Conestoga College Institute of Technology and

Advanced Learning
Kitchener, Ontario
Course No: OPER 3000
Section # 1

Course Name: Operations Management

Professor: Ravi Sharma
Case/Field Project/Assignment Field Study Report
Due Date: 11/30/15 Time: 1:00pm
Submission Date: 11/30/15 Time: 1:00pm

Group # 16
Personal Work Statement
I/ We, the undersigned:
warrant that the work submitted herein is our work and not the work of others
acknowledge that we have read and understood the College Policy on Academic
Dishonesty
acknowledge that it is a breach of College Regulations to give or receive
unauthorized and/or unacknowledged assistance on a graded piece of work
acknowledge that I am / (we are jointly and equally) responsible for the work
submitted herein
Name (Print/Type)
Student #
Signature

Kelcey McCuaig

6723555

Kaitlyn Mackie

6681886

Rachel Wilkinson

6852123

Table of Contents
Executive Summary

pg. 2

Selection of Organization

pg. 2

Company information

pg. 3

Summary of Visual Audit

pg. 4

Summary of Interviews

pg. 4

10 OM decisions

pg. 6

Conclusion

pg. 14

References

pg. 15

Appendices
Appendix One

pg. 16

Appendix Two

pg. 17

Appendix Three

pg. 18

Appendix Four

pg. 19

Appendix Five

pg. 20

Appendix Six

pg. 22

Appendix Seven

pg. 24

Appendix Eight

pg. 27

Appendix Nine

pg. 28

Executive Summary
On Monday November 23rd we were able to take a tour of the Air Liquide warehouse located in
Cambridge. Written permission of our selection of this company can be seen within appendix
one. Before attending our tour, we prepared a visual audit checklist which is attached in appendix
two, we used this checklist to assess the basics of the warehouse and paired this checklist with a
questionnaire to find out more about how Air Liquide functioned using of the 10 OM decisions.
After completing our tour, we came to the consensus that overall Air Liquide operated very well
according to the 10 OM decisions. We were thoroughly impressed with their layout and how the
setup of their warehouse was designed to drastically reduce picker times for orders. They also
operated within a very effective reordering system considering lead time and safety stock.
However, we believe that some items should come from different suppliers as their lead time was
several months due to an international supplier.

Selection of organization
When narrowing down our selections for our field study, we wanted to consider companies that
we knew we would be able to obtain permission from for a visual audit, to ensure that we were
able to complete our report on time. The three companies we considered before doing this field
study were Paul Davis Systems, The City of Waterloo, and Air Liquide, we considered these
specific companies as each of us had some sort of connection within these organizations. Paul
Davis Systems is a franchised restoration company located in Kitchener. The City of Waterloo is
a government organization in charge of many things within the community including

maintenance, recreation buildings, landscaping and more. However, after thoughtful

consideration we ultimately chose Air Liquide to do this field study because we felt it had the
most relevant operations applicable to what we have learned in this course. Air Liquide was the
company we believed that we could collect the most useful information from, since they operate
with a lot of inventory in a warehouse setting.

Company Info
Air Liquide is the world leader in gases, technologies and services for industry and health, they
sell both gases and hard goods and have been building its leadership ever since the business was
founded in 1902. Day after day, innovation after innovation, they have grown continuously to
conquer new markets. Air Liquide pursues a strategy of profitable growth over the long term,
based on three pillars: operational competitiveness, targeted investments in growing markets, and
innovation. This strategy is shaped by three major long-term trends: industry globalization and
resource constraints, evolving consumption and demographics and, lastly, the growing appetite
for innovation of individuals, businesses and society as a whole.1 On November 17th, 2015 Air
Liquide announced an agreement that they had purchased Airgas for a total of $13.4 billion
(US$).2 This means that Airgas will become a unique partner, and together Air Liquide and
Airgas will continue to advance Air Liquide current strategy based on profitable growth and
innovation over the long-term. Air Liquide has forecasted for the companys healthcare business

1 Air Liquide Profile. (2015, January 19). Retrieved November 28, 2015, from
https://www.airliquide.com/group/profile
2 Air Liquide announces agreement to acquire Airgas. (2015, November 17). Retrieved
November 28, 2015, from https://www.airliquide.com/investors/air-liquide-announcesagreement-acquire-airgas-0

to be expected to double in the next five years to $6 billion with a major focus to be in India.3
They carry a wide variety of Welding products and they serve over 90,000 customers in several
industries in Canada and has over 2,200 employees.

