Significance of Operations Management for Business - Assignment Example

Operations Management Name: Registration No: Institution: Date of Submission: Question 1 No of Jackets sold in a month = 85 Sales price of each Jacket= £250 Total output = (250*85) = £21250 Cost of production = (100*40) = £4000 Overhead costs = £5000 Wages per employee per month = £1600 Total Cost of Labor + Overhead + materials Costs = £ (4000+5000+1600) = £ 10600 Total man hours = (10*100) = 1000 hours a. Calculation of labor productivity (in £ per hour) and multifactor productivity ratio (of output value to input value) for a month’s manufacture. i. Labor productive = Total Output/ Total man-hours =10650/1000 =£10.650 per hour ii. Multifactor productivity ratio of output to input values MFP = Output/ (Labor + Overhead costs+ Material Costs) =21250/10600 =2.005 b. Options for improving the multifactor productivity ratio i. Increasing sales price by 10% per jacket New sales price = (250*110/100) = £275 New value of Output = (275*85) = £23375 MFP = 23375/10600 =2.205 ii. Improving quality so that 10% of the jackets are defective New number of production of jackets per month = 90%*100 = 90 Jackets per month New Output value = (250*90) = £22500 MFP = 22500/10600 = 2.122 iii. Reduce labor, material and overhead costs by 10%. New value of labor + Materials and Overhead costs = 10600*90/100 =9540 New MFP = 21250/9540 =2.227 When the three options of improving multifactor productivity ration are considered, it is found that the option that would result into the greatest improvement is the third option where Labor, materials and Overhead costs will be reduced by 10%. This will result into a MFP of 2.227 as illustrated above. c. Significance of operations management for this kind of business This business can benefit greatly from operations management process by ensuring production is managed and all activities involved in the manufacture and sales of Jackets are carried out effectively. For instance, it is a method that ensures the costs of producing a product is greatly reduced. This can be achieved through reduction of material costs and overhead costs so that the value of multifactor productivity ration is improved. Operations management is also a process that ensures time taken to perform a particular task is greatly reduced. This ensures the overall time take during production activities in a month is reduced while the number of products produced is increased. As a result, the value of labor productivity is also improved and employees are able to become more competitive. Operations management is also a process that can be important in determining the order in which activities need to be done and accountability is a achieved as a result of performing a particular task. For instance, in the jacket company, it will be possible to know the order in which activities need to be done from the instant of arrival of raw materials to the production and packaging stage. ` Furthermore, operations management is s strategy that ensures revenues are increased through improved customer satisfaction by providing quality service. In the case study, operations management will ensure activities are carried out with high accuracy and the possibilities of employees making mistakes during production are reduced. Consequently, customers will be satisfied with the quality of jackets produced by the company and they will become loyal to the company. This will result into increased sales of the products produced by the company. In addition, operations management is a process that results into a reduction of amounts of investments required during the process of producing a particular type of products or services by ensuring capacity of operations are increased. For instance, in the case study, it will be possible to determine the right cost of materials required during the process of producing jackets so that the right capacity of production can be determined in terms of the number of jackets that can be produced in a month. This will ensure the company is able to determine the labor required and the time required producing a particular amount of jackets. In addition, it will ensure the company is able to allocate the right amounts of both financial and human resources so that the capacity is achieved. Another advantage of operations management is that it provides the basis on which future innovations can take place through development of a solid foundation of operational activities within the business environment. For instance, in the jacket producing