NMIMS Global Access

School for Continuing Education (NGA-SCE)

Course: Operations Management

Answer 1

Location Decision and its importance

Location refers to the choice of region and Location decision means selecting a particular site for setting
up a business or factory.

Location decisions are related to the choice of appropriate geographical sites for locating various
manufacturing and/or service facilities of an organization. Location Decisions are an essential part of
designing a supply chain for a business or firm. The choice of location has direct impact on the
operational functions of an organization. For instance,

 Location decisions determine the flow of materials from the raw material suppliers to the
factories, and finally to the customer.
 Location also potentially affects the ability to generate sales and deliver customer service.
 Location decisions affects the overall profit and efficiency of a firm.

For businesses in some sectors, location is really very important. An ideal location is one where the cost
of the product is kept to a minimum, with a large market share, the least risk, and the maximum social
gain. Such location facilities very close to these marks provide quicker response and better customer
services and eventually generating more revenue and profits.

Location Planning and Decision criteria for Hospitality setup

In reference to a location decision for setting up operations of a Large Hospitality Setup like a Resort it is
important to have a clear picture of what you have and what you want in the future. Operation
managers of the firm need to evaluate intermediate solutions to arrive at an optimal location of facilities
and for this purpose, Location Planning is the key to address these issues which provides the needed
criteria and techniques to study the location problem.

The selection of the location is influenced by a number of factors. Here are some factors that affects the
location decision and should be considered while choosing the best location for a Resort:

1. Market related factors

2. Cost related factors
3. Regulatory and policy related factors
4. Other factors.

Sub factors of each main factor is shown in the figure below:

 Market-related Factors
The most important factor that will influence the location decision is the existence of the market for the
resort’s hospitality services. Locating facilities close to the market helps firms not only reduce
operational costs, but also serve their customers better. The firm can provide just-in-time delivery,
respond to changes in demand and react quickly to field or service problems with market proximity.

Availability of raw material will significantly affect the overall cost of the system, as the transportation
cost and distribution cost of the material will be less, hence the profitability be more.

Availability of skilled staff and labor is also one of the important factors in Resort services. Because the
hospitality sector requires great managing skills, house-keeping skills, cooking skills etc, so the firm will
be required with skilled staff and location should be preferred where the skilled people are available.

Quality of the infrastructure will include

 availability of services like, Electricity, water, gas, drainage, and disposal of waste,
communication network, medical facilities, etc
  availability of amenities, like personal transport, gym, swimming pool, sports court, etc
 space size
 parking
 visibility of the resort
 Easy access to Road networks, Train networks, etc

Competition for the resort location decision is like to check out competitors in area to see how they
represent themselves. Going on their hotel website or social media accounts and looking at how they
deliver their services at different price ranges can give inspiration to the brand.

 Cost related factors

It captures the desirability of competing locations on the basis of the cost of the operating costs.
Factor costs of inputs includes the logistics and distribution costs. These costs are simple to
measure, direct and tangible in nature.
Cost of service includes labor wages. It may also contain other costs, such as shipping costs or
raw material costs or rent of the place.
Taxes and other tariffs includes the taxes like GST, import or export duties etc.
Currency and exchange rate fluctuation means the value of country’s currency against other
higher value currencies. When there is exchange rate fluctuations the value of one’s country’s
currency decreases or increases that leads to inflation and higher prices of commodities
eventually affecting the market and services.

So, keeping in mind the above cost related factors, the location decision for the resort will be
taken where there is low cost availability of inputs and services.

 Regulatory and Policy related factors

Resort Firm should be aware of the political and economic environment of the proposed
location as these factors might affect the smooth running of the system setup. Firms should
ascertain that the proposed location does not violate any local regulation and laws. The laws
and regulations concerning the recruitment of employees and the disposal of affluents have to
be carefully studied while selecting the location .
The factor that will increase the attractiveness of the location includes:
 Good-quality governance
 Availability of free markets
 Public finances
 Free access to markets
 Tax holidays
 Low interest loans
 Infrastructure support
Thus, the resort firm can prefer to locate their units in these places where they can enjoy govt. policies
with less barriers.

 Other factors
Climatic conditions such as humidity, temperature and atmosphere, and the geology of the area should
be considered while selecting a location for the resort.

Safety requirements it should be ensured that dangerous units like chemical factories, nuclear plants etc
are located in remote areas away from the resort location where the damage will be minimal in case of
an accident.

In Culture the major elements of culture are material culture, language, aesthetics, education, religion,
attitudes and values and social organization.

These factors provide a certain assurance to the firms that operating system can work without much
difficulty, as the key input for the system, in the form of human resources, will be readily available.

Thus, in conclusion, while making location decision for the hospitality setup, these decision criteria are
taken into consideration for selection of the location from among competing candidates.

