Name PRASHANT JAIN

PRN No. 1801016190232

MGT410-Operations Management
ASSIGNMENT MAX.MARKS: 30

1. Briefly mention the challenges and opportunities face by the Operations Managers’
in the current scenario. (5 Marks)
Answer:

The scope of Operations Management (OM) has changed significantly in the last several decades. Starting from
Re-order Point (ROP) to Enterprise Resources Planning (ERP) and Supply Chain Management (SCM), OM has
gone through a long way in terms of scope and techniques being used. JIT philosophy, lean production, and agile
manufacturing have significantly changed the ways how we design and analyze the operations. Recently, OM
and logistics fields get closer, since there is no way to separate those functions any longer from the operational
process perspective. Traditional OM’s focus is about to move from a function of the organization to the supply
chain, starting from suppliers of suppliers to customers of customers.
Along the supply chain, not only goods and services but also all sources of cash, credit, and information need to
be managed. Technological innovations are another facet of the discussion and the real power behind this
integration. It may not be wrong to express those trends in OM with a quotation as “Unite (integrate) and
conquer”.
The profile of the operations managers has also changed a lot through those developments in OM. Teaming,
cross-functional training, leadership, employee involvement, commitment, and couching are just a few skills to
name here to remain in demand in future. The measures for customer satisfaction on cost, response time,
variability, quality, flexibility and service in future’s operations are sure to be high and strict. To match the
expectations, well-integrated technological solutions would be only aid of OM practitioners.
In recent years, the new areas which are not considered traditionally within the OM field or the topics which
OM has showed limited attention previously have gained quite a bit of interest. Among those; design of goods
and services, utilization and compensation of human resources, maintenance, quality, and service sector can be
counted OM is a set of activities that creates goods and services through the transformation of inputs into
outputs. In the past, developments on scientific management, organizational behavior, quantitative modeling,
computing technology and Total Quality Management (TQM) have initiated significant changes on OM
respectively. In recent years, OM practices have seriously increased in the service sector. Logistics as activities
associated with the management of freight and distribution systems among the parties in the supply chain, is
highly a visibility partner of OM. Customer service, demand forecasting, inventory management, material
handling, order processing, plant and warehouse site selection are among the major logistics activities. Almost
all of those are very traditional OM subjects as well. This makes clear how recent developments help both OM
and logistics to merge. This is even more obvious with the definition of The Council of Logistics Management
(CLM): “The process of planning, implementing and controlling the efficient, effective flow and storage of goods,
services, and related information from point of origin to point of consumption for the purpose of conforming to
customer requirement.”
Both definitions highlight the scope of the chain as all type of flows moving from point of origin to point of
consumption. Basically, this covers all functions of the organization. After seen as disparate specialists for a long
time, both OM and logistics are unavoidable components of a value chain today as seen from the definitions
above. This makes OM responsible from all kind of interactions on a value-chain from supplier’s supplier to
customer’s customer and refers to a significant expansion on the scope of OM.
In contrast to the traditional division of the task and functions, today’s world runs towards to integration of the
functional areas with the collaboration of the technological advancements. The reasons behind integration are
as follows:

i. There is considerable interdependence between areas of logistical requirements.

ii. Narrow/restricted functional approach may create dysfunctional behavior and result with sup
optimum.
iii. Control requirements for each individual aspect of operations are similar.
iv. Significant trade-offs exist between manufacturing economies and marketing requirements. These can
be reconciled only by a soundly designed logistical capability.
v. Complexity of future logistics will require innovative arrangements.
All those works show that OM field has expanded from a function of the organization to an enterprise-wide
processes and even crossing the border of the enterprise to the all supply chain of the sector. Today, product
design is an integral part of OM; because it shapes heavily how to design our manufacturing processes and
determines our competitiveness. Marketing is important part of OM since knowing customer wants & needs on
the first hand is the first step towards to the competitive edge. HRM has strong influence on the operations,
because the programs like employee-involvement, operator ownership can’t be possible without it. On this new
era, the key word is integration. In contrast to old saying, “Divide and conquer”, the new substitute for the next
millennium is, “Unite (integrate) and conquer”.
Conclusion:
Process oriented organizational structures have initiated so many discussions related with jobs, measurement
and compensational systems, and corporate culture. One thing is clear that the idea is valid and applicable.
Recent developments also support this approach. Activity Based Costing (ABC), Statistical Process Control (IPC)
techniques, recent discussions on organizational theory, essence of SCM are all steps towards to this direction.
Technological innovations and tools like Internet, QR and ECR with ERP and SCM packages provide the backbone
for future developments on OM and logistics. Common trend on all those is the integration of traditional
functional tasks into one under a process serving to a specific objective, customer satisfaction. The measures for
customer satisfaction on cost, response time, variability, quality, flexibility and service in future’s operations are
sure to be high and strict. To match the expectations, well-integrated technological solutions would be only aid
of OM practitioners.

2. Explain the recent technologies used in product and service design. (5 Marks)
Answer:

Flexibility, Production time, and cost are key considerations in process design. Process selection and layout are
closely related. Layout decisions are influenced by decisions made in product and service design.

