OPERATION MANAGEMENT PRACTICUM
MEETING 1
PRODUCT AND SERVICE DESIGN
Product and service design is an effective corporate strategy that involves selection,
planning, and determination of a product, dan and then transfer the product into the production
phase. Decision tree is one of the methods for making decisions when determining product
design, whether to create a new product or to improve an existing one.
EXERCISE 1:
PT. Makmur Abadi Tbk has two options for selling wallets. The first option is to
purchase raw materials to produce and sew the wallets themselves, while the second option is
to buy the wallet from a manufacturer in Tasikmalaya and resell them.
If Mr. Rahmat, as the operations manager, chooses the first option (1), the company can
expect (a) to sell 600,000 units at a price of Rp 50,000 each with a probability of 0.3, and (b)
to sell 650,000 units at a price of Rp 38,000 each with a probability of 0.7. There is also an
analysis cost of Rp 2,100,000 associated with this option.Meanwhile, if Mr. Rahmat chooses
the second option (2) which is to act as a reseller for wallets, (a) sales of 850,000 units at a unit
price for Rp 45,000 with a probability of 0.4, and (b) sales of 950,000 units at a price of Rp
23,000 each with a probability of 0.6.
Which option will Mr. Rahmat choose? (guided by EMV)
EMV = Price per unit * Sales
Working Steps
Make sure you have already used text book Heizer Render.
1
(Help-user information-text book-Heizer Render).
2 Select module-Decision Analysis.
3 File-new-Decision Table.
Title: PT. Makmur Abadi Tbk (Fill in the company name as stated in the
question).
4
Number of alternatives: contains information (except probabilities) that is
available for each option. For example: sales, price, quantity of units, etc.
Number of nature states: contains the probability of occurrence for each
available option.
Row names: Alternatives 1, Alternatives 2, ….
5 Then, OK.
Change the word alternatives 1 to Sales.
6
Change the word alternatives 2 jadi Price.
Fill in the data according to what is stated in the question, including the
7
probability, the number of units sold, and the price.
8 Click SOLVE.
9 Formula EMV = price per unit x sales.
If there is an analysis cost, then the result of EMV - analysis cost will
10
yield the Final EMV.
Decision-Making Theory using the Expected Monetary Value (EMV) Formula - Decision-
making essentially involves the selection and determination of an alternative course of action
to solve the current problem.
The problem of decision-making under risky conditions is solved by choosing the decision that
maximizes the Expected Return or Expected Monetary Value (EMV).
STEP-BY-STEP ANSWER:
First Option
*Pay attention to the filling in this section, adjust it according to the question
Beginning EMV = price per unit x sales
= Rp 41.600 x 635.000
= Rp 26.416.000.000
Analysis cost = Rp 2.100.000
Ending EMV = Beginning EMV – Analytical Cost
= Rp 26.416.000.000 – Rp 2.100.000
= Rp 26.413.900.000
Second Options
*Click on edit data, then enter the second option's information as stated in the question.
EMV = price per unit x sales
= Rp 31.800 x 910.000
= Rp 28.938.000.000
Conclusion:
Mr. Rahmat should choose the second option, which yields the largest EMV of Rp
28,938,000,000.
Individual Exercise
Kriya Company is a company that manufactures bags and has 2 options for their
production units. The first option is to immediately produce backpacks and tote bags, while the
second option is to give time to the Research Design Team to complete their research on
another type of bag.
If Ms. Ria as the operations department manager, chooses the first option (1), the
company can expect (a) sales of 3,000 units for Rp 45,000 each with a probability of 0.6, and
(b) sales of 2,000 units for Rp 80,000 each with a probability of 0.4. On the other hand, if Ms.
Ria chooses the second option (2), which is to wait for the Research Design Team to complete
the research on the new type of bag, the company expects (a) sales of 5,000 units at a unit price
for Rp 50,000 and a probability of 0.7, as well as (b) sales of 6,000 units for Rp 90,000 with a
probability of 0.3. In the second option, there is an analysis cost of Rp 1,000,000.
Which option will Ms. Ria choose? (guided by EMV)
Answer
First Option
*Pay attention to the filling in this section, adjust it according to the question
EMV = price per unit x sales
= Rp 59.000 x 2.600
= Rp 153.400.000
Second Option
*Click on edit data, then enter the second option's information as stated in the question.
Beginning EMV = price per unit x sales
= Rp 62.000 x 5.300
= Rp 328.600.000
Analysis cost = Rp 1.000.000
Ending EMV = Beginning EMV – Analytical cost
= RP 328.600.000 – Rp 1.000.000
= Rp 327.600.000
Conclusion :
Kriya Company should choose the second option, which yields the largest EMV of Rp
327.600.000.000.
