Cases in Operations Management - Assignment Example

Operation Management xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecturer xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Date Question 1 Operation management is the process that involves the combination and transformation of resources used in the operations subsystems of organizations into value added services/products in a manner that is controlled according to the policies of an organization. Essentially, it is part of an organization that is mainly concerned with the conversion of inputs into the required service/products that are of the right quality level. Hill (2000) defines operation management as the utilization of physical resources in converting inputs into the necessary outputs in order to give a consumer the desired utilities of possession, forms, place or combination of the utilities while meeting the organization goals of adaptability, effectiveness and efficiency. Operations are conversion processes resources (inputs) into services and goods (outputs). Concept of operation in organizations is mainly defined as human and managerial procedures involved in organizations, the technology employed and the operations it serves for the organization. In an organization, operations may be categorized into services operations and manufacturing operations. Manufacturing operations involve the conversion process that yields a product, tangible products while a service operations results to an intangible output; a performance, a deed or an effort. Essentially, the concept of operation is relevant and significant in any organization or business. This is attributed to the fact that it provides the potential to improve and increase both consumers’ efficiency and services simultaneously. Hill (2005) describes it as a core of businesses because it plays a central role in changes that affect business. This include changes in supply networks, consumer preferences, how and where to work and changes in the tasks done at work. The knowledge of the concept of operations is applied in service to customers. In every organization, service to customer is a key element in its operations. Indeed, services to customer are key objectives of operation management. The operating system ought to provide services and products that satisfy the customer in terms of timing and cost. Essentially, the key objective is providing the right thing at the right time and place (Kumar 2006). Not only is customer services is the knowledge of concept operation applied but also in resource utilization. Indeed, concept of operation is concerned basically with the utilization of resources, that is, obtaining the maximum effect of all resources or even minimizing their loss, waste or under utilization. The extent of this utilization is expressed in terms of the proportion of available time occupied, used, and level of activity or space utilization. Essentially, this knowledge is applied in resources utilization in order to satisfy the nee of the customers effectively. It is obvious that inadequate customer services and inefficient utilization of resources results to failure of an operating system in an organization (Hilton 2004). This concept may be applied in a situation where an organization or firm is carrying out specific services to its consumers. Since the operation is mainly concerned with controlling, planning and organizing activities of a business that will ultimately affect the response of the consumer, services to consumers are therefore, main objectives of the operating system. Indeed, satisfactory services to the clients results to an organization achieving the set goals in service deliveries. Utilization of resources available in the business is also a significant issue in this concept. As such, the concept may be applied in a situation that requires effective utilization of the available resources. In so doing, the business is able to satisfy the customer and be in a position to utilize the available resources effectively. It is obvious that management tasks mainly targets the best way that a business is able to accumulate profit by maximizing on the resource that are available. This is done with least possible inputs. Therefore, management tasks are significant in the above situation. Effective and efficient management is important in order for the business to utilize the available resources and satisfy the consumers. Management calls for excellent controlling, organizing and planning the flow of the business. This is because these activities have a great significant on the output of the business which ultimately will affect customers’ satisfaction. In order for the business t meet the required target, motivation and training of the employees and the related staffs may boost the objective set by the organization or company in well utilization of resources and satisfying the customers. Trained employees will have the required skills in handling the tasks at hand. In addition, motivated employees will work efficiently so as to achieve the set objectives (Johnston & Clark 2005). Question 2 (b) In every organization demand is characterized as being variable. A company or firm may select from manage demand to alternatives in order to meet the needs of its customers and the business. By considering different ways of managing capacity, an organization can manage the balance between capacity and demand. Capacity is defined as the maximum output of a process or an operation in a given time. In a ski resort hotel, capacity management utilizes the customer processing operations that have two ways of estimating the rate of arrival of customers, that is, though a forecasting and reservation systems. Johnston & Clark (2005) it takes a great deal of effort to manage to manage the flow of customers in such a set up. Demand management is a strategy for capacity management. It is does not rely on operation management entire. In this approach, the organization tends to change the nature of nature in order for it to fit the given capacity. Essentially, it means shifting the demand to off peaks from peak periods. Basically, demand management strategy involves adjusting the inputs in order to influence the demand so that outputs and inputs are closely matched (Johnson et al. 1997). It is important to note that there are four ways in which demand is shifted. One way of shifting demand is by controlling price. The price is adjusted in order to encourage consumers to come. This is usually done through discounting or adding a surcharge in order to discourage purchasing. A ski resort hotel may operate cheaply during off peak and add charges during peak periods. Promotion is another element that may shift demand. It is, however, linked to price. The hotel may carry out variety of promotion such as free meal or wine. The management may target those hours