ll submit a discussion of the operationalization of a business opportunity (Section II), specifically Starbucks adding Alcoholic beverages to the menu

5-1 Final Project Milestone Two: Operationalization

Module Five

Ibrahim Mohammed

Southern New Hampshire University

Abstract

This paper is a thorough discussion on the operationalization of Nestlé’s business opportunity in smart vending machines. Nestle identify’ s the overall potential cost for the project as well as the work breakdown structure, key milestones, potential obstacles, risks, and risk mitigation strategies. You will also find a diagram that provides a visual of the three main functions that are involved with the launch of this new opportunity.

Potential Costs

The cost of operations for Nestlé’s smart vending machines may vary depending on the location of the machine, but for the most part, should be relatively similar. There will essentially be an initial investment with ongoing expenses, as well as taxes, servicing, and maintenance.

The total ongoing expenses for this vending machine include the cost of each smart vending machine, insurance, administrative cost, the cost for stock maintenance, monthly rent to the business owner for wherever the machine is located, and any miscellaneous expenses. The cost of each machine is $10,000. Liability insurance for that one machine will cost about $2,000. The cost of stock maintenance will be about $3,000. The administrative cost will be $2,000. The monthly rent to the business owner where the machine is located will cost about $800. Taxes for this machine will be range from about $3500-$4000. Servicing and maintenance for each machine will be about $3,000, and any miscellaneous expense will be no more than $200. Therefore the total cost for one machine is about $25,000.

There are a few risk and benefits for Nestle if they make this investment.

Risks include:

· Vandalism to the state of the art equipment

· Inaccurate restocking schedules

· Slow startup (Leonard, 2017)

Benefits include:

· Inventory control lowers the risk of out-of-stock situations

· Intelligent order tracking maintains supply in the workplace

· Automating the distribution of products eliminates employee downtime and frees up IT staff for more important things (IVM, n.d)

Nestle plans on investing in 5 smart vending machines per state. Therefore, that would mean a total of 250 units will need to be manufactured and managed by the initial launch date. This investment will cost about $2.5 million. That being said, it will take a structure operations team to successfully process this new design. Nestle will collaborate with project teams, marketing, and logistics to determine the workload breakdown.

Work Breakdown Structure

A work breakdown structure establishes a logical framework for identifying the required activities to complete a project. (Stevenson, 2018) Nestlé’s smart vending machine project is supported by the below functions.

Narrative

The project management team is responsible for initiating and kicking off the project. They monitor the process of the project to ensure there are no gaps, and if there are, then they can be resolved after evaluating the root cause. This team is responsible for any decision making regarding the information systems being used to develop the machines, and are responsible for preparing all the documents needed to successfully launch the project.

The marketing function is responsible for ensuring the advertisements for these smart vending machines are sufficient and will attract consumers. They must establish a budget, and ensure they are managing it properly so they do not exceed their limits. Any neglect in this area can cause issues for the project team as well as other areas in the business. This team is also responsible for researching the market to determine the best location for these smart vending machines. Once the targeted market is decided, they must decide on project scheduling techniques.

The logistics function is responsible for preparing the delivery schedules and tracking. They have to consider what is the best way to distribute their products to each vending machine and if they will utilize third-party shippers. This function is also responsible for material handling. They must find ways to minimize material handling costs while looking for ways to automate. This function will have the most amount of employees due to the fact that Nestle will be producing 250 units of smart vending machines. Therefore there will be a number of employees that will need training for this new innovation. Logistics will be responsible for ensuring all workers are properly trained and consistently searching for ways to mitigate waste.

Key Milestones

The key milestones for this smart vending machine process are simple but very important because they provide the project management team with key events that show the project is moving forward.

The first milestone would be to complete the project planning. This is a key event because once there is a plan, it makes it easier to take action. There isn’t much that can be done with structure without a plan. The second milestone is the installation of all the smart vending machines. This is key because once the machines are developed and ready for service, it is one step closer to entering the market. The third milestone would be for marketing to release the advertisements for these smart vending machines. This is important because it ensures that the consumers are aware of Nestlé’s smart vending machine services, and promotes the new ways of shopping.

The deliverables for this project include quality checklists, work performance measurements, regulatory actions. Quality checklists and regulatory actions are along the same lines because Nestle must ensure the product sold with this new service is quality and abides by the rules of the FDA. Quality is built in during product development according to the requirements of the consumers and following all food safety and regulatory requirements. Nestlé’s R&D network applies in this "Quality by design" to all of their products and services. (Nestle, n.d) A new rule that Nestle will ensure they follow is the main FDA rule that applies to this smart vending machine design which requires vending machine labeling. This rule requires operators who own or operate 20 or more vending machines to disclose calorie information for food sold from vending machines, subject to certain exemptions. (FDA, n.d)

The main resource requirement for this project will be the people involved. All resources need to be established in order for this project to be a success. These resources include the project manager, quality manager, logistics and scheduling manager, HR manager, delivery truck drivers, procurement manager, machine technicians, and all other employees that will assist in the development of this project.

All milestones, deliverables, and resource requirements are each significantly important in ensuring that this project meets its scope, time, and cost objectives. Even if one area was missing, this could cause potential obstacles or roadblocks during the design process.

Potential Obstacles

Throughout this project implementation, Nestle is bound to go through some sort of obstacle, the real question is what. This project will have many obstacles and impediments to meeting the scope-time-costs objectives. A few obstacles to be considered are defective machines, a project being under budget, advertising failures, transportation delays, or staff injuries. Each of these obstacles may carry a bigger risk than another but regardless can hurt the process of this project. The level of severity in which I would rate these obstacles from most impactful to least impactful are as follows:

1) Defective Machines

2) Project under Budget

3) Advertising Failures

4) Transportation delays

5) Staff injuries

Risk Mitigation

Risk mitigation is proactively taking steps to reduce obstacles such as the few I listed above. Some risks are unforeseen, while others are foreseen, but nevertheless, it is up to the project management team to ensure that they prepare for these obstacles. No matter the level of severity the obstacle may be, the project must still perform mitigation actions to reduce risk. For each obstacle mentioned above, there are a couple of mitigation actions that can be taken.

For defective machines which has the highest level of severity, it would be the Quality manager’s responsibility to resolve the obstacle. The manager can utilize quality checklists to determine the root cause of why the machine was defective. If this project becomes considered as under budget, this would fall in the responsibility of the project manager and cost manager. Both managers can mitigate this risk by creating a contingency reserve that provides safety money in the case of this obstacle. Advertising failure is marketing responsibility. Marketing can also create a contingency reserve for this risk because if an advertisement fails to provide the results they need, Nestle can use the reserve to develop a new advertisement.

For transportation delays, this is an obstacle that can be easily resolved. The scheduling manager is responsible for ensuring that all trucks are scheduled and loaded in a timely manner. If delays begin to occur, the simple fix would be to adjust the time schedule to better accommodate the orders based on the trends that were documented.

Finally, staff injuries during the process of designing these smart vending machines are very likely. It is up to HR to ensure that all employees are trained on the importance of safety and where to go in case of an emergency. HR must ensure that every truck and every production site has first aid kits, as well as an emergency plan. All of these risks are not for certain, but they are possible, therefore Nestle must ensure that they prepare their team for any circumstance.

References

FDA. (n.d) Menu and Vending Machines Labeling Requirements. Retrieved from https://www.fda.gov/food/ingredientspackaginglabeling/ucm217762.htm