OPERATIONS MANAGEMENT

MANVI BHATT BMS 2B 20131

QUES 1. What is Technological Forecasting? How it plays a role in new product development?

ANSWER. Technological Forecasting (TF) is the study of new trends, radical new technologies, and
new forces that may emerge as a result of the interaction of elements such as new public concerns,
national policies, and scientific discoveries. Many of these forces are outside individual companies'
control, influence, and knowledge.
Technology foresight is a method of contributing to strategic planning by combining creative
thinking, expert opinions, and alternative scenarios. Although the future is virtually by definition
uncertain, expert judgments or opinions are used in predicting and foresight activities.
Experts can be utilised individually or in groups. To provide a consensus perspective, a spectrum of
ideas, or maverick views, many strategies might be used. Emerging technology analyses and their
ramifications inform key decisions at all levels, from multinational to individual organisations.

Technical Forecasting becomes highly essential because of the following reasons:

 Improve communication across diverse communities, such as the government, politics,
various industries, and the research and technology sectors.
 It assists organisations in being well-informed about the drastic shift that is going to take
place in the near future. It also gives an estimate of when the projected change will occur.
 It helps to keep people updated about future technology advancements, which helps to
maintain a stable relationship with them.
 It increases an individual's or company's confidence in their ability to present their ideas to the
authorities and the general public.

Technological forecasting can play a very essential role in Product Development:

 MARKET ANALYSIS: The importance of TF in determining new business prospects has grown
in recent years. In actuality, market forces typically dictate the kind and pace of technological
advancement. As a result, study of future technical capabilities and markets for those skills
must be done in tandem to be effective. Because of the importance of defining potential
markets for innovative new products and services and because of the shortcomings of
traditional approaches, it is necessary to turn to approaches such as those embodied in the
concept and techniques of technology forecasting. By combining projections of market needs
and advances in technology, relevant technology forecasts can assist corporate management
in better aligning R&D efforts with potential business opportunities.

 DEVELOPING AND SCREENING IDEAS: Any company that wants to produce a new product
and is affected by technological change will necessarily engage in technology forecasting with
every resource allocation decision. Technological forecasting studies that identify
technologies with the greatest potential can substantially aid in the development of research
programmes.

 DEVELOPMENT OF MARKETING: Technology forecasts evaluate which technological

advancements will result in higher sales, increased profits, and satisfied customers.
Technology forecasting, when done correctly, can help to rationalise the R&D process by better
targeting R&D activities and tying technical developments and market opportunities together.
  CONCEPT DEVELOPMENT AND TESTING: A technology's life cycle is usually divided into
multiple stages. The parameter estimation of a technology's life cycle curve is used to
forecast growth curves. At each point of the life cycle, the growth curve forecasting approach
is useful for calculating the upper limit of technology growth or decline. This type of
forecasting can also be used to predict when a technology will reach a specific stage in its life
cycle.

QUES 2. Refer to on service forecasting. “Service forecasting is challenging”. Justify this

statement.

ANSWER: It is basic that in the present information driven world, the assistance area keeps on
developing more perplexing than any other time. With the influx of consumer data, businesses like
retail and special service providers need to have a better mechanism for demand forecasting for the
following reasons:

● To further develop their client support

● To remain in front of the contenders
● To astutely involve their recorded information on purchasers to design systems for future
patterns.
● To guess when the interest will be high and lay out a drawn-out model that can help in business
development.

As a result, service providers can eliminate their reliance on instinct and intuition for decision-making
by using a service forecasting model. Service forecasting, on the other hand, confronts significant
obstacles in developing a forecasting model that can assist them in dealing with the current
situation.

The corporate climate is becoming increasingly complex.

 Anticipating services is more challenging than forecasting products.

For organisations that sell items, one of the primary goals of demand forecasting is to
determine the most cost-effective inventory levels. They must, however, put a significant
amount of money into personnel training and certification. This necessitates having enough
qualified staff on hand as well as ensuring compliance with regulatory regulations. Employing
and training qualified employees is both costly and time-consuming, therefore service-based
businesses must plan ahead more than product-based businesses with more flexible output
levels.

 Unusual demand patterns in various situations

It has been clearly demonstrated that demand varies not only on a weekly, daily, or hourly
basis, but also on a 15-minute period. Collecting and managing such a large amount of data is
a difficult task in and of itself.

