(OM_MA2) Sanjiv Kamra, Div: B, Roll No.

64

Question 1: a. What are the characteristics of Services and give examples. Service operations management concerns the design, planning, direction and control of all the facilities, processes and required activities to transform labour, capital, materials, energy, and skills into performance and delivery of service. Good service organisation performs the operations functions of planning, scheduling, equipment operation, quality control, record keeping, and human resource management for maintaining efficient usefulness. This takes place while ensuring that the quality of the service is both high and consistent. CHARACTERISTICS OF SERVICES The services have unique characteristics which make them different from that of goods. The most common characteristics of services are: Intangibility. Inseparability. Perish ability. Variability Intangibility Services are activities performed by the provider, unlike physical products they cannot be seen, tasted, felt, heard or smelt before they are consumed. Since, services are not tangibles, they do not have features that appeal to the customers senses, their evaluation, unlike goods, is not possible before actual purchase and consumption. The marketer of service cannot rely on product-based clues that the buyer generally employs in alternative evaluation prior to purchase. So, as a result of this, the services are not known to the customer before they take them. The service provider has to follow certain things to improve the confidence of the client: The provider can try to increase the tangibility of services. For example, by displaying a plastic or a clay model showing patients an expected state after a plastic surgery. The provider can emphasize on the benefits of the service rather than just describing the features. Not all the service product has similar intangibility. Some services are highly intangible, while the others are low i.e. the goods (or the tangible component) in the service product may vary from low to high. For example: Teaching, Consulting, Legal advices are services which have almost nil tangible components; While restaurants, fast food centers, hotels and hospitals offer services in which their services are combined with product (tangible objective) , such as food in restaurants, or medicines in hospitals etc. Inseparability Services are typically produced and consumed simultaneously. Incase of physical goods, they are manufactured into products, distributed through multiple resellers, and consumed later. But, incase of services, it cannot be separated from the service provider. Thus, the service provider would become a part of a service. For example: Taxi operator drives taxi, and the passenger uses it. The presence of taxi driver is essential to provide the service. The services cannot be produced now for
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(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

consumption at a later stage / time. This produces a new dimension to service marketing. The physical presence of customer is essential in services. For example: to use the services of an airline, hotel, doctor, etc a customer must be physically present. Inseparability of production and consumption increases the importance of the quality in services. Therefore, service marketers not only need to develop task-related, technical competence of service personnel , but also , require a great input of skilled personnel to improve their marketing and inter personal skills. Perishability Services are deeds, performance or act whose consumption take place simultaneously; they tend to perish me the absence of consumption. Hence, services cannot be stored. The services go waste if they are not consumed simultaneously i.e. value of service exists at the point when it is required. The perishable character of services adds to the service marketers problems. The inability of service sector to regulate supply with the changes in demand; poses many quality management problems. Hence, service quality level deteriorates during peak hours in restaurants, banks, transportation etc. This is a challenge for a service marketer. Therefore, a marketer should effectively utilize the capacity without deteriorating the quality to meet the demand. Variability Services are highly variable, as they depend on the service provider, and where and when they are provided. Service marketers face a problem in standardizing their service, as it varies with experienced hand, customer, time and firm. Service buyers are aware of this variability. So, the service firms should make an effort to deliver high and consistent quality in their service; and this is attained by selecting good and qualified personnel for rendering the service

(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

Question 1: b. Explain Process Selection types and list differences between Intermittent and Continuous Operations with examples

Types of production system

The types of production system are depicted in the following image.

The types of production system are grouped under two categories viz., 1. Intermittent production system, and 2. Continuous production system.

(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

Intermittent production system

Intermittent means something that starts (initiates) and stops (halts) at irregular (unfixed) intervals (time gaps). In the intermittent production system, goods are produced based on customer's orders. These goods are produced on a small scale. The flow of production is intermittent (irregular). In other words, the flow of production is not continuous. In this system, large varieties of products are produced. These products are of different sizes. The design of these products goes on changing. It keeps changing according to the design and size of the product. Therefore, this system is very flexible. Following chart highlights the concept of an intermittent production system.

