Case Building Sailing Yachts

Inhoudsopgave1. Introduction21.1Problem statement22. Methodology33. Research/Results43.1 Description of Content43.1.1 Horizontal structure43.1.2 Vertical structure53.1.3 Organization structure63.1.4 Market of yachts63.2 Analysis of Content73.2.1 Horizontal structure73.2.2 Vertical structure83.2.3 Organization structure83.2.4 Matrix: conclusion analysis93.3 Redesing of Content114. Conclusion14Bibliografie15Appendix 1- Case16

1. IntroductionContent is a Dutch company located in Den Bommel, it produces polyester sailing yachts with a length between 7 to 12 meters. Content purpose to introduces itself as a firm that produces and sells quality sailing yachts for acceptable prices. Content exists of 28 employees, a managing director and a manager/supervisor. To the staff members it is not clear where Content is exactly focusing on. Next tot that they face a lot of delivery and capacity issues, 65% of their yachts are behind schedule and parts are unavailable. This causes that the staff members want to have a detailed description of the existing operations strategy of Content and the way they can improve their operations strategy.

1.1 Problem statementResearch objectiveThis research contributes to the improvement of the performance of the operations function within Content.

Research questionsMain question: How can Content improve their performance of the operations function by improving their operations strategy?

Research questions1. What is the current state of the company Content and its market?1.1. What is the horizontal structure of Content?1.2. What is the vertical structure of Content?1.3. What is the organization structure of Content?1.4. What does the market of yachts look like?2. What are the main problems Content is facing?2.1 What are the problems in the horizontal structure of Content?2.2 What are the complexity characteristics of the production process of Content?2.3 What are the problems in the vertical structure of Content?2.4 What are the problems in the organizational structure of Content? 3 How could Content improve their operations strategy to improve their performance?3.1 What does an improved horizontal structure for Content look like?3.2 What does an improved vertical structure for Content look like?3.3 What does an organization structure for Content look like?3.4 How could Content fit in the market requirements?

2. MethodologyThe research is based on the case Building sailing yachts, see appendix 1. Within this case a description of the company Content is given with the problems they are facing. The goal of this research is to give an in-depth analysis of the company an its problems. Finally some solutions of the problems are given. The research model in figure 1 gives a graphical overview of how the research is going to be done. In the first part of the research the horizontal, vertical and organizational structure of Content is described. After that an analysis is made of these structures. Finally the redesign of the structures is given. This research model is based on the framework of proactive operations management (Vries de , 2014). All the three structures influence the performance of the company. The basis of good performance lies in a good overview of what the future design of the company must be. DescribeAnalyseRe(design)Horizontal structureVertical structureOrganizational structurePhaseStructureFigure 1 the research model

The description of the company is done based on the case and based on relevant theory of operations management and operations strategy. The analyze part of the research is done based on the model of operations strategy and the operations strategy matrix of Slack and Lewis, 2011.

3. Research/Results3.1 Description of ContentTo give an overall view of the company a description of the horizontal, vertical and organizational structure is given in the upcoming paragraphs. These paragraphs answers the first research question: What is the current state of the company Content and its market? 3.1.1 Horizontal structureContent can produce nine types of sailing yachts divided in four characterizations. Comfortable touring yachts: Content 22, Content 26, Content 28 Sporty Touring/match yachts: Content 22-s, Content 25, Content 33 and Content 38 In between comfortable and sporty yacht: Content 35 Charter yacht: Content 33-c The horizontal structure, or otherwise the transformation process, is the structure which describes how the company transforms inputs into output that satisfies buyers need (Slack & Lewis, 2011). A description of the production process can be found in appendix 1 Building sailing yachts. This description is translated into the basic form of the company, which is displayed in figure 2. As illustrated the process consists of eight steps, each step have to be done before another step. Only the making of the wooden parts, like the floor, the kitchen, a map table and the main bulkheads, can be done independent of the other steps. The first step is the making of polyester parts like the deck, the ceiling, the hull, the inner shell and some small-scale parts. The hull and the deck are transported to the metal department where the metal parts are being fastened. The third step, which can be done at the same time of step two, is the attachment of the deck on the hull. The fourth operation exists of two steps, the boarding and panelling of the yacht and the installation of the engine block. The boarding and panelling is to place the wooden kit, earlier mentioned. The installation of the engine has to be done in cooperation with the boarding and paneling. This can be done two days after the start of the boarding and panelling. The next operation is the installing of the wiring and the fastening of the keel. The last production stage is the rigging of the yacht after which the yacht is finished with a final check and some repairs. Build polyester parts

Fasten metal parts

Attach deck and hull

Boarding and panellingInstall engine

Make wooden parts

Install wiring

Complete yachtDecoupling point

Decoupling pointFigure 2 basic form Content

The production process can have two routings; the above-mentioned so called closed building sequence used for the Content 22-s, 22, 25 and the 26; and the so called open building process used for the Content 28, 33, 35 and 38. This last one refers to the process where the panelling is done first after which the deck is fastened on the hull. The open building process is easier, but cant be used for all yachts.