Work design focuses on the human element in production systems. Increasingly, managers are realizing that
workers are an asset and can contribute greatly to the organization’s success. Design decisions have strategic
significance for business organizations. Many of these decisions are not made by the operations manager.

Product and service design has typically had strategic implications for the success and prosperity of an
organization. Furthermore, it has an impact on future activities. Consequently, decisions in this area are some
of the most fundamental that managers must make. Organizations become involved in product and service
design or redesign for a variety of reasons. The main forces that initiate design or redesign are market
opportunities and threats. The factors that give rise to market opportunities and threats can be one or more
changes in:

➢ ECONOMIC (low demand; excessive warranty claim; the need to reduce cost)
➢ SOCIAL AND DEMOGRAPHIC (aging baby boomers; population shifts)
➢ POLITICAL, LIABILITY OR LEGAL (government changes; safety issues; new regulations)
➢ COMPETITIVE (new or changed products or services; new advertising/promotion)
➢ COST OR AVAILABILITY (of raw materials; components; labour)
➢ TECHNOLOGICAL (in product component processes)
The main focus of product and service design is customer satisfaction. Hence, it is essential for designers to
understand what the customer wants and design with that in mind. Marketing is the primary source of this
information. These typically include development time and cost, and the resulting product or service quality.
Quality, is high on the list of priorities in product and service design, having high quality was enough for a product
or service to stand out; now it is the norm, and product and service that fall below this norm are the ones that
stand out.

Designers must be careful to consider a wide array of legal and ethical considerations. Moreover, if there is a
potential to harm the environment, then those issues become important. Most organizations have numerous
government agencies that regulate them. Among the more familiar federal agencies are the Bureau of Food and
Drug, the Occupational Health and Safety Administrations, the DENR and various local agencies and NGOs.

The basic phrases that are used in product and design can be classifies as:

1) Idea Generator- product development begins with ideas.

2) Product specifications- involves detailed descriptions of what is needed to meet (or exceed) customer
wants, and requires collaboration between legal, marketing and operations.
3) Process specifications- alternatives must be weighed in terms of cost, availability of resources, profit
potential, and quality.
4) Prototype development- units are made to see if there are any problems with the product or process
specifications.
5) Design review- making any necessary changes or abandoning.
6) Market test- used to determine the extent of consumer acceptance.
7) Production introduction- promoting the product.
8) Follow-up evaluation- determining if changes are needed, and refining forecasts.

Service design begins with the choice of a service strategy, which determines and focus on the service, and the
target market. Service refers to an act, something that is done for the customers. Service delivery system. The
facilities, processes; and skills needed to provide a service. Product bundle. The combination of goods and
services provided to a customer. Service package. The physical resources needed to perform the service, the
accompanying goods, and the explicit and implicit services needed.

The guidelines for a successful service design are attributed as:

1) Define the service package in detail.

2) Focus on the operation from the customer perspective.
3) Consider the image that the service package will present.
4) Recognize the designer familiarity with the system.
5) Define quality for both tangible and intangibles.
6) Make sure that recruitment, training and reward policies are consistent with service expectations.
7) Established procedures to handle both predictable and unpredictable events.
8) Establish systems to monitor, maintain and improve service

The product and service design are a futile area for achieving competitive satisfaction. Potential sources of such
benefits include the following:
a) Increasing emphasis on component commonality.
b) Packaging products and ancillary service to increase sales.
c) Using multiple-use platforms.
d) Implementing tactics that will achieve the benefits of high volume while satisfying customer needs.
e) Continually monitoring products and service for small improvements.
f) Shorten the time it takes to get new or redesign goods and services to the markets.

The goal typically is to create a product design that meets all the customer’s requirements and is the least costly
to manufacture. They can be broadly defined as:
Modularity and robustness. Modularity is related to component commonality in that a standard or common
module is used to complete a variety of end items with the goals of cost containment and simplification.
Modularity can increase flexibility with respect to the firm’s ability to offer customized end items. Conversely,
the use of modular construction can have a limiting effect on the total range of customization that can be
offered. Robustness is the ability of a design or service to withstand external detrimental forces and still deliver
the desired functionality, or to deviate from the desired functionality only minimally. For example, many
products are designed to accept minor variations in electrical current; however, computers and other sensitive
equipment often require a surge protector.

Global standardization. These are practices by firms who have a global strategy to standardize products,
components, practices, and service offerings. Such standardization takes the form of designing and altering
products, parts, processes, and procedures to establish and use standard specifications and reduce the total
numbers of parts and materials used and products, models, or grades produced.

QFD is a methodology that shows relationships and dependencies on quality areas, product capabilities, and
product qualities as understood from the voice of the customer. The complexity of achieving each specific
characteristic is also considered. The house of quality (HOQ) is normally used for the management of QFD. The
HOQ is a multistage, structured process that relates customer-defined attributes to the product’s technical
features, to the necessary parts and components, to the processes used to build those parts and components,
and ultimately to a control process that monitors and assures the process is performing to specification.

