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Part 4

Write a description of an operations management issue based on a provided scenario, and draw or outline a decision tree showing possible decisions for addressing the issue. In addition, complete a load-distance analysis for the scenario and describe your calculations.

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Introduction

In Assessment 4, you will focus on the factors in layout planning and facility layout. Companies realize that the costs of a product are inherent in how they transform their inputs into outputs. Transformation costs correlate directly to how well the facility is laid out and how well that layout translates to the delivery of a high-quality, on-time product. Operational decisions also have substantive impact on sustainability; for example, layout can affect how much electric power, heating, and cooling resources are expended.

In the current business reality, we find many forces that affect a company’s decision on where to do business and how to design capacity. Though factors can vary, a key component for all companies is to determine how they can best serve their customers. Many operation managers today consider how planning and facility location can impact the organization’s sustainability. For example, logistics, such as the distance between suppliers and warehouses, may have an impact on organizational costs and ecosystems.

Break-Even Analysis

A tool used by managers to help with capacity planning and plant location is break-even analysis, which allows managers to quantitatively evaluate a decision. Capacity planning takes into consideration the maximum output each facility can produce. Decision trees are used to help further analyze decisions. It is important to make sure that all choices are carefully evaluated and aligned with future forecasts. This will help ensure that facilities are efficient and located in the right area, and lead to optimized outputs. Technology has had a tremendous impact on these decisions and competitors are constantly evaluating their best practices to ensure they stay ahead of the competition.

Basic Layouts

Layout planning and facility layout are important concepts in operations management. The four basic layouts are process, product, hybrid, and fixed position. Each layout is critical to delivering a low-cost, high-quality product while being flexible enough to meet the needs of the customer. The type of layout a company uses is based on volume, product type, and customer needs. It is important to recognize that operational efficiency helps to deliver a low-cost product.

Scenario

Jackson Medical Diagnostics Lab is a small lab providing medical testing for doctors and hospitals. It was founded 10 years ago, has a good reputation among local doctors, and has been experiencing strong growth the past two years. Jackson’s general manager knows from a relatively recent operations management analysis that the lab’s design capacity is 340 patients per day, its effective capacity is 310 patients per day, and the lab currently processes 295 patients per day. The general manager is concerned that the lab will not have the capacity to meet future demand unless the lab is expanded. She has hired a market research firm to study the demand for the lab’s services in the area.

After completing its study, the market research firm predicted that there is a .60 probability of continued high demand (PH) for the lab’s services over the next five years and a .40 probability of low demand (PL). Based on that, Jackson’s general manager has decided to move forward with an expansion. However, she is not sure whether she should do a small expansion (SE) by taking over some adjacent vacant office space that has recently become available, or do a large expansion (LE) by moving the lab to a different floor of the same building.

The general manager has worked with the lab’s finance manager to come up with an estimate that a small expansion would have a profitability of $35,000 if the demand for the lab’s services is low (ProfitSmallLow). If the lab undertakes a small expansion and the demand for the lab’s services is high, the lab would likely have to undertake a second small expansion (assuming appropriate space was available), and the profitability of the two expansions would be $55,000 (ProfitSmallHigh). If the lab undertakes a large expansion, the profit would be $90,000 if the demand for its services is high (ProfitLargeHigh), but only a $52,000 profit is the demand is low (ProfitLargeLow).

Directions

Complete all of the following three components of this assessment:

Component 1

First, briefly describe the operations management issue in the scenario above and describe how you would approach an analysis.

Component 2

Draw or outline a decision tree showing the possible decisions, the probability of each, and the profitability of each. Based on those probabilities and profits, determine the probabilistic profitability of each and, thus, the best expansion decision for Jackson to pursue.

Component 3

As part of considering these two expansions, Jackson’s general manager is looking into how they might best lay out the lab areas if they do the large expansion. The new larger space they would use is already divided into several rooms connected by doors. Plumbing is available in each area, and thus the bathrooms (which are not yet built) could be located in any area. Jackson’s general manager would like to design a layout that minimizes the number of trips employees must make between rooms each day.

Her preliminary layout involves a 3×2 equal size room arrangement. One set of three rooms in that preliminary layout consists of the reception (R) room, the office (O), and the private patient stations (P) room. The other set of three rooms in that preliminary layout consists of the employee break area (E), the bathrooms (B), and the storage area (S). (Refer to the Preliminary Layout Diagram below.)

Preliminary Layout Diagram

Reception (R)	Office (O)	Private patient stations (P)
Employee break area (E)	Bathrooms (B)	Storage Area (S)

Jackson’s general manager has asked each employee to fill out a form logging how many times they currently walk from one area to the next (in their current location). Refer to the Data Table below for the resulting data.

Data Table

	(R)	(O)	(P)	(E)	(B)	(S)
Reception (R)		350	30	40	28	5
Office (O)			410	76	42	23
Patient stations (P)				15	295	2
Employee area (E)					37	8
Bathrooms (B)						3
Storage (S)

• Complete a load-distance (LD) analysis for the preliminary layout by assigning a load of 15 feet for each room-to-adjacent-room movement. (Assume there is a door between all adjacent rooms.)
• Describe your calculations associated with that analysis, and calculate and provide the final LD numeric value.