3.1.2 Vertical structureThe vertical structure, also known as the planning and control systems, gives information on how planning, decisions and trade-offs are made. Content is in a situation where it has five hierarchical planning levels. These planning levels are Delivery planning, order acceptance, production planning, order release and procurement. Figure 3 gives a graphical view of how the planning levels are structured together with the horizontal structure. The planning structure has orange squares and black arrows. The black arrows stand for the movement of the information. First, there is the delivery planning. Here, the planning for the upcoming year is made by the expected demand of yachts. The planning takes the availability of the polyester department and seasonal fluctuations into account. Yachts allocated to customers or yachts not-yet-solds are marked in the planning. Second, there is production planning where orders are scheduled by means of a Gantt chart every two or three months. The planning horizon has three to five months. The production planning is the basis for the procurement of parts and for the weekly order release. The delivery planning is based on the production planning. All departments are informed about the production plan. The warehouse purchases items based on this plan. The making of the production plan takes the promised delivery time from the delivery planning into account. The third planning level is the order release, this level is based on the production planning, approved changes and add-ons and scheduled delivery planning. It gives information for the purchasing process. Practical they work with a assignment form which goes to every department, but the order only releases when it comes at the polyester department. They make their planning and based on that an order is started. The procurement of parts is based on the production planning and the assignment forms. Materials and parts are kept in stock, unless the expensive and customer specific materials. Inventory parts are reordered when the reorder point is reached. Customer specific parts usually arrive one week before they are needed.

3.1.3 Organization structureBuild polyester parts

Fasten metal parts

Attach deck and hull

Boarding and panellingInstall engine

Make wooden parts

Install wiring

Complete yachtDecoupling point

Decoupling pointOrder acceptanceProcurement(Purchase process)Production planning(Month planning)Order release(Week planning)Delivery planning (Year planning)Expected demandAvailable capacity polyesterSeasonal fluctuationsApproved changes and add-onsScheduled delivery timePolyester planBoarding/engine planFigure 3 planning structure Content

Finally the organization structure, known as the organizational measures, is about the division of tasks and responsibilities and how coordination is organized. Content has five producing departments: polyester, metalwork, carpentry, assembly and furniture and varnishing. Next to that they have a service department and some support departments like secretary, procurement, sales and accountant. The director and the supervisor guide the company. The director takes care of the long term planning, and the supervisor for the day-to-day decisions that have to be made. Content exists of 28 employees, a managing director and a manager/supervisor. Because of the company being so small they work closely together a have short communication lines. This causes decentralization, which means that the authority to make important decision does not only lie at the top level, but also at every department (Jones, 2013). They have the possibility to make their own day planning based on what they have to do. An advantage of decentralization is that it causes flexibility and makes the company more responsiveness. The disadvantage of decentralization is however that every department makes its own decision and the goal of the company will no longer be pursued (Jones, 2013).3.1.4 Market of yachtsThe market requirements and possible strategies are discussed in this chapter. It is known that Content is not sure what their what market exactly is and how they have to operate to it.

Yachts can be probably considered the most complex and luxurious products in the world, combining both technical and emotional appeals (Reddy and Terblanche, 2005). This means that people do not need one, but buy one to spend spare time with, or to enjoy from it.

According to Lamming, R.C., Johnsen, T., Zheng, J. and Harland, C.M. (2000), the high product uniqueness of the yacht industry is a fundamental characteristic that has to be pursued by protecting a set of critical resources.

Childerhouse, P., Aitken, J. and Towill (2002), concluded that a company dealing with low production volumes in combination with a high product variety should improve the flexibility of the supply chain. The flexibility of the supply chain should improve mostly at the suppliers of Content. Parts are sometimes unavailable or arrive to late, which is a critical waste of time in the production process.

According to Mason-Jones, R., Naylor, B. and Towill, D. (2000), a leagile production process could be the best option when producing semi-custom yachts. To be flexible and responsive to customer demands, Content needs to be agile. At the same time, they have to reduce their waste and improve the efficiency of their production process, otherwise competitors will grow to the detriment of Content.

3.2 Analysis of ContentWithin the analysis part of the research answer is given to question: What are the main problems Content is facing? Divided in the horizontal, vertical and organizational structure problems and also about complexity characteristics of the production process and dis-fit of Content to a certain market. 3.2.1 Horizontal structureThe main activity of Content is building polyester sailing yachts of seven to twelve meters. These yachts are made in nine different types. Besides that, they also repair and/or maintain yachts and renting yachts. The process of building yachts happens in two different process routings, detailed information about the process can be found in paragraph 3.1.1. The primary process of Content is a typical traditional production process and did not changed the last 20 years. The process of Content can be characterized as a job process. A job process is: A process with the flexibility needed to produce a wide variety of products in significant quantities, with considerable complexity and divergence in the steps performed (Krajewski, Ritzman, & Malhotra, 2007, p130). This fits Content best because every ship is different, they make it peace by peace not in batches and the process can differ true different types of yachts. Next to that their strategy must be a make-to-order strategy, this is a strategy used by producers, which make goods to client specification and in vile volumes (Krajewski, Ritzman, & Malhotra, 2007). The matching competitive priorities of a make-to-order strategy are top quality, on-time delivery and flexibility. Especially on-time delivery is a problem at Content. At the vertical structure we go deeper into this matter.

Another decisions that Content has to make is about the stock points. Content has two warehouses on the plant; one of them is for saving the moulds, and the other is the warehouses were they keep their materials and parts in stock, except for the expensive and customer specific materials and parts. The procurement department buys all the materials and parts. Because customer specific and expensive parts can only bought at the last moment, these parts will arrive late or are out of stock, which causes a delay in the process of building yachts. Communication is a crucial aspect in this problem. When theres good communication between the departments about the planning and orders procurement has to make, they can adjust their activities to another. A delay in the building process can also occur when a serie of the same yachts has to be build, because there is only one mould for each type of ship.

The most important materials that Content needs to make the yachts are polyester, metal, wood and panel kits. These materials are one of a kind and cannot be used for building other parts of the yachts. Next to that, the six steps of the production process generally have to be in order. The steps in the process cant be done in another order, which can cause delay of making the yachts. Not only the process isnt flexible, the employees also arent flexible. Almost all the employees can only perform his/her proceedings and cant fill in for another employees when he/she is absent.

