was difficult for one person to lift and move a container
once it was full of ingredients; at this point it could weigh up to 50 kg.
The floor area around this station was generally cluttered with multiple containers. Since several
batches were in the pipeline, and there were multiple containers available along with a ready supply of
bulk materials, the staff in scaling tended to pre-assemble as many batches as possible for the day,
regardless of the demand from the next station.

4.2 Mixing

This stage was relatively simple. The ingredients were blended in large mixers for 10 to 12 minutes.
Timing was critical: If the ingredients were mixed for too long, nuts and fruit pieces tended to break
down and the dough mixture became overly stiff; for too short and the ingredients were not
sufficiently distributed and blended.

©Al Tareeqah Management Studies - 2020 7

 Batches were sometimes mixed at a higher rate than production could work them. This caused a build-
up of mixed dough. The dough had a limited shelf-life once mixed and could spoil if not worked in
time.

4.3 Production

The rusks were shaped and placed onto baking trays. The thickness of the dough needed to be
consistent to produce rusks of uniform size and weight according to the specification. Division lines
were carefully scored into the upper surface to allow for easy breaking after baking.
Employees occasionally dropped dough on the floor during this step. In line with the food safety act,
this had to be discarded as it was declared unfit for human consumption.

4.4 Baking

The trays of rusks were then placed on rotating racks in paraffin-fired ovens at 180°C for between 20
and 60 minutes, depending on the type of rusk. The ovens were programmable for both temperature
and baking time. Batches had been ruined when the wrong baking times or temperatures were used,
although this was not a common occurrence.

4.5 Breaking

After baking, the rusks were crispy but not hard. They were then split along the score lines by hand
using stainless steel spatulas. Some rusks were potentially compromised during this step if they did
not break evenly and would then be considered factory seconds and sold at one of the factory shops.

4.5 Drying

The separated rusks were placed onto racks in electrically powered driers. The rusks needed to be
placed on racks in a random order, different from the sequence in which they were broken. This
promoted better drying as the uneven surfaces let more warm air through to facilitate the drying
process. Relative humidity, as well as the ambient air temperature, affected the length of time that the
rusks needed to spend in the driers. Cross contamination was a concern. It was necessary to keep
certain batches apart from one another, for example the stronger aniseed-flavoured rusks could not be
dried at the same time as buttermilk rusks.

4.7 Packing

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 The packing line had no automation because of the large variety of products being packed as well as
their generally fragile nature. Woolworths branded packaging was supplied and then the products
were portioned, heat-sealed and packed by hand. Some products were packed on quantity, for
example 12 Aniseed rusks, while others were filled on weight. Woolworths specified upper and lower
limits for product weights which had to be strictly adhered to. The work at this station was both time-
consuming and labour-intensive and as such approximately a quarter of the shop floor employees
were based here.

4.8 Metal Detection

The sealed boxes were then sent through a highly sensitive metal detector. In order to comply with
Woolworths’ quality standards, this step was necessary in the unlikely event that metal shavings or
other pieces had contaminated the product at any stage of the manufacturing process. If anything was
detected, the whole batch had to be pulled and the source of the metal investigated. Obviously, the
detector could not detect glass, ceramics or other organic matter. If any foreign object was reported by
a customer, Woolworths issued a non-conformance notice against their supplier as well as a fine of
approximately R20,000 per infraction. The funds from the fine could be used for staff-training
purposes at Woolworths’ discretion.

4.9 Dispatch

Products were palletized and stored in an adjacent warehouse after which they were shipped to a
Woolworths distribution center. The level of stock in the warehouse fluctuated based on demand and
production efficiency. Since some products could take up to two days to produce, depending on
drying times, Nibbly Bits liked to keep a certain level of buffer stock to ensure instant dispatch to
their customer.

5. Implementing Lean

Stephan needed to decide on where he would act. He had created an expectation with Andre that there
would be tangible improvements in the short term, so he needed to focus on these results first to gain
support for his Lean ideas. The next logical step after having audited the operations was to begin
targeting the proverbial low-hanging fruit.

©Al Tareeqah Management Studies - 2020 9

 The following six-month period was busy for Stephan. With the assistance of Bernd, he started
implementing changes in the factory. There was a general clutter of old machines and surplus
equipment. The rationale around keeping them had been that they may be needed for future
production. After asking the right questions, Stephan realized that most of the equipment had not been
used for years and some had simply been dumped there when they moved into the current premises.
The solution was to move some of the more valuable equipment to a separate storage area while the
rest was disposed of.

There were other immediate tangible improvements that could be made. Surplus hand tools were
removed, work spaces tidied up, and the remaining items were color-coded per station. The factory
floor had previously been demarcated; however, this had not kept up with changes in the production
lines and so tape was applied to the factory floor demarcating where items should live and where carts
could travel.
Bernd lamented on the recent changes:

“The factory certainly looks smarter. We are starting to perform better in our food safety audits as
well. The number of non-conformances has dropped dramatically from around twenty last year down
to about only five per year since we started doing this.”

