Operations Management, Economic Order Quantity Model - Assignment Example

Name : xxxxxxxxxxx Institution : xxxxxxxxxxx Title : Operations management Tutor : xxxxxxxxxxx Course : xxxxxxxxxxx @2011 Question one Operations management entails designing and management of commodities, processes, services and supply chains. It takes into account the acquisition, utilization and enhancement of resources that firms require in order to deliver goods and services demanded by clients. Operations management can also be defined as a field of management that concern itself with overseeing, designing and redesigning business operations when producing goods and services (Stevenson, 2008). Operations management ranges from strategic to tactical and operational levels. The concepts in strategic level incorporate finding out the size and location of manufacturing firms, choosing service structure or networks of communications and designing supply chains of the technology. Tactical concepts incorporate layout and structure of the plant, methods of managing a project and equipment selection and replacement. Operational concepts incorporate control and scheduling production processes, managing inventories, inspection and quality control, traffic and materials management and maintenance of equipment policies. In general, the programs of operations management incorporate instruction within the principles of general management, systems of manufacturing and production, plant management, management of equipment maintenance, production management, trade supervision, systems analysis, cost management and productivity analysis, materials planning and strategic manufacturing policy. The relevance of operations management has dramatically enhanced in recent years. Operations management improves organization’s productivity. It also assists organizations to attain competitive priorities of customers. Operation management can act as organization’s pillar by controlling operation’s system. It is an essential aspect since it can be looked at as a functional field of the business with clear management duties. Operations management reduces product and services life cycles. It creates room for new technology and educates consumers about quality products and services. It normally ensures that business operations are efficient and effective, that is, minimum resources are utilized and customer requirements are met. Operations management mainly concerns with managing processes that transforms inputs into outputs (Greasley, 2007). The two important aspects in operations management are inventory management and quality management. Quality management is very essential in promoting effective operations management. It normally ensures that product produced meets taste and preferences of consumers at all times. Current enhancements in quality management such as benchmarking and total quality management, reengineering and outsourcing have greatly improved operations management. Inventory management is an important aspect in operations management. Managing and controlling inventories is very essential in any organization. Creative methods such as just-in-time inventory management are some of the main methods that can be applied by organization to save costs and to quickly deliver products and services to consumers. Operations management can be applied in business entities such as Guinness limited. Guinness limited is an organization that produces both alcoholic and nonalcoholic drinks. The drinks include Guinness and Malta Guinness. Operation management is very essential in every fabric of Guinness limited activities. In Guinness limited, operations management can be applied to ensure and maintain efficiency and effectiveness. The operations concept can be applied in situation of resource allocation, that is, a situation where human expertise and inputs need to be effectively utilized in production. The company therefore in order to minimize the cost of production, ensures that tangible and intangible resources are not wasted or overstretched within the organization. In this situation, the company is usually expected to execute its objectives effectively so as to be a market leader by utilizing minimum resources and attaining maximum output. Operations management can be applied in products and services management. Management of a product or service incorporate a broad range of activities that ranges from the period a idea has been realized to a time when an ongoing support is provided to customers who purchases the new product. In Guinness limited, a broad overview of considerations is normally given when creating and managing the organization’s products. It usually applies its core competences in the field of manufacturing, branding, and marketing via wholesale and retail outlets so as to acquire competitive advantage within the market placer (Johnston & Clark, 2008). The most essential task in Guinness limited is facilities management. Facilities management has a significant impact on operations management. Effective operations management in activities of an organization depends a lot on effective management of facilities. Facilities that normally require proper management incorporate buildings, computer systems, lighting, signage and machinery and plants. Facilities management is very essential particularly in business situation that deals with beverages, such as Guinness limited. In Guinness limited, facilities management is an essential management tasks since the company normally engages itself with mass or batch production so as to meet the high market demand. Facilities therefore need to be managed in a way that it can support large production of goods that meet the standard market demand at a given time. Effective management of facilities such as plants and machinery in an organization assists in enhancing production speed, reducing the cost of production and promoting efficiency in production processes (Reid & Sanders, 2010). Question two section A Economic order quantity model is a technique of managing inventories. It refers to the amount of inventory that needs to be ordered at a given time so as to reduce annual inventory cost. The quantity to be ordered at any one given