The main performance objectives of Content should be on-time delivery and quality, problems within the transformation causes a lot of quality and delivery problems, an overview of the problems: Complex process because of job process Customer specific and expensive parts only bought at the last moment caused by policy and lack of communication Only one mould for each type of ship, no possibility to build a serie of the same ship Almost all the employees can only perform his/her proceedings and cant fill in for another employees when he/she is absent.

3.2.2 Vertical structureWithin Content there are five hierarchical planning levels, these are delivery planning, order acceptance, product planning, order release and procurement. The furniture department is however not included in the planning levels. Content deals with some trouble with the planning, these problems derive mostly from absence of employees and unexpected repairs. In paragraph 3.2.2 there is detailed overview of the planning structure. Content can be characterized as a job shop company because they are specialized in low-volume production (Krajewski, Ritzman, & Malhotra, 2007). According to Krajewski, Ritzman and Malhotra tasks within such processes are hard to schedule because of the variability in job routings and the continual introduction of new jobs to be processed. Departments find it hard to make the decision about which task to perform first. Another problem with the planning process is that de decoupling point mostly lies in the beginning of the process, see figure 3. The decoupling point is about up to which supplies are made-to-stock and beyond the place where the demand drives make-to-order execution (Lambert, 2008). From the beginning customers can determine what kind of ship they want. Even further in the process they can change some things to the final design. So ships are different each time.

Next to that takes the sales department orders, which must be ready rather earlier than actually possible according to the schedule. This causes rush-orders and the planning must be re-scheduled. Because of some problems with the planning and production process, its important for Content to make important decisions and make some trade-offs. For example the delay that is caused by products that are out of stock or delivered to late. Its possible for Content to have better communication between departments so the procurement department knows on time what to buy a`d when. On-time delivery is very important within the market Content is operating, but because of all this delay problems on-time delivery is not what happens with every yacht.

The main performance objectives of Content should be on-time delivery and quality, problems within the planning structure causes a lot of delay, an overview of the problems: Job shop characteristics causes a lack of prioritizing of which tasks to perform Early involvement of the customer causes a early decoupling point Rush-order causes re-scheduling, planning changes very often Delay of important parts because of bad planning and communication between departments3.2.3 Organization structureThere are 28 people working at Content, 21 of them work in the production departments, one in the service department and four in the support departments. Above these employees is one supervisor and one manager. Because of the relatively flat organization structure, its possible to have strong communication lines and coordination can be done relatively easier. The five production departments are in line with the production process Contents has to build the yachts. Because of the quite little organization you would expect that communication is easy and works well, but that is not totally true within Content. The management does not now which direction to go, they did not succeed in controlling the company based a mission and vision for the last few years. Without top-down communicated clear objectives employees do not now were to focus on. The sales department just takes orders, planning tries to fit all this into the planning and production works to hard to fix all the problems and rush-orders. Alignment is need to be done cross-functional towards the company.

3.2.4 Matrix: conclusion analysisThe previous paragraphs give an overview of what the market requirements and the operations resource are within the company Content. The strategic decisions that have to be made are the following: Capacity: capacity problems caused by absence employees and late supplies Supply networks: appointments with suppliers expensive parts, procurement plan Process technology: returning repairs between the process, complexity process, sequence of the production because of moulds Development and organization: information sharing, planning structure, rush-orders and overall communication within the companyFor Content especially quality, on-time delivery and flexibility are important performance objectives. Quality because of the name of Content and the fact the customer wants quality. Flexibility because of all the possible types of ships, customers want a personal styled ship. Finally on-time delivery because customers want to receive their yacht when they expect it.

The operations strategy matrix above brings the two perspectives of market requirements and operations resources together (Slack & Lewis, 2011). The operation strategy matrix that is made for the case of Content makes clear that there are more critical problems in the supply chain, planning and production. The amount of *s gives the rate of importance. The assumed most important problems are the unreliable suppliers, capacity of just one yacht at the time, the planning structure and the overall communication within the company. Sub-problems which cause also some problems or delay are the late arriving of orders, the decreasing number of suppliers, damages caused at the production and the inflexibility when rescheduling the production planning. Less important but still perceptible is the use of little technology during the production process. Lots of work is done by handwork, which is a lot of time and money consuming. On the other side, this is acceptable because of the attention every yacht gets to ensure the highest quality.

3.3 Redesing of ContentIn general Content needs a plan, an operation strategy to increase their performance. Important performance objectives for Content are quality, on-time delivery and flexibility. The current delivery/year planning should be more extensive, more extensive in content and in the number of years. So a long-term planning based on expected demand, market expectations and seasonal fluctuations but also a broader view of what the company wants to achieve in a mission, vision and practical goals. The plan used to be based on the available capacity of the polyester department but they need to change this the other way around and to ensure that the polyester departments fits the capacity needed. The polyester department needs to be more efficient; later on there will be an explanation of how they can change it. Mission, vision and objectives are important because the overall strategy can be based on that. Next to that objectives make it possible to decentralize authority by allowing these objectives to serve as coordinator and they are important to efficient departmental functioning because of the coordinating influence that objects have upon human behavior (Graham, 1968, 291-293).

According to trends in the market, reparation activities in the ship industry is more often outsourced to integral service providers (Rabobank). This is something that would perfectly fit for Content. The production workers could focus on producing and their planning will not be changed by a rescheduling because of a reparation. This would give Content some rest and certainty for their daily job. Next to that the sales department should ban rush-orders out. The management needs to make clear to the sales department that rush-orders are not appropriate and by improving their total process delivery time is no more an issue because of short lead-times.