Answer 2

Inventory
The term inventory refers to any idle resource that can be put to some future use. It includes all the
items, raw material, goods, merchandise, and materials held by a business for selling in the market to
earn a profit.

Inventory Management
Managing Inventory invariably amounts to handling a large number and variety of items. Thus,
Inventory Management is a practice of tracking and controlling the inventory orders, its usage and
storage along with the management of finished goods that are ready for sale.

Improper inventory management can lead to an increase in storage cost, working capital crunch,
wastage of labor resources, increase in idle time, disruption of the supply chain, etc. All this leads to a
reduction in sales and unsatisfied customers. Therefore, inventory management is an important aspect
of the business which the management cannot afford to ignore. It is therefore obvious that managers
need alternative methods and levels of control while dealing with a multitude of items in the inventory.
Inventory Management Techniques or Selective Control of inventory achieve this objective.

Inventory management Techniques

Selecting the right inventory management technique for any business is no easy task. The faster the
business grow, the more difficult it becomes to manage the business inventory. This is why setting the
right foundation from the very start is so critical. In this guide, there are some techniques that can be
used for best inventory management.

 ABC Analysis
The ABC analysis is based on the cost (or value) of items consumed. As the name suggests, inventory
bifurcation occurs in three categories.

A – Most Expensive the items in A category of inventory are closely controlled as it consists of high-
priced inventory which may be less in number but are very expensive.

B – Moderate Expensive includes medium value item and are relatively lesser expensive inventory as
compared to A category so control level is also moderate.

C – Least Expensive contains low value item which require lesser investments so the control level is
minimum.

 Just in Time
In Just in Time method of inventory control, the company keep only the needful products required
during production, the company doesn’t own overstock products. This way, they save on inventory and
storage costs. The company orders further inventory when the old stock of inventory is close to
replenishment. This is a little risky method of inventory management because a little delay in ordering
new inventory can lead to stock out situation.
 Material Requirements Planning (MRP) Method
In this method the manufacturers order the inventory after considering the sales forecast. MRP system
integrates data from various areas of the business where inventory exists. Based on the data and
demand in the market, the manager would carefully place the order for new inventory with the material
suppliers.

 Vital Essential and Desirable (VED) Analysis

This model controls and maintains the spare parts of the inventory. It is necessary to maintain such
inventory whose absence may slow down the production process.

 Fast, Slow, and Non-Moving (FSN) Method

This method tracks the most used products and least used products in the inventory. So this method
classifies inventory into three categories, fast-moving inventory, slow-moving inventory, and non-
moving inventory. The order for new inventory is placed based on the utilization of inventory.

Application of these techniques in Medical Stores

Inventory Management has a vital role in the Healthcare Industry. The Inventory Management
Software provides the detailed information on medicines batches & stock. It is also very useful in
maintaining the doctor’s equipment and It would protect the store from potential damage. Overall, it
takes care of inventory, purchases, sales orders, payment, etc.

With the help of Inventory Management software, medical store can keep precise and updated stock
records especially for pharmaceuticals and surgical equipment.

To understand how these techniques are useful in medical store inventories, a table is presented as
below to explain its application.

Inventory Management Technique Application in Medical Stores

ABC Analysis To keep track of expensive, moderate and least

expensive medicines and surgical instruments.

MRP Analysis To track all the medicines and equipment that are
 needed to be ordered according to the demand
or less stock.

To alert when the expiry of medicine is coming.

To track current stocks of the medicines.

VED Analysis To track the spare parts of the medical store like
basic facilities of the store including extra room
for stock management, etc.

FSN Method To keep track of the medicines that are sold the
most and which are not.

Thus, the Inventory Management System is the ideal answer for all requirements and necessities of
emergency clinics and facilities as it provides real time tracking, condition of the inventory and enables
one to use inventory efficiently.

Answer 3

(a)

Quality
Quality is the totality of features and characteristics of a product or service that bear on its ability to
satisfy given needs. In other words, it is the degree of excellence. It determines the extend up-to which
an object or entity (e.g., process, product, or service) satisfies a specified set of attributes or
requirements.

Modern approach to Quality

Modern definition of quality is given by Joseph M. Juran. According to Joseph M. Juran, “The Quality of a
product or service is the fitness of that product or service for meeting or exceeding its intended use as
required by the customer.”

He defined quality as ‘Fitness for use’ in terms of design, conformance, availability, safety, and field use.
His notion “fitness for use” extends the definition of quality to a broader domain.

