Case Analysis 1: Hightone Electronics, Inc. Identification Information: This case analysis is from chapter 1 of our text book, Operations Management. It is found on page 25 and titled, “Hightone Electronics, Inc. ” Summary of the Facts of the Case: Hightone Electronics, Inc. (HEI) is an electronic components supply company founded over 50 years ago. The company has a reputation for high quality and service. HEI’s simple business of supplying radio repair shops with parts has grown to include home delivery, and larger customers such as technical schools, universities, and well-known corporations.
The company stocks and sells over 22,000 different items and most customers receive their order within 48 hours. George Gonzales is the operations director for HEI. He has been tasked with making operations management decisions necessary to make HEI a successful Internet-based business. Mr. Gonzales agrees that this is an important step for the future success of the company but believes there is more to solving the problems of the transition to web-based than the board thinks. Case Questions: 1.
Explain why operations management is critical to the success of a business. Operations management (OM) is critical to the success of a business for several reasons. OM is responsible for the decision-making and leadership process that creates the product or service the business provides. The role of OM is to take inputs such as, labor, raw materials, and technology, and turn them into finished goods or services. Other functions of the business, such as marketing, are also important. But, without OM, there would not be a product/service to market to consumers. Reid, 2-23) Why would developing an Internet-based business require different operations consideration for HEI? A traditional catalog-order business and an Internet-based catalog-order business would be very similar in general appearance. A transition to web-based ordering though, would require changes. First, the company would need to upgrade its technology. Either through outsourcing or internal servers, the company would need to create a website. The website would need to be able to handle the customer traffic without crashing.
Also, the website would need to be user-friendly so as not to frustrate and turn away potential customer. Customer support personnel would need to be trained to guide customers with questions about the website. Second, and more important than the actual website, is coordinating orders so that requested goods are shipped to the proper customer. Each order transaction will not be entered by a person. Therefore, all of the information gathered by the website will need to be converted to orders easily understood by warehouse personnel.
Is George Gonzales correct in his assessment that this would not be “business as usual”? Yes. The core functions of the physical locations of the catalog-order business will remain mostly the same as before. They will receive orders, and ship out goods. However, the methods of obtaining orders, customer feedback, return orders, special orders, and many other less notable but still necessary functions will change drastically. If done properly, it will most likely streamline the business, but the initial transition will be difficult. . Recall that HEI wishes to continue its reputation of high quality and service. Identify key operations management decisions that need to be considered. * Will we receive more/less orders? * If demand increases, can HEI supply the demand? * If demand decreases, can HEI “weather the storm” until demand rebounds? * What new personnel will be required? * Can current employees be trained? * Do new, more technically-advanced employees need to be hired? * Can stock be reduced and operations made more lean? * Should stock be increased?
How different will these decisions be for the Internet business? The major difference will be that with a lot of the web-based area of the business, work will be handled electronically and not in a physical location. This will eliminate the need for large call centers and central records keeping locations. A few servers could hold all the information once held by an entire department such as sales, accounting, customer service, etc. This also changes the focus from managing many low-skilled employees to fewer moderate-to-high-skilled employees.