The question rises how they should improve their total process? Already mentioned is the removal of the repair jobs because of the disturbance of the process. But next to that they could minimize the options of yachts they could make. By standardizing the options to a few with the possibility to ad or change things only at the end of the process. So remove for example the options of the color and ad the color at the completing part of the process. In this way they can use the time, which has become vacant, because of no repair jobs have to be performed, to make some product modules in stock. In this way the safety time of each process can be deleted and this will decrease the total lead-time.

The polyester, furniture, metal work, carpentry and completing departments individual must have a schedule, a week schedule based on the order release week planning. Within these week planning they can determine by their self which step to start with by a dispatching method. The decision about which job to process next is made with simple priority rules whenever the workstation becomes available for further processing.(Krajewski, Ritzman & Malhotra, 2007, p681). Advantages of this system are that they become flexible and last-minute information on changes fits in the planning.

The marketing strategy for Content from Porters generic strategies (Porter, 1980) should be the differentiation strategy. Content should focus on premium quality of their yachts to the people who are not price-sensitive. The organization has always been known for quality and they still are. They should focus on the rich people in the Netherlands and eventually people in their nearby neighbors Germany and Belgium. Content needs to keep pushing on reaching the highest quality comparing with their competitors. Only in this way their customers can notice them. Having a Content yacht must become something to be proud of.

In 2000 there were 1.068.000 people in the Netherlands with a GNP above the 50.000 a year. This number increased to 1.286.000 people in 2001. For Content, the market of possible buyers has increased with more than 200.000 people, a change to reach new customers and increase their sales. In their marketing campaign, Content has to be active and visit fairs where the best yacht makers will come to reach a well-known brand name under their potential customers. Next to that, they can keep up with the latest trends and innovations in the yacht industry.

To fit in the market requirements, one of the things Content has to do is protecting critical resources. In the case of Content, this means that the most important knowledge, workers, materials and innovations have to be protected for competitors in order to survive the market. When the best, experienced workers go work for the competitor, this could do some serious damage for Content for two reasons. First, they are getting weaker. Second, because the competitor gets stronger.

The second possible solution for Content could be the improving of flexibility in the supply chain. It is known from the case (appendix 1) that Content will have less suppliers in the future. To keep a stable and trustable of stream of materials, suppliers have to change to. Content could demand suppliers to have needed materials always in stock. Next to that, Content should compose a contract where delivering on time must be a condition to receive full payment for the supplier. Only with this kind of penalties, suppliers will deliver on time and Content will no longer have to deal with out of stock parts and delay in the production. They need to negotiate short delivery time, which delivers the parts just-in-time. Just-in-time eliminates wastes by skipping inventory and erasing non-value added activities (Krajewski, Ritzman, & Malhotra, 2007). JIT works like this, the supplier only delivers parts when they need them, but on time, based on good appointments. An advantage for Content is that they are sure parts are on time available for the production process.

The last solution is the introduction of a leagile production process. Content has to improve their efficiency, reduce their waste and at the same time it has to keep their responsiveness. How the efficiency can be improved and their waste reduced is told in above within this chapter. In addition to that, Content could move their decoupling point downstream after the polyester parts phase. In this way, the hulls can be produced in stock to improve the efficiency. Also, the lead-time is reduced because the organization is one step ahead. The only side note to this is the chose of color by the customer. A possible option could be a fixed color for all content on the banner on the hull. Another solution is the use of a transparent color that could be customized later in the process. Maybe Content has to do some research to this but this should be worth the investment. The organization has to keep up with the responsiveness, although the decoupling point has moved downstream. Customers can still choose their options for their yacht and customize it in their needs. Finally figure 4 gives the final structure of Content based on all these adjustments.

Build polyester parts

Fasten metal parts

Attach deck and hull

Boarding and panellingInstall engine

Make wooden parts

Install wiring

Complete yachtDecoupling point

Decoupling pointOrder acceptanceProcurement plan(Purchase process)Production planning(Month planning)Order release(Week planning)Delivery planning (Year planning)Expected demandMission, vision and objectivesSeasonal fluctuationsApproved changes and add-onsScheduled delivery timePolyester planBoarding/engine planFigure 4 final structure Content

Metal planAssembly planInstall and completing plan

4. Conclusion

As written in this report, it is known that Content dealt with some serious problems in their production process, their planning and with the supply of materials. Workers of Content were sick of this and wanted this for no longer.Theres absence of employees, unexpected repairs, decoupling point is at the beginning of the production process, orders taken that dont fit in the planning and problems about the order of the processes. All these aspects lead to delay and inflexibility. To deal with these problems, Content can make the following changes to improve their planning and process: moving the decoupling point to a later stage of the process, no more or less rush-orders, better communication between departments and a weekly schedule for the polyester, furniture, metal work, carpentry and completing departments.According to this report, the chances are still there for Content. The market opportunities are growing and with a well-overthought strategy, Content could become a healthy and well-being organization again. To catch up with the market requirements, the most important advises are listed here. First, the protection of critical resources. The product uniqueness is such a fundamental characteristic that is has to be protected. Also the knowledge from workers and the patents need to be protected. The second thing is the flexibility in the supply chain. Content will deal with fewer suppliers, but mister de Weerdt has to be sure to make good appointments with them. Content cannot afford to receive parts to late from their suppliers, because of the implementation of Just-In-Time production. The last solution is the implementation of a leagile production process. This is to be more efficient and stay responsive to customer wishes. Concluding, Content is a great company with a well history and enough opportunities for the future. The organization is going to be a company that is loved by customers for their flexibility and quality and feared by competitors for their efficiency.

BibliografieChilderhouse, P., Aitken, J., & Towill, D. R. (2002). Analysis and design of focused demand chain. Journal of Operations Management , 20, 675-689.

Graham, G. H. (1968, september). Correlates of perceived importance of organization objectives. Academy of Management Journal .

