MASTER OF BUSINESS ADMINISTRATION

SEMESTER 2 2021/2022
SET 3

FINAL TEST

OPERATIONS MANAGEMENT AND DECISION ANALYSIS

ZCMA6062

LECTURER: DR. KHAIRUL ANUAR MOHD ALI

PREPARED BY: ARVEENA ARUMUGAM

MATRIX NO: ZP05616
1) Define operations management. Will your definition accommodate both
manufacturing and service operations? Why are organizations becoming more global?
(10 marks)

Operations management is the set of activities that create value in the form of goods and
services by transforming inputs into outputs. This includes processing design to arrange a
building’s layout, functional, cost-effective product design, supply chain deliveries and
networks, inventory for products, capacity or fluctuations in a product or service demand and
product and service quality. Manufacturing organisations and service organisations are the two
basic categories into which all organisations can be placed. Despite the fact that both categories
have an OM function, these distinctions present particular difficulties for the operations
function due to the differing nature of the output. These two types of organisations can be
distinguished from one another by two main factors. First, manufacturing companies create a
material or tangible good that can be kept in stock until the client needs it. Service providers,
on the other hand, create immaterial goods that cannot be made beforehand. Second, clients
rarely interact directly with the production process in industrial businesses. Distributors or
retailers are the points of contact with customers. IKEA's operations management is a good
concept that involves both manufacturing and service operations. The IKEA concept guides
the way IKEA products are designed, manufactured, transported, sold and assembled. Starting
from manufacturing, the product design team designs stylish products that can be flat-packed
efficiently, which has been a unique selling proposition compared to other rival furniture
companies. Brilliant supply network design, which enables us to locate stores of an appropriate
size in the most effective place, and innovative supply chain management by arranging the
delivery of products to the store, helps to improve the logistics and transportation. Effective
and efficient operations management strategies are the foundation of IKEA. They ensure
quality products and services to customers and efficient organizational practices to deliver cost-
effective goods and enhance brand recognition.
2) Identify and explain the four basic global operations strategies. Give an example of
each strategy. State two examples of cultural and ethical issues that face operations
managers in a global environment. (10 marks)

There are four main basic global operations strategies available: international, multi-domestic,
global, and transnational. Each strategy involves a different approach to trying to be sensitive
to (1) costs and efficiencies on the one hand and trying to be responsive to (2) variations in
customer preferences and market conditions across nations. Responding or not responding to
these two pressures of cost and local cultural conditions determines which of the four types of
international strategies will be pursued. Companies who are pursuing an international strategy
don't concern about expenses or cultural adaptation. They make minimal to no changes while
they try to market their items abroad. Harley Davidson does not need to reduce prices or modify
the motorcycle to meet local motorcycle standards while selling motorcycles abroad. Because
a Harley is unique compared to the motorcycles made locally, people from other nations like
to purchase one. Buyers are willing to pay more for a Harley's distinctive American appearance,
sound, and power. Next, the company employing a multi-domestic approach places more
emphasis on market responsiveness to local needs than cost or efficiency. Netflix adapts the
content that is broadcast on its channels in dozens of nations, including New Zealand, Portugal,
Pakistan, and India, rather than attempting to force all of its American-produced shows on
viewers throughout the world. When a company adopts a global strategy, it compromises local
market response in favour of a focus on lower costs and increased efficiency. An opposite of a
multi-domestic strategy is this one. A global strategy emphasises the need to acquire low prices
and economies of scale by delivering essentially the same products or services in each market,
despite the possibility of some small product and service variations in different areas. For
instance, Microsoft makes the identical software applications available in several languages
around the world. Lastly, a company that employs a transnational strategy looks for a balance
between a multi-domestic and a international strategy. Such a company seeks to strike a balance
between the necessity to adapt to local preferences in multiple countries and the desire for
lower costs and greater efficiency. Large fast-food franchises, like McDonald's and Kentucky
Fried Chicken (KFC), for instance, rely on the same brand names and basic menu items all
over the world. These businesses also give in to regional preferences. For instance, you can
buy wine in McDonald's in France. Given that French diets heavily feature wine, McDonald's
strategy makes sense.
3) How can global operations improve the supply chain? How do global operations attract
new markets? What is the difference between a firm's mission and its strategy? (10
marks)