Additional Requirements

• Written communication: Written communication should be free of errors that detract from the overall message.
• APA formatting: Any references and citations should be formatted according to current APA style and formatting guidelines.
• Font and font size: Times New Roman, 12 point.

Part 5Analyze an operations management issue in a hypothetical company, and provide answers to five algebraic equations.

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Introduction

Operations management is the core of any business. Understanding the basics of operations management and the associated best practices allows you to understand the importance of eliminating waste while improving quality and customer service. Inventory is no longer simply a necessary evil but a means by which companies have found ways to gain competitive advantage.

The old management philosophy was to have enough inventories ahead in the system to make sure the customer received the product. This required massive warehouses, tons of raw materials, and a waste of time and efficiency.

All businesses are affected by their operationshow they transform inputs into useable outputs. Most companies do not have all the best practices in place, but they strive to incorporate some of them into their culture.

The document contains important information related to the following topics:

• Aggregate planning.
• Sales forecasting.
• Scheduling.

Scenario

For this assessment, suppose that you are the operations manager for ABC Manufacturing, a small manufacturing company founded three years ago. ABC has been manufacturing and selling an electric motor for the past year, but the company has not always had sufficient workers assigned to manufacturing this electric motor in order to satisfy demand. ABC’s president asked you to plan for the production of this motor for the next six months.

You have decided you will use a level aggregate plan for the electric motor, meaning that you will manufacture the same number of units each month. ABC’s president has told you that some customers order this motor well in advance of when needed, and thus it is allowable to have backorders, if needed. You know there are currently 150 units in inventory (starting inventory = SI), and ABC’s marketing manager estimates that the demand for the motor (in units) for each of the next six months (M = 6) will be 240, 225, 265, 270, 260, and 275 (D1, D2, D3, D4, and D5 respectively). You have decided you would like to reduce average inventory level of several products (including this one), and you want to have 50 units in inventory six months from now (ending inventory = EI).

Directions

Briefly describe the operations management issue in the ABC Manufacturing scenario and describe how you would approach an analysis. Then complete the following problems based on the scenario and provide answers to the algebraic equations.

Question 1

Refer to the ABC Manufacturing scenario to complete the following:

• Provide the algebraic equation for the monthly aggregate production rate (APR, using SI, EI, D1, D2, D3, D4, D5, and M as variables).
• Calculate and provide the numerical monthly aggregate production rate rounded to a whole number.

Question 2

Production employees at ABC work an average of 168 hours per month (HPM), and manufacturing the electric motor involves 3.5 total hours of work per unit (HPU).

• Provide the algebraic equation for the number of workers (W) needed to meet the above aggregate production rate (using W, APR, HPM, and HPU as variables).
• Calculate and provide the numerical number of workers needed.

Question 3

One subcomponent in this electric motor is also used in two other products manufactured by ABC. ABC’s president has told you that the company expects to use 5,400 (annual quantity = AQ) of these subcomponents during the next 12 months, with a consistent demand for them month-to-month (and a consistent demand during each month, with the business day daily demand, DQ, being 22). He has further told you that it costs $10 to place an order (order cost = OC) for this subcomponent (regardless of the quantity ordered) and that the annual holding cost is $2 per unit (unit holding cost = UHC). Finally, he has stated that out of 21 business days per month, there is a five-business-day lead time (LT = 5) associated with ordering this subcomponent.

• Provide the algebraic equation for the economic order quantity (EOQ, using AQ, OC, and UHC as variables).
• Calculate and provide the numerical economic order quantity rounded to the closest whole number.

Question 4

Refer to the ABC Manufacturing scenario to complete the following:

• Provide the algebraic equation for the reorder point (RP, using DQ and LT as variables).
• Calculate and provide the numerical EOQ, rounded to the closest whole number.

Question 5

Historically, ABC has based its production on estimates from the company’s marketing manager. While that has generally been successful, you have decided you would like to factor in an operations management approach to estimating demand.

• Describe the following forecasting methods. Provide the math associated with each method and identify the pros and cons of using it:
  • Nave.
  • Simple mean.
  • Simple moving average.
  • Weighted moving average.
  • Exponential smoothing.
  • Linear trend line.

Additional Requirements

• Written communication: Written communication should be free of errors that detract from the overall message.
• APA formatting: Any references and citations should be formatted according to current APA style and formatting.
• Font and font size: Times New Roman, 12 point.

Part 1

Create a proposal to address operations management issues and decisions as they apply to a fictional bank.

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Introduction

Operations management is the core of any business. It is the management function that coordinates all the activities in relation to product and service reliability, quality, efficiencies, delivery, and meeting customers’ expectations.

Today’s global economy has forced companies to focus on how they deliver their product or service to their customers. Companies must now continuously evaluate better ways to reduce cost, improve quality, and give the customer more than was expected.