Jones, G. R. (2013). Organizational Theory, Design, and Change. In G. R. Jones, Organizational Theory, Design, and Change (Seventh Edition, Global Edition ed.). Texas: Pearson.

Krajewski, L., Ritzman, L., & Malhotra, M. (2007). Operations Management: Processes and Value Chain. New Jersey: Pearson Education, Inc.

Lambert, D. M. (2008). Supply chain management; processes, partnerships, performance. Sarasota, US: Supply Chain Management Institue.

Lamming, R. C., Johnsen, T., Zheng, J., & Harland, C. M. (2000). An initial classification of supply networks. International Journal of Operations & Production Management , 20 (6), 675-691.

Mason-Jones, R., Naylor, B., & Towill, D. (2000). Engineering the leagile supply chain. International Journal of Agile Management Systems , 2 (1), 54-61.

Porter, M. E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Free Press.

Rabobank. (sd). Trends in de Scheepsbouw. Opgeroepen op 1 2015, van Rabobank Cijfers & Trends: https://www.rabobankcijfersentrends.nl/index.cfm?action=branche&branche=Scheepsbouw&p=4

Reddy, M., & Terblanche, N. (2005). How not to extend your luxury brand. Harvar Business Review , May, 20-24.

Slack, N., & Lewis, M. (2011). Operations Strategy. Essex: Pearson Education Limited.

Statistiek, C. B. (sd). Inkomensklassen; personen in particuliere huishoudens naar kenmerken. Opgeroepen op 1 2015, van Statline CBS: http://statline.cbs.nl/StatWeb/publication/?VW=T&DM=SLNL&PA=71510ned&D1=0&D2=a&D3=0-7&D4=0&D5=0&D6=0&D7=a&HD=080522-1723&HDR=T,G4,G3,G5,G2&STB=G1,G6

Vries de , J. (2014). 2-2 the nature of operations strategy. Sheets week 2, 2-2 the nature of operations strategy. Groningen: Rijksuniversiteit Groningen.

Appendix 1- Case Copyright J. de Vries course Operations Strategy 20/11/2014

About how to get a headache..

As a consultant with many years of experience, you have been asked by the management of Content to make a detailed study of the operations strategy of Content. Your knowledge reaches many different fields. You have an extensive experience with logistical projects and you occupied different Operations management functions, both in large and small manufacturing companies. You also worked as a senior consultant (partner) in a renowned consultancy bureau for more than fifteen years. In Europe, you are considered as an outstanding Operations Management expert.Since it is not clear to the staff members where Content is exactly focusing on, you haved beenasked to assist them in improving the performance of the operations function. It is agreed upon that on the next management meeting you will give a detailed explanation/description of the existing (implicit) operations strategy of Content and the way in which strategic choices are translated into operational performance criteria. The management of Content is also very interested in the relation between the overall strategy and the issue of manufacturing strategy.

Jan de Weerd, managing director, 35 yearI am convinced, that we need to incorporate the operations management function more thoroughly in ourstrategy. But before we can do that, we must have a better understanding of the existing situation. What, for instance are our Order winners and our Order qualifiers? What markets are we in? What are the most important performance criteria for these markets and what about the implications of this for our Operations? And please: give us some insight in the consequences of our Volume-strategy.

During previous meetings there also appeared to be a great desire to have a thorough understanding of the material flows with respect to the building of sailing yachts. Piet Harmsen, production planner, has taken you into confidence and told you he is looking for another job.

Piet Harmsen, production planner, 62 yearReally, Sales doesnt have any idea how difficult it is to do this planning job. Every evening I am exhaustedbecause of all the rush-orders and all the re-scheduling I have to do. As I have mentioned you before, 65% ofour Yachts are behind schedule. And they (Sales) think, this is my fault. Well I can tell you this, whenever I amleaving this company, they can do it by themselves and than they will have a huge problem. Sales doesnt knowanything about how to make yachts. You will never find them on the working floor. Just driving in large cars andbeing proud when they have sold another yacht. I am sick of this.

You have therefore decided that during the next management meeting you will also deal with the issue of manufacturing complexity in more depth. For you, characterizing the production process is the starting point for a better understanding of the primary process of Content and for understanding control complexity. But what kind of production process is it? Is it a job-shop? Is it a project-oriented production environment? And most important of all: what are the consequences of this for all the planning activities that have to be done. So you start reading your Bible again: the book of Slack

1Finally, you have decided that you will end your presentation with an outline of the Vertical structure of the production process. Regarding this issue, your main goal for the next meeting is to give a detailed overview of the planning structure of Content. Again, you are convinced of the fact that by creating a better understanding of how Content is dealing with control complexity, improvements will be easier. So you start asking yourself a lot of questions. What are the most strategic decisions with respect to making yachts? How does the production planning of Content on a tactical level look like? And what about the production decisions that have to be made on a daily base? As a logistical expert, you immediately start thinking about the influence of the customer orders on the planning process..

With a lot of courage you start writing your management report. There are only a few weeks left and as always, a headache slowly takes possession of you while trying to understand the production-situation of Content. You love sailing, but you dont like making sailing yachts at this moment. In what respect an easy production process? In what way complex markets? And what about control complexity. And even more important: how to analyse the operations strategy of Content. Clearly, a lot of issues relate to each other and therefore the management of Content asked you to make an integrated analysis of all the relevant topicsBuilding sailing yachts1

IntroductionThe history of Content goes back to the year of 1960. In this year the company Content was founded in the place Ooitgensplaat. At that time the yard built small open sailing boats. In 1966 the owner of the yard decided to move to Den Bommel to build larger yachts. The company Content was sold in 1992, 32 years after its foundation. The new owner changed the name of the company in Content Shipyards B.V. This yard however existed only for a small period of time. Content Shipyards went bankrupt in December1997, only five years after the take over. Sport Invest B.V. wasthe new owner of the Shipyard and immediately started producing sailing yachts again. In March of 1999 the first modified Content was developed. This yacht was presented at the HISWA in the RAI (Amsterdam), one of the largest exhibitions of sailing yachts in the world. Content, still a famous brand name in the world of sailors remained the trade name of the shipyard. The company intends to present itself as a company that builds and sells quality sailing yachts for acceptable prices. In 1999 the company sold 35 sailing yachts.