Following are examples on the intermittent production system. Please refer above chart while reading examples given below. 1. The work of a goldsmith is purely based on the frequency of his customer's orders. The goldsmith makes goods (ornaments) on a small-scale basis as per his customer's requirements. Here, ornaments are not done on a continuous basis. 2. Similarly, the work of a tailor is also based on the number of orders he gets from his customers. The clothes are stitched for every customer independently by the tailor as per one's measurement and size. Goods (stitched clothes) are made on a limited scale and is proportional to the number of orders received from customers. Here, stitching is not done on a continuous basis.

(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

The features of an intermittent production system are depicted below.

The characteristics of an intermittent production system are listed as follows: 1. 2. 3. 4. The flow of production is not continuous. It is intermittent. Wide varieties of products are produced. The volume of production is small. General purpose machines are used. These machines can be used to produce different types of products. 5. The sequence of operation goes on changing as per the design of the product. 6. The quantity, size, shape, design, etc. of the product depends on the customer's orders. The types of intermittent production system include: 1. Project production flows, 2. Jobbing production flows, and 3. Batch production flows.

(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

Continuous production system

Continuous means something that operates constantly without any irregularities or frequent halts. In the continuous production system, goods are produced constantly as per demand forecast. Goods are produced on a large scale for stocking and selling. They are not produced on customer's orders. Here, the inputs and outputs are standardized along with the production process and sequence. Following chart highlights the concept of a continuous production system.

Following are examples on the continuous production system. Please refer above chart while reading examples given below. 1. The production system of a food industry is purely based on the demand forecast. Here, a large-scale production of food takes place. It is also a continuous production. 2. Similarly, the production and processing system of a fuel industry is also purely based on, demand forecast. Crude oil and other raw sources are processed continuously on a large scale to yield usable form of fuel and compensate global energy demand.

(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

The features of a continuous production system are depicted below.

The characteristics of a continuous production system are listed as follows: 1. 2. 3. 4. 5. The flow of production is continuous. It is not intermittent. The products are standardized. The products are produced on predetermined quality standards. The products are produced in anticipation of demand. Standardized routing sheets and schedules are prepared.

The types of continuous production system include: 1. Mass production flows, and 2. Process production flows

(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

Question 1: C.There is guest house in Mumbai suburb and it has a capacity of 20 rooms where 3 can be accommodated in each room and other basic residing facilities. Currently the overall occupancy is low. You are to provide capacity plan for the owner.

1. Increase more number of beds by reducing facilities like cupboard to joint with bed. 2. Common T.V. room rather than individual room. 3. Flexible table which can be offered to the customer on bed itself for dinning. 4. Optimum Utilization of every square feet of room. 5. Experience staff with crowd handling experience. 6. Common bathroom and refreshment. 7. If possible converting room into dormitory in order to increase capacity of beds. 8. For forecasting qualitative measures such as executive opinions, delphi method, use of subjective opinions of experts. 9. Decision Tree can be used to decide the best alternatives. 10. Considering competitors facility and taking decision accordingly. 11. Identifying, Developing and considering the alternatives of the capacity need would be applied.

(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

Question 2: a. Draw Process Flow Analysis diagram for buying movie tickets in multiplex complex consisting of 4 cinema halls.

(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

DECISION TREE
TIMINGS ACTION TAKEN

Morning show

Buy ticket at half rate 9:00 am to 12:00pm

weekdays 9:00AM TO 12:00 PM Evening show Tickets are available at normal rate

TICKETS BOOKING

Vodafonetuesday Morning show weekends Evening show

BUY ONE TICKET GET 1 TICKET FREE ONLY FOR VODAFONE CUSTOMERS Buy tickets at normal rate

Buy tickets at double rate

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(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

Movie details operator No. of seats

Multiplex Manage System

Ticket collection

Customer

Report operator

Enter id and password operator

1.1 login Operator details

Movie details 1.2 Movie updation

Ticket details 1.3

ticketing

Movie info.

Ticket info.