The supply chain can often be improved by locating facilities in countries where unique
resources are available. These resources may be expertise, labour, or raw material. For
example, world athletic shoe production has migrated from South Korea to Guangzhou, China
as this location takes advantage of the low-cost labour and production competence in a city
where 40 000 people work making athletic shoes for the world. Global operations also able to
reduce response time to meet customers’ changing product and service requirements.
Customers who purchase goods and services from Canadian firms are increasingly located in
foreign countries. Providing them with quick and adequate service is often improved by
locating facilities in their home countries. Besides that, international operations require
interaction with foreign customers, suppliers, and other competitive businesses, international
firms inevitably learn about opportunities for new products and services. Mission captures at a
high level what you will do to realize your vision. And strategy lays out the goals, big themes
of works and go-to-market approach that will help you achieve both the vision and mission.
Mission is what you will do or build to achieve your vision. It puts your vision in pragmatic
terms and helps guide strategy. You can use it to define success and how you will
differentiate yourself from others in the same market. Our mission at Aha! is to help companies
build software that their customers love. Strategy is an operational plan — the measurable
goals, high-level initiatives, and other work items that will help you achieve your vision and
mission. Setting strategy provides focus. These are guardrails for decisions about what you
should work on now and what should wait. Anything that moves you closer to your vision and
mission should be prioritized.
4) Identify the ten determinants of service quality. Describe five of them in a sentence or
two each. What is the difference between conforming quality and target-oriented
quality? (10 marks)

1.Reliability - is the consistency of performance and performing the service within the
expected/standard time

2. Responsiveness - the availability of the employee to provide the service / respond

immediately

3. Competence - the fitness of the employee's skillset and knowledge to perform/meet the
minimum requirements of the service

4. Access - convenience to reach the service; convenience of location or modes of

communication or ease of reaching the service

5. Courtesy - the level of customer service being given by the staff; the behaviour,
communication skills, approachability, gestures, even appearance of the staff while performing
the service to the customer

6. Communication - being able to convey information that is received and comprehended by

the customer, even after the service has ended

7. Credibility - believability and accountability of the staff performing the service

8. Security - level of safety, comfort, freedom from danger experienced by customer

9. Understanding/knowing the customer - being able to address the customer's needs and
exceeding their expectations, or forecasting their needs

10. Tangibles - physical evidences of the service

Conforming quality is meeting the minimum quality standard/requirements of the product

using the current process while Target-oriented quality is being able to perfectly meet the target
quality of the product as a whole and also tackles TQM wherein you will also consider
improving the process while meeting the accurate target.
5) The definition of quality management has evolved from "quality by inspection"
toward "delivering competitive advantage to the firm." Discuss the various definitions of
quality management and described their applications. (10 marks)

Quality management is the act of overseeing all activities and tasks needed to maintain a
desired level of excellence. This includes the determination of a quality policy, creating and
implementing quality planning and assurance, and quality control and quality improvement.
Quality management ensures that an organization, product or service is consistent. It has four
main components: quality planning, quality assurance, quality control and quality
improvement. Quality management is focused not only on product and service quality, but also
on the means to achieve it. Quality management, therefore, uses quality assurance and control
of processes as well as products to achieve more consistent quality.

The most famous example of QM is Toyota's implementation of the Kanban system. A kanban
is a physical signal that creates a chain reaction, resulting in a specific action. Toyota used this
idea to implement its just-in-time (JIT) inventory process. To make its assembly line more
efficient, the company decided to keep just enough inventory on hand to fill customer orders
as they were generated. Therefore, all parts on Toyota's assembly line are assigned a physical
card that has an associated inventory number. Right before a part is installed in a car, the card
is removed and moved up the supply chain, effectively requesting another of the same part.
This allows the company to keep its inventory lean and not overstock unnecessary assets.