Jan de Weerdt, managing director, 35 yearsContents are excellent, high standard quality yachts. During the previous years however, management hasntsucceeded in controlling costs. I am convinced that in the upcoming years we have to focus on efficiency. This means shortening our throughput time and producing more according to flow-production. It must be possible to build more than 100 yachts in 2000/2001. Thats the target Im aiming for.

Products and MarketsThe main activity of Content is building polyester Sailing yachts with a length between 7 to 12 meters. The market consists of both private individuals and companies (yacht charters and sailing schools). One of the main sub activities of Content is repairing and/or the maintaining yachts, regardless of the brand or the building material of the yacht. This sub activity contributed in 1999 to 20% of the turnover of Content. Currently, Content also rents (Content) Sailing yachts.Content builds nine types of Sailing Yachts. Table 1 gives an overview of the characteristics of some of the yachts. From table 1 it can be concluded that in 1995, Content Shipyards B.V. built and sold 63 yachts. In 1999 however, the new Content Company produced and sold only 35 yachts. The sales target for 2000 is to deliver 50 yachts. At this moment a substantial lower number of employees are working at Content compared to some years ago.The Content 22, 26 and 28 can be characterized as comfortable touring yachts. The 22s, 25, 33,and 38 are sporty touring/match yachts. The Content 35 has both characteristics.The 22-s has a simpler interior than the 22. The 33-c is a charter version of the 33 and has a larger number of sleeping places. The 22-s, 33-c, 25 and the 38 only recently have been put into production. Table 1 also illustrates that the Content 22, 28 and 33 are the most successfulyachts in terms of sales.

1 This case is written by Prof. dr. Jannes Slomp and Prof. dr. Jan de Vries The material provided in this case is only meant for educational purposes. Any similarity between this case and real situations is just a coincidence.The nine versions of the Content can be characterized as standard-yachts that can be delivered in each building stage. It is furthermore possible for customers to customize the yacht, starting from the standard-yacht. On can for instance think of the colour of the deck and the hull, thenumber and shape of the sails, the depth of the keel, and the way the saloon is boarded.

VersionLength (m)Produced sinceProduction (1995)Standard Price

M 22-s7.301992-. 31.370

M 227.30197816. 34.750

M 257.901993-. 48.750

M 267.9519775. 52.750

M 288.90197416. 74.750

M 3310.25198515. 108.750

M 33-c10.251992-. 110.750

M 3510.80198011. 143.750

M 3812.1019910. 176.750

Table 1. Versions of Yachts and some characteristics

OrganizationContent has five production departments: (i) polyester, (ii) metalwork, (iii) carpentry, (iv) assembly and (v) furniture and varnishing. Content also has a repair and service department which repairs yachts. This is done on the yard as well as on location. Content has 28 employees of whom 21 are working in the production departments, one in the service department and four in support departments. There is one managing director and one manager/supervisor (e.g. figure1).

Director

Supervisor

Accountant secretary

Procurement Sales

Production Service

Polyester Metal work Panelling Furniting completion

Figure 1 Organization structure Content

Layout and production processFigure 2 gives an outline of the layout of the plant. On the left side of the area are offices, a warehouse for the moulds and the polyester department. On the right side of the territory are the production hall and a second warehouse located. The inner harbour is covered. Only one yacht at the time can be built/finished or repaired here. The production of a complete Content consists of several (sequential) stages. Each stage will shortly be described in this section.

The first stage is the building of the polyester parts of the yacht like the deck, the ceiling, the hull, the inner shell and some small-scale parts like the cooling box, the toilet unit, the gas storage unit, and the rudder. For each version of the yacht, only one particular part can be made at the same time. This is because of the fact that only one mould is available for each part. The mould is the most important tool in making the polyester parts. In the mould, some layers ofglass fibres and resin are composed to one product. The number of layers is determined by the product/part to be made. The first layer is the so-called gel-coat layer: a layer of paint to protect to product. This gel-coat determines the colour of the product. Before making the gel-coat layer, a piping/banner is put on the hull which highlights the shape of the yacht (see photo). The piping is a colour band which is made of coloured gel coat. After the production of the hull and the deck, these parts are moved to the metalwork department. The other parts are transported to the assembly department. In the polyester department four persons are employed. Three of them are working in the polyester department itself, one is employed to fix damages and to work on small-scale polyester jobs.A second important operation is the fastening of metal parts on the deck like the pulpit of theyacht, the sea railing, the winches, the fender edge, hatches, and the portholes. A metal worker performs the fastening of the metal parts.The next operation is the installation and attachment of the deck on the hull. This operation isalso performed in the metalwork department. For this job, the metalworker is assisted by one of the carpenters.

Figure 2 Layout of Content

A fourth operation is the boarding and panelling of the yacht and installing the engine block. The panelling is done by carpenters, which use wood and panel kits to finish the interior. Of each type of kit there is always at least one in stock. A standard wood kit exists of the floor, a kitchen block, a map table and the main bulkheads. In the furniture department three furniture makers are constructing the wooden parts of the yacht. One employer is varnishing the wooden parts of the yacht. Six carpenters perform the building of the wooden kits. Usually one or two carpenters work on a Content 22, 25 or 26. One to three carpenters can work on a Content 28, 33, 35 or38. Each carpenter is specialized in performing a set of activities. The skills of both the carpenters and the furniture makers are summarized in table 2. From table 2 it can be concludedthat there is one all-round furniture maker specialized in the Content 28.