or periods when the customers are more. The hotel may shift the demand by modifying their service and products. Appealing services may be targeted at the low peaks in order to attract customers. Finally, place is another method that is applied to shift demand. Various channels of distribution are modified in order to appeal at the off peaks periods. Advertising is also an important tool to utilize in order to change the demand patterns. The hotel should utilize advertising elements that are appealing to the customers in order to attract customers during the off peak periods (Kumar 2006). According to Jones & Robinson (2012) there are two approaches to manage demand; reservation systems and forecasting. Reservation is mainly involved with the customers making reservations, an advance payment maybe, in order to get the services. This type of approach enables the manager to know the volume of customers expected. In addition, it enables the flow of consumer to be managed effectively. This approach definitely ensures that the flow of the customer is efficiently and effectively managed to allow the operation to be smooth as possible. A disadvantage associated with this approach is when the customers do not up (Slack et al 2010). Forecasting the managers predict accurately how the demand will be like at a given time. The managers apply their current and future knowledge in predicting the possible outcomes. Before a business select a particular forecasting technique, it is important that it first decide what requires a forecast and how far this forecast will be realized in future. As forecasting is a complex process, most organizations or firm need to select and apply certain forecasting systems. This is because an organization may require data not only operations to run the system. Different types of forecasting techniques include; simple moving averages, weighted moving averages, exponential smoothing and time series analysis. Reservation system is more relevant demand management than forecasting in the ski resort hotel. The customers willing to use the services in this hotel are expected to book for services in advance. Indeed, this will allow the managers to be at a position to know the volume of clients it is likely to handle at a given time. This declines any delayed and also utilizes the time of services efficiently. One may argue that ‘no shows’ in this approach may affect the demand flow in a given time. This is true to some extent and may largely affect the flow of business in this hotel. However, the management may introduce another mechanism that will ensure that the gains are made. One way of handling such incidents is by billing for any advance booking that has been made and bounced. As such, the hotel is still in a position to provide cash flow for the business and remove the no shows concern. Forecasting, on the other hand, may not be applicable effectively in this case given that it is impossible for the system to cope with random variation. In addition, the system is most effective in retailing (Jones & Robinson 2012). Quiz: 3 (C) Brown and Matysiak (2007) assert that, a cogent borrower ought to place an order for the loan amounts that do not add so much cost for which the profit are low. EOQ is the most cost-effective loan amount to order as it lessens the overall cost. This is because EOQ trims down the balance of costs stuck between ordering costs and holding costs for the loan. Therefore, both costs are equal. I.e. holding costs and ordering costs ($2510). To get the total cost of loan, the two costs are summed up as follows: $2510 + $2510 = $5020. The loan amount that corresponds to this least cost is the EOQ ($2478948). So, to purchase inventory, Christie`s most economical loan amount happens to that. This means if Christie borrows a loan amount which is less or greater than $2478948, automatically higher cost is incurred in the company with regard to the loan amount borrowed (Hilton, 2004). The cost incurred by the company because it maintains the loan is referred to as holding or carrying cost. This cost has a direct relationship with the loan amount borrowed. As such, the holding cost increases with the increasing amount borrowed. In other words, the higher the amount borrowed, the higher the holding cost. In the process of obtaining the loan, several procedures are undertaken which calls for extra. This cost incurred in order to obtain the loan is known as ordering cost. The ordering costs and the quantity of loans and organizations borrowers annually have a contrary relationship. Therefore, the higher the number of orders, the higher the ordering cost. For that reason, it is advisable for a company to borrow outsized loans so that it limits or lower number of orders it makes for the loan hence reduce ordering costs. In order to retain minimum levels for ordering cost, it is highly recommended that it make maximum of 2 orders for the loan per year. $5010 In attempt to keep off stock out costs, the company ought to make sure it has some loan at any time. While stocks out costs are not easy to quantify, they may be significant. Thus, they ought to be evaded. The reorder level is dependent upon usage and the lead-time during the lead-time. Having the period of time involved to process the loan by the bank to be 15 days, therefore , 17000*15 = $255,000 is the best level of cash at which the company is supposed apply for a new loan. Graph below exemplify the relationship between holding cost, ordering cost and total cost E $ 5010 Ec is the total cost at the EOQ. It shows that any other amount of loan less than or greater than the EOQ results to a higher total cost. The total cost curve is above holding cost and ordering cost curves as it is the total of the two costs. Notice the ordering cost curve incline downwards from left to right side. According to Fess and Warren (2004), price per unit benefits and lowers significantly by price discounts gained through quantity purchased. This means ordering costs is reduced by ordering few orders in large quantities. Though, these price discounts results to increased costs incurred from extra loan holding costs caused by the average loan level being higher due to the larger order quantity. Good to note that reduction of origination fee from 2.25% to 2.00%, results to rise of the optimal amount to $2629322. As such, the ordering cost is reduced as number of orders is reduced with the raised loan amount. Hence, this is the preferable amount. References Brown, G & Matysiak, G (2007). Real Estate Investment: A Capital Market Approach. London: Financial Times. Fess, E & Warren, C (2004), Accounting principles. Canada: Southwestern Company. Jones, P & Robinson, P (2012) Operation management. Oxford: Oxford Press Kumar, A (2006) Production and operations management. 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