Visual Audit Summary

Arriving at Air Liquide we were able to make a lot of positive observations solely based on the
visual aspect of things, before we went deeper with Steve and Craig using our questions. We
were very impressed upon arrival and the questionnaires further reinforced their impressive
operation. The Air Liquide showroom, offices, and warehouse were all very tidy, organized and
well run. The Layout in the warehouse was well thought out and practical, and it truly reduced
any risk of waste (time) when preparing orders. The warehouse was well labeled, and well
stocked. Visually we saw no issues, so the next step was to jump into questions we had prepared,
this will be summarized next.

Interview Summaries
For our interview questionnaires we opted to interview three people from Air Liquide (Appendix
Three). We interviewed two managers who were present during our tour and worked within the
Warehouse. Steve who is the Shipping supervisor, and Craig who is the Central distribution
shipping supervisor. They were both very knowledgeable about the operations at Air Liquide,
and were able to answer the questions we had prepared. In the time we were there we got to
experience their corporate culture first hand. Their relationship with the staff was very positive
3 Jacob, S. (2015, November 26). Air Liquide to double its healthcare business in five years.
Retrieved November 28, 2015, from
http://www.livemint.com/Companies/Rbs3gCdV5QQJWE0rvVFh3J/Air-Liquide-to-double-itshealthcare-business-in-five-years.html

and it seems like an enjoyable and empowering place to work. As well as the managers we also
interviewed one of the office employees, Marylou. Marylou works in Accounts Receivable and
was very helpful with the office side of things because of her first hand knowledge. A copy of
these questionnaires and their answers can be found in appendix three.

From the questionnaires we have gathered plenty of insight into the inner workings of Air
Liquide. They have implemented many systems to ensure productivity is as high as it can be. The
Layout of the warehouse is done to reduce the overall time is takes to fill an order in the
warehouse. Items that are ordered most frequently are in the bays closest to where orders are
prepared, and as you work back towards the back of the warehouse there are less common items.
Along with this, Air Liquide have labeled every bin across and down the warehouse to ensure
items are found easily (appendix four). When Orders come in they have bin numbers printed
directly on them so that the pickers can easily locate items needed. On top of working to be
efficient, Air Liquide is also cost effective. Once orders are picked they go to the employees who
package and prepare the orders, here they use a program that assesses the cheapest current
courier to ship their packages. They package and ship roughly 250 orders a day, with only a 1%
error, when these errors occur Air Liquide believes in fixing the problem immediately on the
premises that the customer is always right.

Air Liquide believes in cross training their employees in order to be able to practice job rotation
within the warehouse, because of this they are able to reduce the amount of hiring externally they
do, and reduce the amount of shifts needed to fill all of the orders in a day. The warehouse is

scheduled with three shifts in order to ensure all orders are filled and to reduce the uncertainty of
orders not getting filled in one shift due to things like snow storms or bad traffic with couriers.