time, need to be determined by considering two factors, which are the cost of carrying or possessing materials and the cost of obtaining or ordering materials. The cost of carrying materials or inventories include interest on working capital’s investment, insurance and property tax, handling cost, storage cost, obsolescence of stocks, deterioration and shrinkage of stocks (Anderson, 2010). Economic order quantity is based on several assumptions. It normally assumes that the demand is constant and known, the lead time is constant and known, inventory delivery is instantaneous and there are no possibilities of quantity discount. The model also assumes that orders are usually placed so as to avoid stock outs and that only two variable costs prevail, which are ordering costs and holding costs. These assumptions are however not realistic even if the economic order quantity is the most common model (Wisner & Leong, 2008). The assumption that the demand is constant and can be forecasted accurately is not real. Demand can never be constant. There are several factors that normally lead to changes in demand. Factors such as population change, environmental factors, taste and preferences, consumers’ disposable income and seasonal events. Increase in population increases the demand for commodities. The increase in demand therefore increases the amount of inventories to be ordered and a decrease in demand reduces amount of materials to be ordered. Assuming then that the demand is constant is not realistic. Lead time refers to amount of time that is normally utilized between placing an order and receiving the commodities ordered. The assumption that this time is always constant is not realistic, since there are several factors that can affect the delivery of the commodities. The condition of transportation can ease or delay the delivery process. The claim that inventory delivery is instantaneous and that there are no possibilities of quantity discount is not realistic (DuBrin, 2008). Several factors such as weather condition, means of transport and technical breakdown can cause delay in delivering quantities ordered. The assumption therefore of immediate delivery of inventory is not realistic. With the current stiff competition in various businesses, no business is capable of effectively operating without quantity discounts. The assumption, therefore of no possibility of quantity discount is not realistic. Safety stock refers to an inventory that is normally held as buffer against mismatch between predicted and real demand, between expected and real delivery time and unexpected emergencies. It is also called reserve inventory. The issues of safety stock can be included in economic order quantity and re-order point when ordering stock. Re-order point refers to a threshold at which more order need to be ordered so as to avoid shortages while overstocking is also avoided. In order to ensure constant supply of commodities, safety stock needs to be large so as to avoid the risk of running out of stock. Incorporating safety stock in economic order quantity is usually done by management policy. The policy normally determines the rate at which back ordering is tolerable to the customers and the loss of goodwill that can result via the condition of running out of stock (Abid, 2008). Safety stock can be incorporated in reorder point by determining the minimum amount stock that need to be available before placing an order. Determining when to re-order a commodity should not be a complicated stuff. For instance, if it is known that customers usually orders ten pieces of product every day and that it always takes seven days to ship the commodity, reorder need to be placed when there are seventy pencils above the safety stock. This normally protect against running out of stock when restocking. Safety stock protects organizations from stock outs when the period it takes to obtain a replenishment shipment surpasses the fore casted lead time (Proud, 2007). Of late, economic order quality model is usually avoided when ordering inventory. Many organizations are currently using classic inventory model. Classic inventory model is usually applied to predict maximum inventory an in evaluation of two or more inventory systems. Two essential techniques are usually used by industries to establish inventory reserve estimates. They include the deterministic and probabilistic techniques (Moyer & McGuigan, 2005). The deterministic method normally allows the use of a single best assessment of inventory reserves placed on identified engineering, geological and economic information. The probabilistic method normally applies common economic, engineering and geological data to give out a collection of estimated stock reserve quantities and the associated probabilities (Sharma, 2006). All the inventory reserve categorizations normally provide a signal of prospect of revival. Deterministic models of inventory control are usually applied so as to determine the best inventory of a single product when the demand is unpredictable. Inventory in this model is usually created at a constant rate so as to attain determined or accepted demand (Blecker, 2005). Question three section D Modularization refers to dividing a task into subtasks. It is usually applied when a problem become too complicated. Hayward & James (2004) argues that Modularization makes an individual to be more flexible, mobile and have control over the activities that need to be executed. The major task, under modularization, need to be identified and subdivided into subtasks so as ease problem of understanding. The concept of modularization greatly applies in an example of reducing design complexity. The steps, such as dividing a problem into smaller subtasks, defining a problem, writing down the events to be done and grouping the events into subtasks or modules, that are normally incorporated in modularization can easily be identify in the example provided. The major problem in the example is minimizing design complexity. The complexity that needs to be reduced in the provided example is the satisfaction of several television audiences across the globe that displays various preferences for programs that obey their regional tastes, culture and language (Hayward & James, 2004). Global program makers as stated in the example face some difficulty when attempting to attain economies that come due to high-volume production as they permit programs to be customized for various markets (Vallespir, 2010). The concept of modularization also applies in the example when a simple cardboard is created so that all versions can share scenes in which only the hand of a presenter can be seen. In order to minimize the design complexity that came up as a result of the need to satisfy many television audiences across the globe, commentary in the required language was over-dubbed within the scenes, which were seamlessly edited with other shots of the relevant presenter. This therefore is just a concept of modularization. Modularization concept is also displayed in the example when it was identified that sixty percent of every show is common in all versions (McIvor R., 2010). In the example problems were identified, named and placed into different categories as is usually required under the concept of modularization. McIvor (2010) highlights that the name given to tasks that need to be executed could clearly tell the task that needs to be done. In the example, the shots that were silent or those that were not displaying the face of presenters were taken differently. The modularization concept of linking all the modules together was also displayed in the example. In the example, the final product incorporated the head and shoulders of Brazilian, Italian, German, French or Spanish presenters that were perfectly grouped with similar pairs of British hands developing the model. This therefore enabled the viewers in various markets to watch the show as if was produced at their region. Several similarities prevail between the broadcasting company and motor vehicle manufacturing company, particularly in matters relating to the way vehicles are designed. The ways motor vehicle manufacturers design their products are similar to how the broadcasting company produces different programs for different markets (Lansbury, 2008). Both companies develop abilities via modular product and process architectures that integrates competences and resources in a manner in which managers of various projects, departments or external partners join together and link their different skills, expertise, functional background so as to provide product and services that gives revenue and satisfy the requirements of customers. Both companies involves in new innovation dynamics that causes more firms engaging in modularity to not only develop product variety but also a new structure for aggressive strategic learning and knowledge management that is more effective (Thorsten & Gerhard, 2008). Similar to programs production, designing of motor vehicle is a complex activity. The product to be produced is usually broken down into subsystems. This enables designers in motor vehicle manufacturing industry to gain vast flexibilities and reduce the costs. Designing of motor vehicle is similar to program production since both companies need to produce products and services that satisfy worldwide consumer demand and that respect regional tastes, culture and tradition. Motor vehicle manufacturing companies are becoming more flexible due globalization, deregulation and mass customization (Cooney & Yacobucci, 2007). The way the broadcasting company produces its final product is similar to how motor vehicle manufacturers design their products. Programs in broadcasting company were perfectly mixed such that local viewers in every market around the world look at the show as if it was produce at their locality (Cooney & Yacobucci, 2007). Similarly motor vehicle manufacturers normally design their products that suit every market around the globe. They normally design products for particular markets thus associating the product with a specific locality. Even though designing of motor vehicle is usually done at a strategic central location, Assembling plants are usually established by Vehicle manufacturing companies in every market region so as to create an impression that the manufactured vehicle is their own (Thorsten & Gerhard, 2008). References Abid M., 2008, Operation Research for Management, New York: Global India Publications. Anderson D., 2010, An Introduction to Management Science: Quantitative Approaches to Blecker T., 2005, Mass customization: concepts - tools – realization, Berlin: GITO mbH Verlag. Cooney S., & Yacobucci B., 2007, U.S. automotive industry: policy overview and recent history, New York: Nova Publishers. Decision Making (Book Only), New York: Cengage Learning. DuBrin A., 2008, Essentials of Management, New York: Cengage Learning. Greasley A., 2007, Operations Management, London: SAGE. Hayward G., & James S., 2004, Balancing the skills equation: key issues and challenges for policy and practice, New York: The Policy Press. Johnston R., & Clark G., 2008, Service operations management: improving service delivery, New York: Financial Times/Prentice Hall. Lansbury R., 2008, Globalization and employment relations in the auto assembly industry: a study of seven countries, New York: Kluwer Law International. McIvor R., 2010, Global Services Outsourcing, London: Cambridge University Press. Moyer R., & McGuigan J., 2005, Contemporary financial management, New York: Cengage Learning. Proud J., 2007, Master scheduling: a practical guide to competitive manufacturing, New York: John Wiley and Sons. Reid R., & Sanders N., 2010, Operations management: an integrated approach, New York: John Wiley. Stevenson W., 2008, Operations Management, London: McGraw-Hill Irwin. Sharma S., 2006, Operation Research: Inventory Control And Queuing Theory, New York: Discovery Publishing House. Thorsten B., & Gerhard F., 2008, Customer Interaction and Customer Integration, Berlin: GITO mbH Verlag. Vallespir B., 2010, Advances in Production Management Systems: New Challenges, New Approaches: International Ifip Wg 5.7 Conference, Apms 2009, Bordeaux, France, September 21-23, 2009, Revised Selected Papers, New York: Springer. Wisner J., & Leong G., 2008, Principles of Supply Chain Management: A Balanced Approach, New York: Cengage Learning. Read More