Some Others Definition of Quality Management:

1. Fit for Purpose

Perhaps the most useful business definition of quality is "fit for purpose". This definition
evolved in quality management circles. It's useful because it's applicable to any process, service
or product. However, it can be difficult to measure. It's easy to think of examples of fit for
purpose. If the purpose of an aircraft is to be fast, efficient, comfortable and safe — then that's
the definition of a quality aircraft. Fit for purpose is a practical and flexible definition that's the
cornerstone of most quality management initiatives.
2. Conformance to Requirements
Quality is often measured in terms of conformance to requirements. For example, business
users define requirements for a sales system. The sales system is developed and its quality is
measured against the requirements. This definition is ideal for quality assurance teams that
need to validate processes, systems, services and product quality. Working from requirements,
they can easily validate conformance and identify non-conformance.
The problem with this definition is that requirements may offer a biased and subjective view
of quality. In many cases, requirements represent little more than the ideas of business
stakeholders. There's often no objective validation that these ideas will yield a quality result.

3. Quality Is Cost
Traditionally, product quality was thought of in terms of material costs. A watch that's made
of gold is higher quality than a watch made of plastic. High quality sheets have a thread count
of 180 or higher. High quality hand moisturizer has a high Shea butter content. This type of
quality definition works well for some simple products. However, it's inapplicable to
technology, art and culture. The history of technology is filled with cheaper products that have
higher quality.
6) As the firm strategies vary from low-cost to response to differentiation, how does this
impact the criteria used for selection of a supply-chain strategy? What are the special
requirements of supply-chain systems in global environments? Identify the reasons for
making in the make-or-buy decision. (10 marks)

With the low-cost strategy the primary selection criterion is cost. When using the response
strategy, the selection criteria are capacity, speed, and flexibility. For differentiation strategy,
the supplier is selected based on product development skills. Special requirements of the supply
chain system in global environments include flexible enough to react to sudden changes in
parts availability and currency rates, etc.; able to use latest information technology to manage
shipments; and staffed with specialists to handle duties, customs, political issues in other
countries.

A make-or-buy decision refers to an act of using cost-benefit to make a strategic choice

between manufacturing a product in-house or purchasing it from an external supplier. It arises
when a producing company faces diminishing capacity, experiences problems with its current
suppliers, or sees changing demand. The make-or-buy decision compares the costs and benefits
that accrue from producing a good or service internally against the costs and benefits that result
from subcontracting. For an accurate comparison of costs and benefits, managers need to
evaluate the benefits of purchasing expertise against the benefits of developing and nurturing
the same expertise within the company.

The reasons for making in the make-or-buy decision include increase or maintain size of the
company (management preference); lower production cost; unsuitable suppliers; ensure
adequate supply; utilize surplus labour facilities and make a marginal contribution; obtain the
desired quality; remove supplier collusion; obtain a unique item that would entail a prohibitive
commitment for a supplier; maintain organizational talents; and protect proprietary design or
quality.
7) What is the fundamental distinction between design capacity and effective
capacity? Provide a brief example. Distinguish between utilization and efficiency.
Why is the capacity decision important? (10 marks)

Design capacity is the maximum theoretical output of a system in a given

period under ideal conditions. It is normally expressed as a rate, such as the number of
tons of steel that can be produced per week, per month or per year. For many
companies, measuring capacity can be straightforward: it is the maximum number of
units the company is capable of producing in a specific time. Effective capacity is the
capacity a firm expects to achieve given the current operating constraints.
Effective capacity is often lower than design capacity because the facility may have been
designed for an earlier version of the product or different product mix than
is currently being produced.
Utilization and efficiency are two performance indicators that manufacturing companies
use to make plans and determine success. They can be helpful in comparing production
levels to manufacturing capacities. In manufacturing, utilization is the percentage of
resources, such as labor, raw materials or equipment, that's being used for its intended
purpose. In other words, it's the proportion of time that manufacturing resources are being
used. While, efficiency is the ability to produce without wasting materials, time or energy.
In other words, it's the percentage of actual output to the expected output when limitations
in areas like quality control, staffing or material management are factored into production
capacity. Although there are several types of efficiency and the variables may change
depending on what materials or resources are being used.
8) How do service facility location decisions differ from industrial location decisions
in terms of the techniques used to analyze them? What kinds of location decisions
are appropriate for use of crossover analysis? Write a brief paragraph explaining
how crossover analysis (break-even analysis) can assist an operations manager choose
among alternative sites in making a location decision. (10 marks)