5.2 Implementing One-Piece Flow and Pull

Stephan decided that scaling and batching was the department where he could experiment with some
Lean concepts, see the results quickly, and then implement them elsewhere in the factory if they were
viable. He identified a problem relating to multiple batches of ingredients sitting for extended periods
of time in open containers waiting for mixing. The workers wanted to appear to be productive. As
long as there were order cards, ingredients to draw and containers to mix in, they wanted to produce
batches for mixing. The batches would sometimes spoil at this step and needed to be discarded. A
change in mindset was necessary.

This was a perfect place to start implementing one-piece flow and then pull. He chose to play a series
of games with the workers in the department to teach them the practicalities of the new system. After
assigning each worker to a station, they “manufactured” paper aeroplanes using the Kanban system.

Everyone seemed to enjoy the exercise and grasp the concept. However, a few days later everything
lapsed back to the old system with batches again piling up. Then Stephan had a conversation with
Fezeka, the supervisor working in the area. She suggested that they use the trolleys as the mechanism

©Al Tareeqah Management Studies - 2020 10

 to run production. There would be only two containers and trolleys in a bay at any given time. The
operations department had purchased additional containers and trolleys the previous year with the
hopes that it would assist the department. Now they took away all but two per station: one that could
be ready for mixing, a buffer, and one container that was in the process of being completed. This
immediately solved the problem.
There was, however, massive resistance from some the employees in the department. They had
previously measured their own success through how quickly they could process the day’s batches,
which generally involved a mad rush in the early part of the day followed by idle time in the
afternoon. Stephan and Bernd needed to explain that they were not being judged on how quickly they
could produce all their batches but rather on quality and consistency. Gradually most of the
employees warmed to the new way of doing things.
A pull system was introduced through providing the order card to the mixing department rather than
scaling and batching. Mixing would only provide the next order to scaling and batching as they took
the buffer container. Again, this was successful and then needed to be extended throughout the factory
processes.

5.3 The Shop Floor

A year after beginning Lean, Stephan commissioned a study to get the shop floor employees’ views
on the company and what changes if any Lean had brought. The following are summarized quotes
from the findings, voiced collectively:
“We are usually nervous when Stephan or Bernd walk around the factory. We are worried that they
will find something wrong and issue a warning.”
“Things have improved, but we still need to feel more respected and valued as employees at Nibbly
Bits.”
“The reason we belong to the union is because we are worried about losing our jobs. It is a form of
protection.”
“On Lean, we are on board with the concept, however we do not feel as if we are a part of the change
initiatives and the project is still being driven by Stephan.”

5.4 Daily Meetings

The operations department held a meeting from 9–10am daily. The purpose was to keep all
participants informed and accountable. Typically, the attendees included Stephan, Bernd, who chaired
the meeting, the shift manager on duty, the packaging manager, and the maintenance manager. The
meetings had an agenda that was seldom followed and normally the discussion centred around

©Al Tareeqah Management Studies - 2020 11

 firefighting, recurring issues, and blaming other departments where possible. The meeting generally
ran over time and often little was achieved.

A breakthrough occurred in January 2017 when Stephan implemented several major changes after
asking for some meeting advice at the Lean training event he had attended. He introduced a “Lean
clock” where the meeting was divided up by the minute hand’s movement, which the team would
strictly follow. He also removed the sense of hierarchy in the meeting by asking everyone to be open,
saying how they felt regardless of who they were addressing. A radical change was made by inviting
and including two shop floor employees to the meeting. These employees were rotated daily. The idea
was that the employees could raise issues that prevented them from doing their job effectively.

Many seemingly small problems with production were discovered by management this way. The
other reason for including the shop floor employees related to their perceptions of management. Here
they were able to see that managers were also busy and not just sitting in an office all day or giving
orders to employees. The employees attending also tended to gain a level of empowerment and
prestige through attending a meeting with management.

Bernd, as production manager, also needed to track, and if necessary, flag, steps in the production
process that needed attention. He introduced a chart where quality parameters were judged as either
being acceptable or unacceptable and marked as either red or green on a chart. Over a period, the
color patterns on the chart tended to indicate which departments required the most attention. Another
chart which was updated and discussed in meetings was concerned with tracking wasted products.
Discarded batches at any stage of production had a major impact on efficiency. The total value of
these losses was recorded weekly and solutions were discussed in the meeting.

Answer any 8 Questions:

1- What are the challenges facing Nibbly Bits company?

2- What are the issues frequently faced during scaling and Batching?
3- What are the issues frequently faced during mixing stage?
4- What are the issues frequently faced during production?
5- What were the two critical things that determined the quality of rusks during baking?
6- What were the critical things that determined the quality of rusks during Breaking and
Drying?
7- While implementing Lean, what waste was addressed when Stephan removed the surplus of
machines and hand tools? Which waste was reduced with the color coding of items and floor
demarcations for carts?
8- How lean helped the workers to organize their work with the aid of the pull system that
Stephan had invented?
9- How lean assisted in improving meetings efficiency?
10- What were the benefits of implementing quality parameters and why they were color coded?

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