 Service Sales Forecasting

Demand can be dependent on a wider range of variables in service-oriented businesses. While
a product-based company must focus its research on a certain sort of product, such as
laptops or a specific type of vehicle, service-based companies look at the big picture and
 utilise macro-forecasting methodologies to forecast future business demands. For example,
an information technology supplier may be more interested in historical statistics and future
estimates for the information technology and computer industry as a whole than in demand
for a certain brand of computer or software.

 Demand Forecasting Can confuse Correlation with Causation

Demand forecasting can frequently generate an overlap between demand pattern correlation
and the reasons of demand fluctuations. Service retailers may employ approaches to infer
customer behaviour patterns from demand shift correlations and link to external events on
occasion. This may lead people to conclude that demand shifts are to blame and that this is
the genuine explanation.
 Lack of Adequate, Accurate, and Timely Demand Data
As previously stated, gathering appropriate, accurate, and timely demand data is a time-
consuming and difficult task most of the time. When big data contains bad data, it can cause
major issues for businesses that rely on it to create and strengthen customer connections.
This is a huge issue for service-oriented businesses because they must collect a lot of
information about their customers' preferences, which makes handling such data difficult.

QUES 3. Refer to the case on “Marriott Room forecasting”. Refer to the data in demand column. Use
an appropriate method to Forecast the demand for Saturday. What is the value of RMSE.

ANSWER:

QUES 4. Answer the following:

A. Within a short few month between the summer of 2019 and early 2020, Tesla added more
than $100 Billion to its market cap. Do you believe that Tesla’s stock market valuation
making it the second most valuable car company globally is rational or do you think it is a
hyped up overvaluation?
B. What business model is Tesla pursuing? How is Tesla’s business model different from
traditional car manufacturers?
 C. Historically the automotive industry in the United States has been identified by high barriers
to entry. How was Tesla able to enter the automotive mass market industry?

ANSWER:

A. By conventional measures, Tesla's valuation is completely out of sync with the rest of the auto
industry. Tesla has a price-to-earnings ratio (P/E) of 1,200, which implies it has a market
capitalization of $1,200 for every dollar of earnings. Ford has a price-to-earnings ratio of 22.74, while
GM has a price-to-earnings ratio of 17.84.

Tesla also doesn't sell nearly as many cars as the competition, which it now outperforms in terms of
valuation. Tesla sold slightly under 500,000 cars worldwide last year. In 2020, GM sold more than five
times that amount in the United States, while Ford sold around 800,000 F-Series pickups. According
to investors and analysts, Tesla's production capacity will increase dramatically in 2021 as new
manufacturing factories open in Berlin, Germany, and Austin, Texas, come online.

Many people feel that demand for Tesla automobiles will continue to grow, especially in China, where
the electric vehicle maker has already done exceptionally well. It also benefits from widespread
interest in electric car stocks, as tightening emissions regulations around the world provide a clearer
picture of a future auto industry dominated by zero and low-emission vehicles.

It has retained its leadership position in an electric car market that is anticipated to grow rapidly in
the near future. Tesla has the ability to make money outside of its principal automobile business,
even if such auxiliary enterprises have yet to materialise. A future autonomous taxi service, an energy
storage unit, and software advancements like Tesla's long-awaited "full self-driving" mode might help
the business reach previously unimagined levels of profit.

B. In comparison to its competitors, Tesla has a distinct business model. Their primary goal is to
solve issues, and they are never bound by traditional methods and conventions. Musk claims that he
conducts no market research and instead designs items from the ground up using a first-principles
approach (that is, reducing problems to the fundamental parts that are known to be true, and start
building from there). Tesla is mainly a vertically integrated firm, unlike more traditional automobile
manufacturers that outsource components and rely heavily on third-party suppliers.

Tesla has built a value chain that includes everything from upstream research and development to
battery and electric vehicle manufacturing to downstream battery software; hardware chip and
software design for full self-driving (FSD) capability and autopilot; and a dense network of
supercharging stations (free to all Model S and Model X owners), as well as sales and service—all
done in-house. Tesla's patented supercharging station network allows any Tesla vehicle to travel
from coast to coast with ease. Tesla's business strategy differs from that of traditional automakers
in various ways, including:

 Direct-to-consumer sales through the company's website (www.tesla.com) and delivery

facilities. Tesla does not utilise auto dealers and makes online ordering easier by offering a
restricted number of options. This simplifies online buying while also reducing manufacturing
complexity due to the limited number of variants compared to more traditional carmakers.
  Social Network: Tesla's website (www.tesla.com) is a social media platform where users may
communicate with one another and with Tesla itself, rather than just a communications
device. Elon Musk's blog is also available on the website, where the CEO routinely updates the
public on corporate and technical developments, as well as resolves issues. Elon Musk also
has over 31 million Twitter followers.