3. Michael’s Engineering, Inc. manufactures components for the ever-changing notebook

computer business. He is considering moving from a small custom design facility to an
operation capable of much more rapid design of components. This means that Michael
must consider upgrading his CAD equipment. Option 1 is to purchase two new desktop
CAD systems at $100,000 each. Option 2 is to purchase an integrated system and the
related server at $500,000. Michael’s sales manager has estimated that if the market for
notebook computers continues to expand, sales over the life of either system will be
$1,000,000. He places the odds of this happening at 40%. He thinks the likelihood of the
market having already peaked to be 60% and future sales to be only $700,000. What do
you suggest Michael do and what is the EMV of this decision? (10 Marks)

Answer:

The EMV for the desktop systems is $620,000 vs. $320,000 for the integrated system. Therefore, Michael should
purchase the desktop systems.

4. Medanalysis, Inc., provides medical laboratory services to patients of Health Providers, a

group of 10 family practice doctors associated with a new health maintenance program.
 Managers are interested in forecasting the number of blood analysis requests per week.
Recent publicity about the damaging effects of cholesterol on the heart has caused a
national increase in requests for standard blood tests. The arrivals over the last 16 weeks
are given below.

Week Arrivals
1 28
2 27
3 44
4 37
5 35
6 53
7 38
8 57
9 61
10 39
11 55
12 54
13 52
14 60
15 60
16 75

a. Calculate the forecast for the next period using

a. Naive,
b. Moving average (considering 3 period) and
c. Exponential smoothing (alpha as 0.4).
Answer:
a) Naïve
b) Moving Average
c) Exponential Smoothening (Alpha = 0.4)

Initialization
Naïve Moving forecast for Exponential
Forecast Average Expo Smoothing
Week Arrivals Smoothing
1 28 28.00
2 27 28 28
3 44 27 27.6
4 37 44 33.0 34.2
5 35 37 36.0 35.3
6 53 35 38.7 35.2
7 38 53 41.7 42.3
8 57 38 42.0 40.6
9 61 57 49.3 47.2
10 39 61 52.0 52.7
 11 55 39 52.3 47.2
12 54 55 51.7 50.3
13 52 54 49.3 51.8
14 60 52 53.7 51.9
15 60 60 55.3 55.1
16 75 60 57.3 57.1
75 65.0 64.2

b. Calculate the next three period forecast using linear regression method.

Answer:

Week Arrivals Linear Regression

16 75 66.03
17 68.38
18 70.72
19 73.07

Arrivals
80

70
y = 2.3456x + 28.5

60

50

40

30

20

10

0
0 2 4 6 8 10 12 14 16 18
 c. Use forecast accuracy methods (MAD, MSE, MAPE and tracking signal) for the all the
methods and suggest the method of forecasting for the above data.

Answer:

Naïve Moving Average Exponential Smoothening

Error MAD MSE MAPE Error MAD MSE MAPE Error MAD MSE MAPE

-1 1.00 1.00 0.04 1.00 1.00 0.04

17 17.00 289.00 0.39 16.40 268.96 0.37
-7 7.00 49.00 0.19 -6.0 6.00 36.00 0.16 2.8 2.84 8.07 0.08
-2 2.00 4.00 0.06 8.0 8.00 64.00 0.23 -0.3 0.30 0.09 0.01
18 18.00 324.00 0.34 -1.7 1.67 2.78 0.03 17.8 17.82 317.64 0.34
-15 15.00 225.00 0.39 -6.7 6.67 44.44 0.18 -4.3 4.31 18.55 0.11
19 19.00 361.00 0.33 11.0 11.00 121.00 0.19 16.4 16.42 269.49 0.29
4 4.00 16.00 0.07 -11.3 11.33 128.44 0.19 13.8 13.85 191.81 0.23
-22 22.00 484.00 0.56 5.0 5.00 25.00 0.13 -13.7 13.69 187.42 0.35
16 16.00 256.00 0.29 8.7 8.67 75.11 0.16 7.8 7.79 60.62 0.14
-1 1.00 1.00 0.02 -12.7 12.67 160.44 0.23 3.7 3.67 13.48 0.07
-2 2.00 4.00 0.04 5.7 5.67 32.11 0.11 0.2 0.20 0.04 0.00
8 8.00 64.00 0.13 0.3 0.33 0.11 0.01 8.1 8.12 65.96 0.14
0 0.00 0.00 0.00 -3.3 3.33 11.11 0.06 4.9 4.87 23.75 0.08
15 15.00 225.00 0.20 2.7 2.67 7.11 0.04 17.9 17.92 321.26 0.24

3.13 9.80 153.53 0.20 -0.03 6.38 54.44 0.13 5.79 8.61 116.54 0.17

Suggested Method:

The method for forecasting, recommended is Moving Average since it has least errors as observed from the
table.

*** Note that only for the data for which you have both Actual and Forecast are known, we
can calculate the forecast accuracy. 10 M