Service location decisions tend to focus on the revenue function, whereas

manufacturing/industrial location decisions tend to focus on costs. The service sector uses
techniques such as correlation analysis, traffic counts, demographic analysis, and
purchasing power analysis. The industrial decision uses transportation method, factor-
weighting approach, break-even analysis and crossover charts.
A specified ideal sales mix or the volume of output can be determined using break-even
analysis. The metrics and calculations employed in the study are not used by outside parties
like investors, regulators, or financial institutions; instead, they are intended solely for a
company's management to use. The break-even point is calculated in this type of study
(BEP). By dividing the entire fixed production costs by the cost per unit less the variable
production costs, the break-even point is determined. Fixed costs are expenses that don't
change no matter how many units are sold. The level of fixed costs is compared to the
profit generated by each extra unit produced and sold in a break-even analysis. A business
with smaller fixed expenses will typically have a lower break-even point of sales. For
instance, if variable costs do not exceed sales income, a business with no fixed costs will
instantly break even after selling its first product.
It can help managers compare the locations alternatives on the basis on quantitative factors
that is expressed in terms of total cost. Break-even analysis implies that at some point in
the operation the Total Revenue = Total cost. The best way to view the analysis is to use a
break-even graph plotting revenue and cost as a function of the output.
9) What is the purpose of aggregate planning? Describe some demand and capacity
options for implementing plans. If a service firm were to attempt a pure level strategy
for aggregate planning, should its level of output be at average demand, peak demand,
or minimum demand? (10 marks)

Aggregate planning entails defining the production demands for our medium term based
on company goals and strategies chosen following careful research of demand projection.
In order to maintain balance and keep the entire organisation on track while keeping the
focus on long-term goals, aggregate planning is crucial in achieving cooperation and
coordination between the long-term strategic planning of the organisation and its goals with
the short-term business plans and goals. To be effective, aggregate planning requires
precise inputs in the form of an aggregate demand projection for the relevant time, as well
as complete and detailed knowledge of the production capacity and all viable choices for
raising or lowering production. The current operating status of the human resources with
the correct capabilities and skill set, as well as the current stock levels and production
efficiency. On the basis of a precise and reliable demand forecast, a level strategy maintains
a constant production rate and workforce level for expanding or decreasing the level of
output to satisfy the demand. Although it leads in the maintenance of a high level of
inventory and tends to lengthen backlogs, this helps to keep a consistent workforce. A
chase strategy connects demand with production, which reduces inventory and backlogs,
but it does not maximise the use of production capacity, which results in lower
productivity, lower quality, and an unhappy workforce. The hybrid approach, which
employs a balanced strategy between the two, is the best.
Making an overall plan to maintain a constant production rate is part of the pure level
approach. When demand is at its lowest, the company tends to maintain a stable/steady
pace of output if it is using the level approach. This choice will assist the company in
maintaining higher-than-needed inventory levels. Additionally, prepare the business to
handle scenarios where product demand increases unexpectedly. Therefore, it is evident
from the discussion above that the firm's output level will be at the minimum demand if it
adopts a pure level strategy.
10) What conditions make yield management of interest? How does aggregate
planning in services differ from aggregate planning in manufacturing? How does
"yield management" impact the aggregate plan? (10 marks)

The following conditions make yield management an appropriate tool are service or product
can be sold in advance of consumption; demand fluctuates; capacity is relatively fixed; demand
can be segmented, and variable costs are low and fixed costs are high.

Aggregate planning in manufacturing works well because of the ability to produce, hold and
sell inventory at any given time. Alternatively, aggregate planning in services differs
substantially because services cannot be inventoried. The demand for services is much more
difficult to predict and capacity is also difficult to measure. Service capacity must be provided
at the right place and the right time, while labour is generally the most constraining service
resource.

By setting varying pricing based on how much each sort of consumer is ready to pay for various
types of services, many companies attempt to meet the demand curve. In order to maximise
income, yield management involves establishing different pricing points based on customer
willingness to pay. Examples include American Airlines, which invented yield management in
1980 and used its reservation system to adjust ticket rates in response to demand data.
Additionally, Omni Hotels employs a programme that runs over 100,000 calculations per site
per night.