company in the case study, it will be possible to determine the activities that need to be carried out in the future such as the nature of raw materials to be bought and the amount of labor required. This will ensure the company is able to set aside the right amounts of resources that will facilitate the process of accomplishing these future objectives. Question 2. The Pert Mustang a. Report of what has been requested by Vicky Roberts in restoration of the car that has been bought The main requests that have been made by Vicky Roberts are to account for a number of priorities such as Cost, Time, Quality and Flexibility: In terms of cost, the owner of the car has requested that the car should be designed in a manner that ensures processes do not results into high costs during the process of improving the quality of the Mustang. For instance, she has requested that low cost should be achieved in creation of scrap during the process of improving the car and she has also requested that overhead costs during the process of improving the car are reduced significantly. It is also required that during the process of improving the car, little costs should be incurred during the use of technologies for improvement of the car such as obtaining materials for improving the car at reduced costs. In terms of time, Roberts has requested that the car should be improved at a rate that results into least time consumption so that the car can be taken to the Detroit show. She has also requested that storage of inventory and transportation options for inventory are improved. Furthermore, she requested that planning processes and appointments should be improved and capacity planning should be aimed at increasing customer orders. In terms of quality, Roberts requested that top quality should be delivered and the mustang should be of higher quality compared with its quality when she bought it. She also requested that its features should be improved and the car should be more durable compared with its durability when she bought it. She also requested that processes should be designed so that errors and defects are reduced and similar outcomes should be achieved in the shortest time possible. In terms of flexibility, she requested that processes should be customized so that low volumes, closer customer contact and the needs of diverse customers are achieved. In addition, she requested that processes should be able to support a number of customized volumes and they should not be unique to particular customer needs. She also requested that the improved car design should ensure excess capacity is handled and fluctuations that result in demands are managed effectively. b. Network diagrams for the project and b. Report on the Restoration programs Based on the nature of the restoration program, it is evident that the main area of focus will be to improve the physical appearance of the car owned by Vicky Roberts. It is also evident that she intends to display the car during the Detroit shows so that her business of vintage car restoration can be vindicated. In addition, he it is found that the main areas that will result into the highest costs in terms of funds and resources during the restoration process will include the purchase of upholstery seat and covers. The appendix 1 provides the network diagram of activities that will take place during the process of improving the car. In addition, appendix 2 presents the slack of each activity during the process of improving the car. It is found that most activities will have zero slack except activities P and V that will have slacks of 2 and 3 respectively. Another issue that may arise during implementation is to ensure that the total expenditure during the purchase of materials for improving the car does not exceed the budget or does not become too high that the car becomes costly to improve. As a result, it is required that the budget is maintained within the capability of Roberts. c. Appendix 3 represents the budget that will be used to ensure all activities of the project are known and their respective costs. i. Based on the nature of the budget displayed, it is found that the total cost of improvement of the car will be £17100. This will be less than the allocated budget of £20000. This results into the conclusion that the project of improving the car will be feasible. ii. In all the activities in the project, it is found that no activity will require more than £36000 per week. However, when such a case arises, it can be solved by obtaining funds for activities that will