 Marketing costs are low: Tesla's marketing expenses were negligible for the first several years
because Musk believed that all of the company's resources should be concentrated on
enhancing the product. Nonetheless, much like Apple in its early days, the Tesla brand has a
cult following. Tesla's marketing costs are low by industry standards, despite the fact that they
are no longer nil in 2020.

 Service model for vehicles: While OTA software updates have revolutionised much of the
traditional car dealer service strategy, Tesla is also transforming other areas of the vehicle
service paradigm. Tesla has only produced about 800,000 cars in total; more crucially, EVs
require far less maintenance than typical ICE automobiles. Open-source innovation is number
six. Tesla makes its patents available to anyone who is interested in helping to set a new
standard in the automobile business. Elon Musk's ambition is to use car electrification to
hasten the transition to sustainable transportation. Furthermore, he believes that Tesla's open-
source mentality will foster continuing innovation and aid in attracting the greatest engineering
talent from across the world. Patents, according to the Tesla CEO, tend to stifle rather than
encourage innovation.

All of these improvements in the business model, as well as new and innovative production and
distribution procedures, have made Tesla as well-known and effective as it is now, positioning it to
win the EV race in the future.

C. Tesla took a novel way to breaking into the market. Instead of focusing on building a relatively
affordable car that it could mass-produce and market, it focused on creating an attractive car that
would generate demand for electric vehicles. This was his initial strategy and vision for the business.
1. Construct a sports automobile.
2. Put that money toward building an automobile that is cheap.
3. Put that money toward making a car that is even more inexpensive.
4. Provide zero-emission electric power generation choices in addition to the foregoing.

The fact that the $30,000 Model 3—the approximate price range of petrol-powered sedans preferred
by the US middle class—is being marketed as Tesla's first mass-market product highlights one of the
major roadblocks: cost. Tesla's past offers, as spectacular as they were, were priced in the $70,000-
plus range and targeted at the wealthy. They are a visible statement of eco-awareness if you have the
means, but they are not everyday drives for the middle class.

The cost problem is caused by issues of scale. Being an electric vehicle manufacturer is costly, in
part because there is such a small market for them. As a result, it makes sense for businesses to
concentrate on the higher end of that market in order to optimise profitability. However, following that
technique ensures that the market remains tiny, creating a cycle.

Since then, Tesla has made a number of measures aimed at establishing large-scale production and
retail infrastructure, lowering per-unit costs. The most important of these is its ongoing initiative with
Panasonic to establish a "gigafactory" for producing batteries, the single most expensive component
of an electric vehicle. It is attempting to increase the EV market by supporting additional discoveries
through open-source ideas, as well as building and lobbying for more EV charging stations and
infrastructure.

Elon Musk credits autonomy and electrification as the two technological discontinuities that allowed
Tesla to enter the car industry and scale up to mass production. This, combined with all of the
previously mentioned unique business model aspects and its ability to innovate, made Tesla a fan
favourite, allowing it to enter the highly competitive mass market competitive industry.

QUES 5: Explain why scheduling personnel in a service operation can be challenging.Claims

received by an Insurance Company are entered into the database at one station, and sent to another
station for review. The processing time (in minutes) required for each general type of claim is
shown below.
Currently, Bill Frazier has 10 claims to be reviewed. In what order should he process the claims so
that the entire batch can get into the system as soon as possible? How long will it take to process
the 10 claims completely?

ANSWER: Businesses in any industry require schedules to guarantee that workflows run effectively
and that clients' needs are met on time. However, a number of roadblocks can prevent proper
personnel scheduling.
The obstacles that get in the way of a productive business day are referred to as scheduling issues.
Employee unavailability to poor scheduling systems are only a few examples. So, here are some of
the most common scheduling issues that every business owner may encounter:

 Employee shortage
 Overscheduling
 Unfair scheduling
 Shift swapping
 Employee vacation
 Employee turnover

Jobs order as per johnson’s rule and timings: