NAME: ADISIE BIRHANE

ID: 102239

SECTION: ONE

Operations Management
Individual Assignment (20%)

1. Identify and discuss the factors that are important in the selection of the most effective
strategy for aggregate planning.

Answer:

The most effective strategy depends on the following three important elements.

 Demand distribution,
Demand forecasting is an important aspect of business operation. It is applicable
to many different functional areas such as sales, marketing and inventory
management. Proper demand forecasting also allows for more efficient and
responsive business planning. Because of the benefits it can bring, many
industries have paid great attention to demand variability management and
forecasting. Tourism and manufacturing are the two major industries who adopt a
wide range of demand forecasting and variability management solutions.

 Competitive position
A competitive position is the value offered by a brand, product or service relative
to the other offerings in a market. It is often modeled with a simple graph known
as a competitive position map that plots your offerings against the competition for
any two parameters that customer’s value.
A good positioning strategy is influenced by:
Market profile: Size, competitors, stage of growth
Customer segments: Groups of prospects with similar wants & needs
 Competitive analysis: Strengths, weaknesses, opportunities and threats in the
landscape
Method for delivering value: How you deliver value to your market at the highest
level

 Cost structure of a firm or product line

Cost structure is the proportion of a company's fixed and variable costs in relation
to its overall operation cost. A product cost structure has variable costs, such as
materials, supplies, and commissions. A product cost structure's fixed costs
usually include manufacturing overhead, such as rent and equipment. However, a
company's cost structure depends on the industry it is in. For example, a clothing
manufacturer has a different cost structure than a furniture manufacturer, and a
law office has a different cost structure than a dry cleaner. The first step a
company takes when determining its cost structure is to find out what costs the
company has incurred or will incur as a result of the product. Second, the
company categorizes those costs as either fixed or variable. Operating leverage,
which is the effect that fixed costs have on a company's operating income, can be
calculated by dividing a company's contribution margin by its net income. The
more fixed costs a company has compared to variable costs, the higher its
operating leverage.

2. Differentiate between level productions and chase demand strategy of adjusting capacity.
How do they manage the variations in demand?

Answer: A level production strategy plans for the same production rate in each time
period. A chase demand strategy sets the production rate equal to the demand in each
time period.Also Know, what types of industries or situations are best suited to the chase
strategy the flexibility strategy the level strategy? The flexibility strategy should be used
when inventory carrying costs are relatively high, machine capacity is relatively
inexpensive, and the work force cannot be adjusted on short notice. This strategy works
in the automotive sector, durable goods, and consumer electronics. Were as The chase
strategy refers to the notion that you are chasing the demand set by the market.
Production is set to match demand and doesn't carry any leftover products. Inventory
costs are low, and the cost of goods for products sold is kept to a minimum and for a
shorter length of time.

3. Assume that a firm has resource constraints in the short run to increase capacity to meet
high demand for its product and it is necessary to meet customers’ demand to improve
 their loyalty. Under this condition, what strategy do you recommend to meet customer
need and what assumption do you make for this strategy?

Answer:

I will recommend Peak Demand strategy to maintain its resource. It is used when:
Superior customer service is important, or Customers are willing to pay extra for the
availability of critical staff or equipment.

4. For a reason, a firm does not want to increase its capacity in the peak demand season and
wish to influence the demand distribution over seasons. In this regard, what techniques
do you suggest? Explain.

Answer:

It calls for maintaining resources for peak demand levels. It is used when: Superior
customer service is important, or customers are willing to pay extra for the availability of
critical staff or equipment. Investment in extra workers and machines that remain idle
during low-demand periods.

5. Explain the differences between professional and mass services in terms of resource
requirements and process design.

Answer:
Professional services
Theses are high-contact organizations where customers spend a considerable time in the service
process. Such services provide high levels of customization. I.e. the service process being highly
adaptable in order to meet Individual customer needs A great deal of staff time is spent in the
front office. Contact staff are given considerable discretion in servicing Customers. Professional
services are people-based rather than equipment- based. Emphasis is placed on the process (how
the service is delivered) rather than the ‘product’ (what is delivered).There is frequent contact
between the service provider and the client.
Examples: Management consultants, lawyers’ practices, architects, doctors’ surgeries, auditors,
health and safety inspectors and some computer field service operations. Were as Mass service
Is how many transactions, involving limited contact time little customization.it also equipment
based and product oriented with most value added in the back office. Staffs are likely have a
closely defined division of labor and to follow set of procuders. Examples: supermarkets,
telecommunication services libraries…
6. Explain the differences between project process and continuous process in terms of
resource requirements and process design.

Answer: Project is a type of process used to make a one-at-a-time product exactly to

customer specifications. It is used when there is high customization and low product
volume. Customer is usually involved in deciding on the design of the product. Projects
take long time to complete, and involve a huge amount of investment. Examples:
construction, shipbuilding, aircraft building, and interior design. Were as continuous
process it operates to produce continually high volume of fully standardized commodity
products. The system is highly automated and typically in operation continuously 24
hours per day. Examples: oil refiners, water treatment plants

7. Briefly discuss the steps to be followed in the development of product design.

When we develop product design we have to follow the following four steps

1. Idea generation

All product designs begin with an idea. To remain competitive, companies must
be innovative and bring out new products regularly. Product ideas can be generate
from different sources in different ways. The most common sources include:

 From inside the company

 Customers
 Competitors
 Suppliers and distributors

2. Product screening

This stage involves evaluating the product idea to determine its likelihood of success. The
product screening team evaluates the idea according to the needs of the major business
functions. Analysis on the requirements of operations, finance and marketing functions
approximately 80% of ideas do not make it pass this stage.

3. Preliminary design and testing

At this stage, design engineers translate general performance specifications into

technical specifications. Form and functional designs are created Prototypes are
built and tested. Changes are made based on test results the process of
revising, rebuilding a prototype, and testing continues. Testing (mini-
launching) should not be carried out not for too long or too short period.
 4. Final design

The final specifications are then translated into specific final processing
instructions to manufacture the product this includes:

Selecting tooling and equipment outlining jobs that need to be performed

Identifyingspecific materials needed and suppliers that will be used,

Prepare job descriptions Determine operation & assembly order

8. Briefly discuss the steps to be followed in the service design process.

Answer: service design process have four steps

1. The service concept

It defines the target customer and the desired customer experience. It also defines how
the service is different from others. Service blueprinting: a method used in to
conceptualize a service design or to describe and analyze a proposed service.

2. Service package

The service package consists of a mixture of physical items, sensual benefits, and
psychological benefits. For instance for a restaurant service:

Physical items: consist of the facility, food, drinks, tableware, napkins, and other
touchable commodities.

Sensual benefits: include the taste and aroma of the food and the sights and sounds of the
people.

Psychological benefits: are rest and relaxation, comfort, status, and a sense
of well-being. Effective service design defines all components of a service package.

4. Service Delivery

Rendering the service to the customer in the specified premise.

 9. Assume that you have a pizza house and are learning how to measure productivity.
Calculate the a) food cost productivity b) labor productivity, and  c) total productivity.
Also calculate the percent change for each measure.
  June July

Sales $52500 $59650

Food cost $15750 $16702

Labor cost $11550 $14912

Overhead cost

$3500 $3500

Answer

a) Food cost productivity = (Output)/ (food cost)

Food productivity for June = 52,500.00/ 15,750.00 = 3.33

Food productivity for July = 59,650.00/ 16702.00 = 3.57

To get the Change for food productivity we have to get the food productivity difference betweenn
June and July then divide it by food productivity for June

Therefore, Change for food productivity = (3.57-3.33)/ 3.33 = 0.24/3.33 = 0.072 = 7.2 %.

b) Labor productivity = (Output)/ (Labor cost)

Labor productivity for June = 52,500.00/ 11,550.00 = 4.55

Labor productivity for July = 59,650.00/ 14,912.00 = 4.00

Change for Labor productivity = labor productivity difference between June and July divided by
Labor productivity for June

Change for Labor productivity = (4.55 - 4.00)/ 4.55 = 0.55/4.55 = 0.1208 = 12.01%.

c) Total productivity = output produces/ all inputs used

Total productivity for June = output produces in June / all inputs used in June

Output in June = 52,500.00

All inputs used in June = 15750.00 + 11,550.00 + 3,500.00= $30,800.00

= $52,500.00/ $30,800 = 1.70

Total productivity for July = output produces in July/ all inputs used in July

Output in July = 59,650.00

All inputs used in July = (16702.00 + 14,912.00 + 3,500.00 = 35114 =

59,650.00/ 35114 = 1.70

Change in Total productivity = (total productivity for July - total productivity for June) / total

Productivity in June

= (1.7 – 1.7) / 1.70 = 0