take place towards the end of the project or so that such activities can be financed when their time arrives. Question 3: Magma Digital software Deployment Cost of crashing per week will be obtained by the equation: Cost of Crashing = (CC-NC)/ (NT-CT) In the above equation: CC= Crash Cost NC=Normal Cost NT=Normal Time CT=Crush Time When the above formula is applied, it is found that the cost of crashing the project per week will be as shown in the table below. Activity Predecessors Normal Time (NT) Normal Cost (NC) Crash Time (CT) Crash Cost (CC) Cost of Crashing per week Weeks (£ ,000) Weeks (£ ,000) (£,000) A 5 2 3 4 1 B 8 5 7 8 3 C A 10 10 8 12 1 D A,B 4 3 3 7 4 E B 3 4 2 5 1 F D 9 8 6 14 2 G E,F 2 2 2 2 0 H G 8 6 5 9 1 I C,F 9 7 7 15 4 TOTAL 58 47 43 76 17 Report on the Crashing project Based on the Critical path of the project, it will take at least 30 days to complete while it was a condition that there will be a fine of £1000 each week that the project will be delayed. Thus, when the project is delayed for 5 days, there will be a total fine of £5000. Normal cost of the project will be £47000. The indirect costs of the project were estimated to be £2500 per week. This implies that the total indirect costs will be 2500*30 = £75,000. Consequently, the total project cost will be £ (47000+5000+75000) = £127000. Advantages and limitations of crashing a project There are a number of advantages and limitations that results when a project is crashed. The obvious advantage is that the project is completed within the right duration so that the owner of the product being constructed can use the product. In addition, it ensures any penalties that would have been incurred if the project was not crashed can be avoided. Furthermore, it is a process that ensures cost of the project is reduced and the project manager spends little amount of resources compared with a situation where the project is not crashed. An example of advantage associated with crashing a project is that there is limited responsibility and the project manager is likely to receive praise if the project goes well. If the project is likely to fail, it is possible to bail out the project prior the end of the project so that losses are prevented. Another advantage is that the project crashers serve as team-players. The project participants can be recognized for their involvement in the project and their initiative to ensure the project is successful. The limitation of crashing a project is that in some cases, there may be divisiveness as a result of lack willingness of some members of the project team to cooperate. There may be competitiveness among members who have similar skills. For instance, there may be a possibility that their competence and adequacy is being challenged. For instance, there may be a case where they are not allowed to make their personal decisions and this may make them unwilling to help further. Another limitation associated with crashing a project is there may be negative reactions among both the management and co-workers as a result of intrusion. This can result into negative working relations in the future. A person involved in disagreement may be subjected to a number of implications such as being prevented from taking parts in future projects. In certain situations, it is suggested that the competence of the management and co-workers should be trusted and no one should be regarded as indispensable. Question 4: Al Marakeb Machine Company a) Use of rectilinear distance to calculate weighted distance (wd) score Current Plan Department Pair Number of trips (1) Distance (2) Wd score (1) x (2) 1,2 16 6 96 1,3 6 4 24 1,5 18 3 54 1,6 11 2 22 2,4 5 5 25 3,5 20 1 20 3,6 15 1 15 4,6 5 2 10 5,6 8 2 16 TOTAL 262 b) Weighted distance when the positions of Tool Stores and Inspection areas are interchanged Current Plan Department Pair Number of trips (1) Distance (2) Wd score (1) x (2) 1,2 16 6 96 1,3 6 4 24 1,5 18 3 54 2,4 5 2 10 3,5 20 1 20 3,6 15 1 15 4,6 5 5 25 5,6 8 5 40 TOTAL 284 c) Suggested plan based on trial and error In the suggested plan, the distance between department 1 and 6 will be reduced to 1, the distance between department 1 and 5 will also be reduced to 1 and finally the distance between department 2 and 4 will be reduced to 2. This will result into a wd score shown in the figure below. Current Plan Department Pair Number of trips (1) Distance (2) Wd score (1) x (2) 1,2 16 1 16 1,3 6 4 24 1,5 18 1 18 1,6 11 2 22 2,4 5 2 10 3,5 20 1 20 3,6 15 1 15 4,6 5 2 10 5,6 8 2 16 TOTAL 151 Report on the layout and