Piet Alberts, carpenter, 51 yearsWork isnt any more what it was in former days. Nowadays only few carpenters are left but they still expectfrom us that the same amount of work be done. It is clear that we cannot finish the yachts in time. In particular the repairing jobs are killing us. When we are working on a job, we have to change to other small job and doing repairing tasks frequently. All day long we have to run from one place to the other. Sometimes there is almost no work to be done; at other days there is not enough space for storing a yacht. Clearly, we often dont know what to do first. Im glad I will be 55 in four years. Than I can retire and enjoy my garden.

The engine man installs the engine and the engine foundation. This can be done after two daysof carpentry installation. Installing the fuel tanks, the fuel gauge and other engine attributes canbe done during the boarding and panelling of the saloon. However, installing the engine cannot take place at the same time when the carpenters are completing the interior. The exact timing of the installation of the engine is done by the engine man and the carpenters which co-ordinate their work in a rather informal way.The next operation is the installation of the wiring and the fastening/constructing of the keel which is performed by an electrician and a rig man. These two employees, who work closely together, are appointed in the assembly department.

The last production stage is the rigging of the yacht. The sequence of the tasks to be performed is informally arranged. The rigging includes the installation of the mast and preparing the yacht for use. In this stage the yacht is cleaned and a bottle of Dutch gin with a brass plate with the name Content on it, is put in the saloon. In some cases small damages are repaired during this stage. Finally, some attributes are put on the ship (Stickers, etc.). Four men who are employedin the assembly department perform the completion of the yacht.

DepartmentVarietyspacenumber ofemployeesmaximumoutput

polyesterof interest3 yachts348

Iron work-1 yacht155

Panelling/carpentryof interest6 yachts673

Furnitureof interest-363

completion-4 yachts(and harbour)7110

Table 3 Maximum output per year

With respect to the production process two routings can be distinguished. The above-mentioned sequence refers to the production of the Content 22-s, 22, 25 and 26 and is also called theclosed building. The Content 28, 33, 35 and 38 are produced according to a so-called openbuilding process. The difference between the open and closed building process lies in the moment the deck is fastened on the hull. During the open building production, carpenters first board the hull before the deck is put on the hull. During the closed building process, the deck is first fastened on the hull after which the panelling is done. Although the open buildingproduction is easier, half of the yachts are produced according to a closed building process.

VersionFurniture makersCarpenters

AbHenkKlaasJanAlPietJoopGertRob

M 22****

M 25****

M 26*****

M 28* (sp)***

M 33******

M 35****

M 38****

Table 2 Skills of Furniture makers and carpentersMain reason for this is the interior. When the hull is panelled first, there is the risk of the deck will not fitting on the hull exactly.

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Table 3 gives an overview of the capacity of the departments. In Content, the employees aredetermining to a great extent the number of yachts that can be built. The maximum output is (negatively) influenced by a one-sided mix of orders, because when a series of the same yachts has to be built, there is a shortage of moulds. As a consequence, the output is decreasing. In general, physical space is no problem in the company. The number of yachts to be repaired however is restricted because of the limited amount of space in the harbour.

Processing of ordersThe production of Content yachts is mainly based on individual orders. This implies that yachts are not kept in stock and that customers have to accept the entire throughput time with respect to the making of yachts. Clearly, the variety in the yachts being produced starts already at the beginning of the manufacturing process: this because the customer can decide on the colour of the banner on the hull. Some yachts however, are kept in stock. Especially the Content 28 and33 are sometimes built as demos because these yachts are sold more frequently than the othertypes of Content. In these cases customers have to accept the specifications of these demos(colour of the piping, engine, etc). The making of demos is only done when there is a shortage of

Freddy Snellius, satisfied customer, 60 yearsIve always wanted to have a sailing yacht. Unfortunately, I never had the money the buy one. At thebeginning of last year, I bought a polyester casco of Content and with the assistance of my family wesucceeded in finishing the boat. In this way we could afford having a sailing yacht

orders. Demos that are not sold are used as charter yachts (rental yachts). Furthermore, Sales are characterized by a seasonal pattern with a peak between October and March. Potential buyers of yachts often pay a visit to boot shows like the Dsseldorf show, the HISWA, and the Hamburg yacht show. Due to the throughput time, the delivery of yachts has a peak during March to June. Clearly, most of the time customers dont want to have their yacht delivered in the winter.

Production ControlProduction control of Content is characterized by five hierarchical planning levels: delivery planning (i), order acceptance (ii), production planning (iii), order release (iv) and procurement (v)

Delivery planningBy means of a delivery plan, Content defines for the upcoming year the delivery time for all the Contents to be built. In general, the delivery plan consists of Contents not sold yet. Main input for the delivery plan is the expected demand of yachts and the available capacity of the polyester department. A part of the delivery plan for 2000 is depicted in table 4. From table 4 it can be derived that Content plans to deliver a Content 33/33-c every three weeks, every week a28 and every three weeks a 22, 25 or a 26. According to this planning Content can built 46Contents in 2000. Besides this planning, Content is in the position to built a Content 22, 25, or26 between these yachts.Each accepted order is marked in the plan as being allocated to a customer. It is also possible to mark not-yet-sold yachts (the so-called demos). Seasonal fluctuations in demand are the mainreason for building demos. Sometimes, idle time is accepted however.