The 10 OM Decisions
Goods and Services Design
Air Liquide provides high quality goods and services to their customers. They use a make or buy
decision when it comes to the goods and services they offer. They sell both hard goods like
welding material and parts such as cylinders, as well as these hard goods they also sell different
types of gases such as helium, propane and even oxygen. They select their products from outside
suppliers like Lincoln and Blue Max based on price, quality and guidelines they expect of their
suppliers. They choose their suppliers based on these factors because they want to sell high
quality products to their customers while also being cost efficient. By scoping out what supplier
has the best prices they can compare each supplier to see what sells the products for less. For
example; they purchase their welding wire from Italy because it is of a higher quality the best
welding wire in their opinion. They chose to purchase welding wire from across the world
because they know the quality is the best and it's worth it for them since they got to create their
own welding wire from Blue Max and it will keep the customers coming back and purchasing
more. However, we believe they should be looking at local suppliers because the lead time on
this item is far too long making for a high risk of stock out. They also look at the guidelines, this
means that some products need specific parts as well as certified parts and if the supplier doesn't
offer the correct part they won't purchase from them. Overall we would say their goods and
services design is functioning well, they are ordering things cost effectively as well as based on
customers direct needs.

Quality Management
Air Liquide would rate their quality a 9 because they have less than 1% error on orders to their
customers. However, when these errors do happen their policy is that they must be dealt with
immediately, Air Liquide believes that the customer is always right. When filling cylinders with
gases Air Liquide uses a system called Servitrax to keep track of all their cylinders. When they
first get a shipment of new cylinders they place a UPC barcode on them to keep track of what
stage the cylinder is in. In the case where contamination happens to occur they know what exact
bottles were apart of the contamination. Servitrax keeps track of the cylinder for when they are in
process and finished, it also allows customers to keep track of their orders process. In the
warehouse they do inspection on incoming materials and products, if they find a product is
damaged they will remove the product out of the warehouse and send it back to the supplier. If a
customers order arrives damaged Air Liquide will issue a full refund or resend/replace with a
brand new product. As well as inspecting on incoming items, they do a second inspection as the
new products are being put away in the warehouse, we believe that this step could be eliminated
as it falls within one of the 7 wastes. The second inspection seems redundant, they should have
trust in the first inspection to be done the first time. We inquired about their quantity of inventory
they hold and if they have systems in place to deal with perishing or obsolescence issues. Due to
the nature of the business they dont need to worry about perishing items, but they do review for
obsolescence. Since the majority of their items are purchased and stocked for specific things they
do tend to move parts well enough for inventory to not be an issue, however if an item doesn't
sell for 3 years they will dispose of it.

Process and Capacity Design

The process that Air Liquide carries out when filling a typical customers order is receiving a
paper copy of the customer order, these orders are complete with bin numbers to make the next
step very easy. The pickers locate the items from the customer order within the warehouse and
then they bring the order to the packaging station (appendix five). At the packaging area they
would package it with protective packaging to help reduce damage and add delivery labels, it is
here they review courier costs to ensure the package will be sent the cheapest method and they
are then sorted into bins by courier. The bins once full are loaded into the truck and the items are
sent out for delivery. Air Liquide uses white boards big customers like Aecon, these whiteboards
are located at the front of aisles and these large orders are gathered underneath on pallets
(appendix six). This makes it easier to fill the orders because when a new shipment comes in
they can easily put aside the products these companies order on a weekly basis to a designated
spot for that customer. There is no set number on their capacity, since they are a warehouse they
say when the racks are full they know they are at full capacity. The warehouse is currently
running at a 90-95% capacity utilization rate; this means that they are effectively using their
space for their inventory. They do change their level of capacity depending on demand, and they
have forecasts in place to assess how much inventory they will need at any given time. The two
methods they use to manage demand are a system which they called MinMax when a quantity
level goes towards the minimum level it triggers a re-order which will order the quantity needed
to be in maximum quantity level again, or as we learned in class an EOQ. Each of their products
within the warehouse has its own EOQ and reorder point, as well as a safety stock established
depending on the lead time associated with that product. Secondly, they do sometimes receive
insights from sales representatives that tell them when there a large order being placed so they

ensure they will have enough product ready for those orders. Overall we were thoroughly
impressed at the process in place to fill orders, they have a very organized and efficient system in
place. However, some items had such a high lead time that their safety stock was large for these
items, we would suggest trying to find a more local supplier in order to reducing stock and
perhaps even increase the frequency of the orders.