Various Dimensions of Quality

For the given case of Restaurant business it is observed that customers are more exposed to different
types of restaurant settings, they have developed a complex set of attributes for selecting a restaurant
for their excellent dining experience. To understand these attributes there are 9 dimensions of quality
that are explained below:

 Performance
It refers to a product's primary operating characteristics. This dimension of quality involves
measurable attributes; brands can usually be ranked objectively on individual aspects of
performance like
 Health
 Fresh ingredients and food
 Vibrant flavors
 Junk and bad calories free food
 Availability of international cuisines
Etc

 Features
Features are additional characteristics to meet the basic performance of quality that enhance
the appeal of the product or service to the user. Features for a restaurant can be
 Customization of the food
 Variety in the menu
 Choices in seasonings or sauces
 Discounts etc
 Reliability
It the expectation that the product will perform satisfactorily for a period of time. It may include
  Hygiene food
 No shortage of ingredients
 Efficient supply chain
 Consistent flavors

 Conformance
Conformance is the precision with which the product or service meets the specified standards
like
 Striving in fast food industry while offering smart food choices
 High resemblance
 Ensure the standards of hygiene and food temperature and safety as claimed

 Durability
It the measure that how long the products last before it requires a replacement. Since a
restaurant business offer edible items, their shelf life is not much.

 Serviceability
It mentions the ease with which the product can be serviced like
 Highly cooperative staff
 Ensure customer ease at every level from choosing meal to finalizing the order
 Explaining all the services that a restaurant offers like Separate lounge, restroom,
part halls etc.

 Aesthetics
These are the various feel-good factors that a customer evaluates before making a choice. It
may include
 Attractive interior
 Pleasant ambience at restaurants
 Soft music at the background

 Perceived quality
Customers may have a host of subjective perceptions such as
 Brand name
 Image
 Impact of advertisement

In conclusion, this is how the quality of a restaurant will help its owner to create a brand name, attract
more customers, create its good will, earn more profit and hence an overall successful restaurant
business in the area.

(b)
Bill of Material for a restaurant business
A bill of materials (BOM) is an inventory of all the parts, raw materials, ingredients, the quantities of
each and any other relevant information needed to manufacture a product. A BOM for a restaurant
business is essentially consists of

 the complete list of each ingredient that is used in the final product
 Fruits
 Vegetables
 Spices
 Different types of flours
 Oil, etc

 the components that are directly used in providing restaurant services

 Furniture
 Cutlery
 Air conditioners and fans
 Light Bulbs, etc

 the quantity of each component needed to make one unit of the product
 Amount of ingredients added to the different recipes
 Amount of furniture required
 Amount of machines, etc

 the material and machines used in preparing the final product

 Microwaves
 Ovens
 Juicer Mixers
 Chimney, etc

 Units of measure, etc

In a nutshell, it is the complete list of all the items that are required to build a product. A BOM is
sometimes also referred to as a product structure, assembly component list or production recipe.

Bill of Material has multiple purposes including:

 Pricing: A labor and overhead element can also be included in the bill of materials. By listing
each raw material and the associated labor you can derive a cost for your products. Then
you can compare that to the market price to ensure you will be producing a profit!

 Production: The BoM is the basis for manufacturing the product. It is used for pick-sheets
and routing.
  Purchasing: The BoM is used to forecast the raw materials demand based on the quantity of
finished products that needs to be produced.

A BOM provides an efficient methodology to represent complex product structures having multiple
levels and numerous items. Codes are used to denote the level.

A variety of formats are available for BOMs.

 Single level BOM consists of a list of all components that are directly used in the parent item.

 Indented level BOM is kind of a multi-level BOM that exhibits the final product as Level 0 and all its
components as Level 1. The Level number increases as one proceed down to the tree structure.

 Modular level BOM are useful to represent product structure with several varieties.

To understand how a different level BOM looks like, here is the representation of BOM of one
component of restaurant i.e. dining hall.

Single level BOM

Item code Item description UOM Quantity per product

1010 Chairs each 40
1020 Tables each 10
1030 LED Bulbs each 12
1040 Air conditioner each 3
1050 TV set each 1
1060 Paintings each 6
1070 Speakers each 4

Multi-level BOM

Item code Item description UOM Quantity per product

101X Chairs
1011 Wooden chairs: White each 20
1012 Wooden chairs: Beige each 20
102X Tables
1021 Wooden table: White each 10
1022 Wooden table: Beige each 10
103X LED Bulbs
1031 Syska LED Bulbs: White each 3
1032 Syska LED Bulbs: Yellow each 3
1033 Philips LED Bulbs: each 3
 Green
1034 Philips LED Bulbs: Red each 3
104X Air Conditioner
1041 LG Air Conditioner: each 1
Gray
1042 LG Air Conditioner: each 2
White

So, this is an illustration of different level BOM.

BOM is the backbone of any business. Having a BOM eliminates doubt from the business floor as It
offers benefits like calculating total costs of the manufacturing a product, it makes plans for raw
materials, workstations, and employees and maintain consistent standards for a product across the
business.