benefits of using Layout Design From the report, it is found that the total distance travelled between departments when the positions of Tool Store and inspection areas are interchanged is greater than the current plan. However, when trial and error method is used where the distance between Burr and Grind and Inspection are reduced to 1 while that between Burr and Grind and Tool Store is reduced to 1 and finally the distance between NC Machines and Lathes and Drill will be reduced to 2, it is found that the total distance travelled will be 151 compared with 262 in the current plan. This shows that when the layout suggested in the trial and error method is applied, there will be a reduction of total distance travelled by 111 or 73%. Benefits of using this analysis in Layout Design There are a number of benefits associated with the use of this analysis in Layout design. For instance, It ensures the distance between departments is reduced so that unproductive motions are prevented. It is easy to construct and interpret It does not consume much time to construct It ensures the workers minimize motion between departments so that possibilities of fatigue are reduced. References Hammer, M. 2004. Deep Change: How Operational Innovation Can Transform Your Company. Harvard Business Review, vol. 82, no. 4 (April 2004), pp. 85–93. Hayes, R. 2006. Operations, Strategy, and Technology: Pursuing the Competitive Edge. Strategic Direction,vol. 22, no. 7, (2006). Hill, T. 2000. Manufacturing Strategy: Text and Cases, 3rd ed. Homewood, IL: Irwin/McGraw- Hill. Jack, E. and John C. 2006. Strengthen and Tone: A Flexible Approach to Operations Can Build Some Serious Muscle. APICS Magazine pp. 35–38. Appendix Appendix 1: Diagram of Activities Name Predecessor Start Time End Time Duration (Days) Cost £ A Order Needed materials and parts - 30/07/2007 1/08/2007 2 100 B Receive upholstery and seat covers A 3/08/2007 3/09/2007 30 2100 C Receive windshield A 3/08/2007 13/08/2007 10 800 D Receive carburetor A 3/08/2007 10/08/2007 7 1750 E Remove chrome from the body - 30/07/2007 31/07/2007 1 200 F Remove body (doors, hood, trunk and fenders) from frame E 1/08/2007 2/08/2007 1 300 G Have fenders repaired by body shop F 3/08/2007 7/08/2007 4 1000 H Repair doors, trunk and hood F 3/08/2007 9/08/2007 6 1500 I Pull engine from Chassis F 3/08/2007 4/08/2007 1 200 J Remove rust from frame I 4/08/2007 7/08/2007 3 900 K Regrind engine valves I 4/08/2007 9/08/2007 5 1000 L Replace carburetor and oil pump I, D 14/08/2007 15/08/2007 1 200 M Rechrome the chrome parts E 1/08/2007 4/08/2007 3 210 N Reinstall engine K,L 16/08/2007 17/08/2007 1 200 O Put doors, hood, and trunk back on frame H, J 10/08/2007 11/08/2007 1 240 P Rebuild transmission and replace brakes N, O 12/08/2007 16/08/2007 4 2000 Q Replace windshield C 14/08/2007 15/08/2007 1 100 R Put fenders back on G,P 17/08/2007 18/08/2007 1 100 S Paint Car Q,R 19/08/2007 23/08/2007 4 1700 T Reupholster interior of car B, S 3/09/2007 10/09/2007 7 2400 U Put chrome parts back on E, S 11/09/2007 12/09/2007 1 100 V Pull the car to Detroit Auto show T, U 13/09/2007 15/09/2007 2 1000 Appendix 2: Slack for each activity Activity ES EF LS Slack = LS-ES A-B 0 0+30=30 0 0-0=0 A-C 0 0+10=10 0 0-0=0 A-D 0 0+7=7 0 0-0=0 E-F 0 0+1=1 0 0-0=0 F-I 1 1+1=2 1 1-1=0 F-H 1 1+6=7 1 1-1=0 E-M 0 0+3=3 0 0-0=0 D-L 7 7+1=8 7 7-7=0 C-Q 10 10+1=11 10 10-10=0 B-T 30 30+7=37 30 30-30=0 F-G 1 1+4=5 1 1-1=0 G-R 5 5+4=9 5 5-5=0 I-J 2 2+3=5 2 2-2=0 I-K 2 2+5=7 2 2-2=0 H-O 7 7+1=8 7 7-7=0 J-O 4 4+1=5 7 7-4=3 K-N 7 7+1=8 7 7-7=0 K-L 7 7+1=8 7 7-7=0 O-P 6 6+4=10 6 6-6=0 N-P 8 8+4=12 8 8-8=0 P-R 10 10+1=11 12 12-10=2 S-U 41 15+1=16 41 41-41=0 T-V 37 37+2=39 37 37-37=0 V-U 39 39+2=41 42 42-39=3 Appendix 3: Budget for all activities during the project Name Cost £ A Order Needed materials and parts 100 B Receive upholstery and seat covers 2100 C Receive windshield 800 D Receive carburetor 1750 E Remove chrome from the body 200 F Remove body (doors, hood, trunk and fenders) from frame 300 G Have fenders repaired by body shop 1000 H Repair doors, trunk and hood 1500 I Pull engine from Chassis 200 J Remove rust from frame 900 K Regrind engine valves 1000 L Replace carburetor and oil pump 200 M Rechrome the chrome parts 210 N Reinstall engine 200 O Put doors, hood, and trunk back on frame 240 P Rebuild transmission and replace brakes 2000 Q Replace windshield 100 R Put fenders back on 100 S Paint Car 1700 T Reupholster interior of car 2400 U Put chrome parts back on 100 V Pull the car to Detroit Auto show 1000 TOTAL 17100 Read More