Location
Air Liquide moved to their current location 2 years ago. They choose this new location because it
allowed them to have both the distribution center as well as the filling plant in one place while
abiding with zoning requirements, due to the danger of working with compressed gases they can
only be within a certain distance of schools and residential houses. The new Cambridge facility,
which includes a filling plant, a distribution center, a showroom and an administrative office,
represents a two-million-dollar investment in the region and will more effectively serve the
Southwestern Ontario market in industrial gases and welding products this location is the only
warehouse/distribution center Air Liquide has in Ontario4. Some factors that were important was
the localization the building had, it is located in Cambridge which is halfway between two major:
Toronto and London. The new facility is local for all their customers as well as it has an easy
access route to both west and eastbound 401 for their trucks and couriers. Air Liquide
implemented the Center of Gravity Method when searching for their next location by locating
their retailers and then determining best area to move to. Since they only have one main
distribution/filling plant they need to consider the distance between themselves and their
retailers. Although they considered their retail stores when selecting this location, they should
have also considered proximity to suppliers, as previously mentioned they do have some
4 http://www.airliquide.ca/en/air-liquide-invests-in-new-cambridge-state-of-the-art-facility.html
9

suppliers that are a very far distance away that does cause some issues with lead times in their
inventory.

Layout Design
The layout that Air Liquide implements is a Warehouse Layout. They have created a very
organized and impressive layout for their inventory and this is the area where we were most
impressed. Their inventory is stored on shelves that are all labeled to make finding parts much
easier to find when they need to, left to write they are labeled by letters, than front to back they
are labeled numbers (appendix seven). When orders come in the pickers are able to easily locate
items because each item on the order is complete with these bin numbers. Along with this bin
labelling they have organized the items within the warehouse based on popularity, items ordered
frequently appear at the front closest to the pickers to reduce the time needed to fill orders. They
have not had to change the layout yet as they just opened this warehouse 2 years ago and find the
way they have it to be very efficient. A problem they mentioned about their warehouse is that
they are sometimes starting to run out of storage space and that they have had to store some
inventory on the floor until there is room on the shelves. This is an issue that could be perhaps
fixed by holding less inventory in the warehouse and moving more towards a leaner system.

Human Resources and Job Design

When asked about hiring Steve and Craig told us that they dont hire very often, but when they
do it is usually internal hiring. The times when they do need to hire they have written job
descriptions and these are placed in the newspaper and on the internet (appendix eight). They do
not tend to have seasonality so they do not need to hire additional staff often, however they do

10

hire one student in the summer which is generally to cover for employees taking vacations.
When they do need to hire someone Craig said that he will conduct the interview and then if
need he will get a second opinion on the person from the HR department. Ongoing training is
required for each employee every year, employees are expected to do at least 25 hours of training
per year, they can choose to do training in a variety of subjects such as WHMIS, dangerous
goods, forklift operation, gases safety etc. They do practice job rotation so employees can easily
switch tasks when needed. Employees in the warehouse seemed very motivated to be working as
Steve and Craig seemed to make them all feel empowered and have a good corporate culture.
Orders vary too much to do by time and size to have a standardized time expected, but the goal
for the pickers in the warehouse is to do about 1500 orders per month.

Supply Chain Management

Air Liquide outsources all of its products from different vendors, but their main purchases are
from Lincoln Electric. Some key products they purchase are welding machines as well as parts
for these machines, and welding wire. They select their suppliers based on the prices the supplier
may offer, although they want to be cost efficient they also want to offer great quality in the
products they purchase. Air Liquide does all of its purchasing through catalogues and fax, the
order size is based on the quantity demanded by customer orders. This means they purchases all
of their inventory like parts, wire, welding machines, etc through catalogues and fax machines
they don't do any of it online. They pay for their purchases by certified cheques when they send
their formal purchase order to the supplier. Overall we would say their supply chain is good, they
have quality suppliers and do their best to reduce costs on every order.