Week number

--456789101112-

33, 33-cXXX

28XXX

22, 25, or 26XXX

35X

Beside this, it is possible to built Contents 22, 25, or 26 in between the above mentioned version

Table 4 Part of the delivery planning

Order acceptanceCustomers place orders with or without a requested delivery date. For orders without a requested delivery date, the earliest possible delivery date is determined by the delivery plan. If the customer accepts this date, the yacht is marked as allocated to a customer in the delivery plan. If the customer doesnt agree with this delivery time, he is offered a demo. In some cases it is possible to build the requested yacht between the other yachts. This however, frequently leads to a shortage of production capacity for some time. In cases of a requested delivery time Content first examines whether this delivery time can be achieved. In cases where it is not possible to achieve the delivery time, a modified delivery time is passed on to the customer. The procedures being followed is in this case the same as outlined above.

Production planningOn this planning level customer orders are scheduled by means of a Gantt chart. This scheduling is done every two or three months and has a planning horizon of three to five months. The production planning is the basis for the weekly order release and for the procurement of parts. Besides this, the production planning is the backbone of the delivery planning, which is entirely based on the production plan.The production planning is made manually. All the departments as well as the supportingemployees are informed about the production plan. The warehouse purchases items and parts on basis of the production planning. When making the production plan, the polyester department is taken as a starting point because of the limited number of moulds. By controlling the polyester department, in fact all the operations performed by the other departments are planned. The furniture department uses the production plan for making a detailed schedule of the panelling and furnishing activities. Table 5 shows part of a production plan. In the columns are the weeks to be planned, the rows represent the yachts to be build as well as the main activities that need to be performed when making these yachts. From this, it can be concluded that operations related to a specific order can be considered as a chain of specific sub-activities that are fulfilled din a specific sequence. The furniture department however is an exception to this. This department works parallel to the production departments and produces parts to a certain extenton stock. This department therefore is not included in the overall production plan.

MonthAprilMay

Week number141516171819

22-028xxxxxxooooooaaaaaaaaaaaaaaaeeeeeee

28-021xxxxxxxxxxxxaaaaaaaaooooooeeeeeeeeeeeee

25-012xxxxxxxxxxxxxooooooaaaaaaaeeeeeee

33-34xxxxxxxxxxxxxxxxxxxooooo

28-022 demoxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxx=polyester; ooooo=iron work ; aaaa=paneling; eeee=completion

Table 5 Part of a production planning

The throughput time of a specific yacht depends, among other things, on the number of carpenters being available. Departments other than the panelling/carpentry cannot shorten their operations time.

Piet Harmsen, planner, 45 yearsPlanning of the operations is quite complex. By using some safety time I can control the throughput time.Especially the unexpected absence of employees often causes a lot of problems. A small research over the months December 92 and January 93 showed that from all yachts under production about 10% is in front of schedule and 65 % is behind of schedule. Deviations vary from two days to one and a half week. I really dont know how I can improve controlling the throughput time

9In making the production plan, the planner first takes into account the promised delivery time. With this information, the planner plans backwards in time from the assembly process to making the hull (polyester department). He furthermore uses the existing flexibility of the carpentry department to smooth capacity of the polyester department. Making the schedule is done by trial and error.The allocated throughput time used in the production planning consists of the operation timeplus an amount of safety time. The internal throughput time of each department is summed up in table 6. The amount of safety time used in the planning is necessary as a buffer for unexpected disturbances. These disturbances are caused by a lot of reasons like for instance unavailability of parts or absence of employees. Sometimes, unexpected repair orders for yachts play an important role. The amount of safety time for each department is one or two days. In the polyester department the safety time not being used, is allocated to the building of demo- yacht. In other departments the idle time is used for other activities like cleaning up andrepairing moulds.

VersionPolyester(days/3 empl)Iron work(days/1 empl)paneling(days/1 emplcompletion(days/1 empl)Total throughput time

M 225510525

M 251055525

M 2610510530

M 2810551030

M 3315551030

M 3515551540

Table 6 Throughput time (it is assumed that two carpenters are working at the same time on a Content 28, 33 and 35)

Order releaseReleasing production orders take place by means of an assignment form. For each order this form is made in eight-fold. On this form - besides some characteristics of the Content to be built- approved changes and add-ons, the throughput planning and the scheduled delivery time areaddressed. The original form is stored in the secretary's office. The other copies of the form go to the polyester department, the production manager, the warehouse/purchase department, the engine man, the rig-man and the electrician. The form sent to the polyester department,accompanies the yacht during the production process. The warehouse purchases expensiveparts, based on the information addressed on the assignment form in co-operation with the engine man, rig-man, and electrician. Examples of expensive parts are customer specific add- ons like navigation equipment, sails, mast, engine etc. When necessary, the furnituredepartment takes care of modifying panel kits in time according to customer specifications.

Figure 3 Throughput time of ContentReleasing the assignment form corresponds with the decision of releasing the order. This release

however cannot take place without checking the availability of capacity. Whenever there is a shortage of capacity or in case production is in front of/behind schedule, the assignment form istaken back and changed and released again to the departments. The form is also taken back when a customer has indicated that he wants to change the specifications of the yacht.

ProcurementThe procurement of parts is based on the production planning and the assignment forms. Material and parts are kept in stock except for the expensive and customer specific materials and parts. Inventory parts are reordered when the reorder point is reached. The amount to be ordered is related to thedemand/production of the parts.Customer specific and expensive parts usually arrive one week before they are needed in production. From the planning it can be derived that 5 to 10% of the yachts built have a delay because parts are delivered too late or are out of stock when they are needed. Although this problem can in many cases be solved, a lot of communication and co-ordination is needed when this occurs. Generally, production can proceed however. In the near future the procurement of parts will changedramatically because the management of Content is planning to decrease the number ofsuppliers. In the new situation the remaining suppliers have to deliver procurement-kits, consisting of the parts needed to build a specific type of yacht.

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