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(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

Movie Updating Process

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(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

ONLINE BOOKING

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(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

Question 2: b. Why business have moved from individual Functions execution towards Process Engineering. Illustrate with examples End-to-end business processes: Processes that totally fulfill a defined external customer need. Business process reengineering: The philosophy that recommends the redesign of processes to fulfill defined external customer needs. Different characteristics of operations processes: Volume: repeatability, systemization. Variety: Standardization, flexible Variation: variation in demand Visibility: process exposure Front office: The high visibility part of an operation Back office: The low visibility part of an operation Activities that apply to all types of operation: Understanding the operations strategic objectives Developing an operations strategy for the organization Designing an operations strategy for the organization Planning and controlling the operation Improving the performance of the operation The broad responsibilities of operations management Why is operations management important Reduce costs Increase revenue Reduce the amount of investment Provide the basis for future innovation More profitability! Operations management: Operations strategy Improvement Planning and control Design Operations strategy: The operations strategic objectives The operations competitive role and position Improvement Operations strategy Elimination of waste. Involvement of staff in the operation. The drive for continuous improvement.
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(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

Four stages of operations contribution: 1. Internal neutrality (avoiding making mistakes) 2. External neutrality (trying to implement best practice) 3. Internally supportive (providing a credible strategy) 4. Externally supportive (innovative, creative and proactive, one step ahead competitors) Five basic performance objectives: (can be added value) Quality Speed (time between requesting and receiving) Dependability Flexibility Cost (advantage) The seven forms of waste: Over-production Waiting time Transport Process Inventory Motion Defectives The 5Ss: 1. Sort: Eliminate what is not needed and keep what is needed. 2. Straighten: Position things in such a way that they can be easily reached whenever they are needed. 3. Shine: Keep things clean and tidy; no refuse or dirt in the work area 4. Standardize: Maintain cleanliness and order perpetual neatness 5. Sustain: Develop a commitment and pride in keeping to standards.

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(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

Question 2: c. What are the factors (in bullets) that you consider for location for the following businesses:1. Starbucks coffee outlets 2. Gold & Diamond jewellery manufacturing 3. Ford cars from manufacturing factory to distribution outlets

Starbucks coffee outlets Cost of rent. Corner of a busy street The interior, obviously the space has to be a suitable enough place in which one can conduct business without sacrificing quality. The next factor that must be considered is the exterior. Is it neat and clean? Does the building need a paint job? Are the windows polished? Would your signs be visible from the road? Two-thirds of consumers, and three in four 16-24-year-olds, buy coffee and other hot drinks. Cost of transportation should be cheap. Inventory and stock should be sufficient. As starbucks is premium coffee chain and no price war with CCD and barista, location should be targeting upper class. A large seating area, a kitchen, space for internet access and a performance area. Legal lease/rent agreement and clear title commercial property Permission from local authority. Food standards and legal food authorities should be verified The publication covers key areas on serving food including contamination, cleaning, chilling, cooking, management and keeping a food diary Job and business licenses should be available on that property Good physical labour is available in surroundings. Different area wont be any issues with competition.

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(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

Gold & Diamond jewellery manufacturing Cheap labour Climate Raw material availability Transport should be safe and secure Land electricity and water Service and repair Government policies As price keep on varying availability of raw material should be in consideration Efficeny of inspection and verification for certification.

Ford cars from manufacturing factory to distribution outlets Raw material availability Location (with respect to the marketing area) Availability of suitable land Transport facilities Availability of labors Availability of utilities (Water, Electricity) Environmental impact and effluent disposal Local community considerations Climate Political strategic considerations Taxations and legal restrictions

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(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

Question 3: a. b. c. d. Explain Level, Chase and Hybrid Types Aggregate plans with basic examples What are the advantages & disadvantages of using ERP? Explain terms like Reorder, safety stock, EoQ, Break even Analysis with examples Why seasonal variations to be considered in Forecasting (in brief)?

Level plans

Use a constant workforce & produce similar quantities each time period Use inventories and backorders to absorb demand peaks & valleys Eg: Wave top, Inc. currently has 10 employees, each producing 5 complete units per day, for a total of 50 units every workday. Calculate the number of employees needed in the companys level aggregate plan if the company has an average weekly demand of 500 units and plans on satisfying all of its demand.

If average weekly demand is 500 units and employees work ve days per week, we need to produce 100 units per day. Thus, the workforce should be 20 employees (100 units needed each day divided by 5 units completed per employee per day). If we use this method, inventory accumulates when demand is below average and depletes when demand exceeds the average level. If we do not have enough inventory on hand to satisfy demand, then back orders result.

Chase plans

Minimize finished good inventories by trying to keep pace with demand fluctuations Matches demand by varying either work force level or output rate Eg : Wave top, Inc. decides to adjust its capacity by hiring and ring employees each month. We calculate the number of employees needed during each period based on the net demand. For example, January demand is 12,000 units, but since we have 6000 units in inventory, the net demand is only 6000 units. Each employee builds 500 units per month, so Wave top, Inc. needs 12 employees (6000 units divided by 500 units per employee per month) in January. The company needs 18 employees in February, 24 employees in March, 30 employees in April, 36 employees in May, and 48 employees in June. How does this affect the space needed, the number of workstations, the sets of tools, and so forth? When Wave top, Inc. used a level aggregate plan, it needed

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(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

space and equipment to accommodate 28 employees. With the chase aggregate plan, however, the company needs space and equipment for 48 people. Hybrid Strategies

Build-up inventory ahead of rising demand and use backorders to level extreme peaks Layoff or furlough workers during lulls Subcontract production or hire temporary workers to cover short-term peaks Reassign workers to preventive maintenance during lulls Any combination of options is possible. Because of the number of options you can combine in a hybrid plan, you need to evaluate your companys current situation and limit the options you choose from.

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(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

b. What are the advantages & disadvantages of using ERP? Advantages of ERP (Enterprise Resource Planning) System: 1. Complete visibility into all the important processes across various departments of an organization (especially for senior management personnel). 2. Automatic and coherent work-flow from one department / function to another to ensure smooth transition/ completion of processes. 3. A unified and single reporting system to analyze the statistics/ numbers/ status etc in realtime, across all the functions / departments. 4. Since same software is used across all departments this can avoid individual departments having to buy and maintain their own software systems. 5. Certain ERP vendors can extend their ERP systems to provide Business Intelligence functionalities as well. 6. Advanced e-commerce integration is possible with ERP systems that can handle webbased order tracking/ processing. 7. There are various modules in an ERP system like Finance/ Accounts, Human Resource Management, Manufacturing, Marketing / Sales, Supply Chain / Warehouse Management, CRM, Project Management, etc. 8. Since ERP is a modular software system, its possible to implement either a few modules (or) many modules based on the requirements of an organization. If more modules implemented, the integration between various departments might be better. 9. Single Database is implemented on the back-end to store all the information required by the ERP system and that enables centralized storage / back-up of all enterprise data. 10. ERP systems are more secure as centralized security policies can be applied to them and all the transactions happening via the ERP systems can be tracked. 11. ERP systems provide visibility and hence enable better/ faster collaboration across all the departments. 12. It is possible to integrate other systems (like bar-code reader, for example) to the ERP system through an API (Application Programing Interface). 13. ERP systems make it easier for order tracking, inventory tracking, revenue tracking, sales forecasting and related activities. 14. ERP systems are a boon for managing globally dispersed enterprise companies.

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(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

Disadvantages of ERP (Enterprise Resource Planning) Systems: 1. The cost of ERP Software, planning, customization, configuration, testing, implementation, etc is too high. 2. ERP deployments take 1-3 years to get completed and fully functional. 3. Too little customization may not integrate the ERP system with the business process & too much customization may slow down the project and make it difficult to upgrade. 4. The cost savings/ payback may not be realized immediately after the ERP implementation & it is quite difficult to measure the same. 5. The participation of users is very important for successful implementation of ERP projects So, exhaustive user training and simple user interface might be critical. But ERP systems are generally difficult to use (and learn). 6. There maybe additional indirect costs like new IT infrastructure, upgrading the WAN links, etc. 7. Migration of existing data to the new ERP systems is always difficult to achieve as with integrating ERP systems with other stand alone software systems. 8. ERP implementations are difficult to achieve in decentralized organizations with disparate business processes and systems. 9. Once an ERP systems is implemented it becomes a single vendor lock-in for further upgrades, customizations etc.

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(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

c. Explain terms like Reorder, safety stock, EoQ, Break even Analysis with examples

Reorder level: Reorder level (or reorder point) is the inventory level at which a company
would place a new order or start a new manufacturing run. Reorder Level = Lead Time in Days Daily Average Usage Lead time is the time it takes the supplier or the manufacturing process to provide the ordered units. Daily average usage is the number of units used each day. If a business is holding a safety stock to act as buffer if daily usage accelerates the reorder level would increase by the level of safety stock. Reorder Level = Lead Time in Days Daily Average Usage + Safety Stock Example: ABC Ltd. is a retailer of footwear. It sells 500 units of one of a famous brand daily. Its supplier takes a week to deliver the order. The inventory manager should place an order before the inventories drop below 3,500 units (500 units of daily usage multiplied with 7 days of lead time) in order to avoid a stock-out.

Safety Stock: Safety stock is the stock held by a company in excess of its requirement for
the lead time. Companies hold safety stock to guard against stock out. Safety stock is calculated using the following formula: Safety Stock = (Maximum Daily Usage Average Daily Usage) Lead Time Example: ABC Ltd. is engaged in production of tires. It purchases rims from DEL Ltd. an external supplier. DEL Ltd. takes 10 days in manufacturing and delivering an order. ABC's requires 10,000 units of rims. Its ordering cost is $1,000 per order and its carrying costs are $3 per unit per year. The maximum usage per day could be 50 per day. Calculate economic order quantity, reorder level and safety stock. Solution EOQ = SQRT (2 Annual Demand Ordering Cost Per Unit / Carrying Cost Per Unit) Maximum daily usage is 50 units and average daily usage is 27.4 (10,000 annual demand 365 days). Safety Stock = (50-27.4) 10 = 226 units. Reorder Level = Safety Stock + Average Daily Usage Lead Time Reorder Level = 226 units + 27.4 units 10 = 500 units.

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(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

Break Even Analysis: The break-even point is the point at which revenues equal
expenses. In investing, the break-even point is the point at which gains equal losses. The basic idea behind break-even point is to calculate the point at which revenues begin to exceed costs. The first step is to separate a company's costs in to those that are variable and those that are fixed. Fixed costs are costs that do not change with the quantity of output. Examples of Fixed cost include rent, insurance premiums, or loan payments. Variable costs are costs that change with the quantity of output. They are zero when production is zero. Examples of common variable costs include labour directly involved in a company's manufacturing process and raw materials. Setting a Prices critical to your breakeven analysis; you can't calculate likely revenues if you don't know what the unit price will be. Unit price refers to the amount you plan to charge customers to buy a single unit of your product. Breakeven Point = Fixed Costs/(Unit Selling Price - Variable Costs) This calculation will let you know how many units of a product you'll need to sell to break even. Once you've reached that point, you've recovered all costs associated with producing your product (both variable and fixed). Above the breakeven point, every additional unit sold increases profit by the amount of the unit contribution margin, which is defined as the amount each unit contributes to covering fixed costs and increasing profits. As an equation, this is defined as: Unit Contribution Margin = Sales Price - Variable Costs

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(OM_MA2) Sanjiv Kamra, Div: B, Roll No. 64

d.

Why seasonal variations to be considered in Forecasting?

A seasonal pattern is any pattern that regularly repeats itself and is of a constant length. Such seasonality exists when the variable we are trying to forecast is inuenced by seasonal factors such as the quarter or month of the year or day of the week. Examples are a retail operation with high sales during November and December or a restaurant with peak sales on Fridays and Saturdays. One factor that can signicantly impact sales is the weather. In the past, there was little companies could do to plan for weather problems. However, new businesses have sprung up to help companies use weather data to predict consumer behavior and manage weather risk. It could be as simple as predicting a hot summer, a cold winter, or an early spring. This type of information can help companies move the right inventories to areas where consumers will be more likely to buy them.

Eg: Paralytics Inc. is a company that helps businesses use weather data to make their business plans. Its clients include Gillettes Duracell Batteries, Home Depot, and Wal-Mart. In one example, Paralytics helped Duracell move a large number of batteries to areas expecting to be hit by hurricanes during the hurricane season. Although using weather data does not replace traditional forecasting methods, it is one additional tool that can help companies improve their forecasting and planning. Forecasting demand at ski resorts such as Snowshoe, Holiday Valley, and Seven Springs can be very challenging because data are highly seasonal. Multiple seasonal factors need to be considered, including the month of the year, day of the week, and holidays and long weekends, in addition to considering the weather forecast. Historical data are used to develop the indexes for these seasons. In addition, the ski industry has been experiencing an upward trend over the past years, particularly with the growth of snowboarding. A simple way to make forecasts in this industry is to forecast the trend and then make adjustments based on developed seasonal indexes.

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