11

Inventory, Material Requirements Planning and JIT

Air Liquide forecasts their demand based on the amount that has been ordered in the past. They
use a MinMax system to order inventory, essentially they are using an economic order quantity
with established reorder points for the items in their warehouse. With this system when a
quantity level goes towards the minimum level they order the quantity needed to be at maximum
desired quantity level again. The have custom made welding wire that they order because of the
quality, however it comes all the way from Italy. When ordering the welding wire they use the
lead demand strategy. Since it takes eight weeks to get to their warehouse from Italy they order it
in large quantities knowing that people who purchase the wire buy it very quickly and also in
large quantities because it is such a good quality product, because of this they need a large safety
stock as well as frequent orders (appendix nine). They hold quite a bit of inventory in their
warehouse, and we believe moving more towards a TPS leaner system could benefit them and
cut their costs. They have the forecasting available to implement a just in time (JIT) system by
increasing their order frequency and decreasing the order size to reduce the amount of inventory
held in the warehouse.

Intermediate and Short-term Scheduling

The employees that are working in the warehouse everyday are on three different shifts. These
shifts include 8:00am-5:00, 8:30- 5:30, and 9:00 to 6:00. There are three different shifts
scheduled because everyday they ship two trucks out at 4:30p.m. having three shifts makes it
more manageable for the shipments to go out on time, or if there is a problem everyone isnt
leaving at 5:00 and leaving the problem with the shipment unresolved. By having three shifts it
allows employees to have their choice in which shift they want to work. Having a shift that stays

12

later helps to ensure the shipments for the day get sent on their way smoothly, or problems are
fixed without having to rush. The work in the warehouse is scheduled based on orders that need
to be shipped. The shipments go out every day at 4:30 p.m. so there are certain things that need
to make it onto the truck at the end of everyday and some employees work is scheduled around
this demand. We see this as an effective system to deal with uncertainties and would suggest they
keep using this scheduling system.

Maintenance
Air Liquide measures productivity by doing monthly reports, these reports consist of how many
orders were filled by this employee and how long it takes to fill them. Each month they pull
reports on each employee to see how many orders they filled and how long it takes, based on
these results they can see how productive their employees are. If there numbers are too low or
not in the range they want them to be they will then determine what they can do to increase
productivity. Ways they can improve productivity when the numbers arent meeting expectations
they can skill training, reward system, employee empowerment as well as if a manager needs to
get involved. These few changes can help achieve results in improved quality and capacity as
well as continuous improvement. Inventory maintenance occurs by checking products for
obsolescence, by disposing of products that do not sell for three consecutive years. Maintaining
their employee performance is done by requiring employees complete at least 25 hours of
training per year, this helps the company to keep up to date and continually improve.

13

Conclusion
In conclusion we believe that Air Liquide functions very well within the systems we have
learned in this course, they comply well with the 10 OM decisions. We only have a few small
suggestions that could reduce the amount of waste that occurs within the company. If they use
closer suppliers, to establish a better just in time system, as well as reduce the amount of quality
inspections they could create a leaner organization.

14

References
Air Liquide announces agreement to acquire Airgas. (2015, November 17). Retrieved
November 28, 2015, from https://www.airliquide.com/investors/air-liquide-announcesagreement-acquire-airgas-0
Air Liquide Profile. (2015, January 19). Retrieved November 28, 2015, from
https://www.airliquide.com/group/profile
Jacob, S. (2015, November 26). Air Liquide to double its healthcare business in five
years. Retrieved November 28, 2015, from
http://www.livemint.com/Companies/Rbs3gCdV5QQJWE0rvVFh3J/Air-Liquide-todouble-its-healthcare-business-in-five-years.html

15

Appendix One

16

Appendix Two
** Visual audit with original notes is attached on the next page

17

Appendix Three
**Three interviews are attached, we used a general questionnaire and they answered the areas
they were able to.

18

Appendix Four

19

Appendix Five

20

Appendix Six
21

22

23

Appendix Seven

24

25

26

Appendix Eight

27

Appendix Nine

28