Operations management is an integral part of this process because it focuses on the transformation of needed inputs to desired outputs. This transformation includes office, production, manufacturing, and vendors or suppliers, as well as other things that affect the company’s ability to deliver superior quality products.

Operations management includes the use of the facilities, equipment, materials, technology, and, most importantly, the employees. These operational activities are designed relative to sustainability concerns. Understanding operations management will allow you to see the flow of the product or service delivered.

A product or a service starts with design. A key component of the design process is to determine whether a product or service can be offered at a price point that will produce a profit for a company. A key consideration in design is any cost or environmental impact affecting sustainability concerns.

Another aspect of operations management is that companies must strive to improve the work environment for their employees and enhance sustainability concerns. People are a company’s most important resource, and managers must take care of their employees in order to grow and maintain industry leadership.

Our fast-paced economy has shortened the product life cycle, by forcing companies to innovate more often in order to serve their customers and stay ahead of the competition. One tool used by many companies to help maintain a competitive advantage is the flowchart. This tool allows companies to diagram out all the processes needed to deliver their products. The flowchart diagram provides a visual illustration of the work down to the simplest step in the process. It allows management to constantly review processes to see where bottlenecks occur and to help determine how they can improve the process.

Some of the best practices used by companies that lead in their industries include:

• Break-even analysis.
• Benchmarking.
• Reverse engineering.
• Concurrent engineering.

Scenario

Consider the operations management aspects of the organization in the following scenario:

Madero Bank is a regional U.S. bank. Madero Bank’s managers decided on a business strategy emphasizing customer service, rather than on some other dimension such as customer financials (providing higher interest rates on savings accounts, lower interest rates on loan, and so forth). To help the bank implement that customer service strategy, the bank conducted a survey of its customers and found that the customers would like the bank to be open for more hours. As a result, Madero Bank decided to remain open later on Fridays, until 7:00 p.m., and open on Saturdays, from 9:00 a.m. to 4:00 p.m.

The expanded hours have presented challenges for Madero Bank’s operations management team, in staffing an adequate number of tellers to cover those additional hours without customers having to wait in long lines. Madero Bank’s managers are also considering additional approaches to support their customer service strategy, including the following:

• Providing additional hours of telephone customer support (which would involve securing additional telephone lines, customer support representatives, and telephone and computer equipment).
• Advancing the bank’s online banking functionality (including redesigning websites and developing an app on each of the leading mobile platforms).
• Redesigning the physical layout of the bank to better utilize high-contact areas (areas with significant customer traffic) and low-contact areas (areas with little or no customer traffic).
• Offering service bundles for the bank’s largest personal and business banking customers, such as a predefined set of accounts, services, and reduced fees for platinum-level customers.

Operations Management Proposal

Using the scenario above, create a proposal in which you provide answers to the following questions:

• How should operations management and associated improvements support Madero Bank’s strategy?
• How might service bundles be utilized in support of this strategy? How do they relate to the initial purpose of the bank?
• What are some of the key operations management decisions to be made at Madero Bank?
• What operations management changes would you recommend, and why? (These changes could be related to hours, facilities, equipment, and personnel.)

Additional Requirements

• Written communication: Written communication should be free of errors that detract from the overall message.
• APA formatting: Any references and citations should be formatted according to current APA style and formatting guidelines.
• Font and font size: Times New Roman, 12 point.

Part 2

Complete five problems in which you analyze common approaches to determining product or service quantities based on financials, contribution to profit based on a specific price and volume, product reliability, and quality control.

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Introduction

This assessment explores the quality tools companies use to monitor, control, and analyze their products or services. Most businesses in today’s economy must invest in quality to survive. Experts on quality have consistently shown that investing in programs and processes to ensure high quality does pay off.

Today’s customers want high quality products at the lowest possible price. Businesses establish quality expectations and conform to those expectations based on the customer or market segment they are serving. Today’s consumers also demand organizations to be concerned with sustainable resources; this is evident with the passage of recent regulations and laws.

What Is Quality?

It is important to understand that quality is not just an issue for companies that provide products. Services are measured by quality expectations as well, and they are monitored to ensure high levels of quality. Organizations that provide services are extremely vulnerable to high quality expectations because they are usually face-to-face with the customer on a regular basis. Service is not as easy to quantitatively measure, but it is still important to measure the service quality through the use of surveys, questionnaires, and other tools.

In services, the idea is to make sure that the customer’s expectations have been exceeded, thus establishing the client as a return customer. Businesses have started to recognize the important role their employees play in this process, and they have invested heavily in education, training, and team development. The best practice of investing in employees helps a company survive in today’s competitive economy.

A company determines its level of quality based, in part, on the specific expectations an individual is willing to pay. Once this and other factors are considered, a company sets its quality standards. The transformation of inputs to outputs creates many variablesfrom materials used to shipping and handling of the final productthat can affect quality. More importantly, industry metrics need to be considered to better manage effective resource use and determine organizational performance for sustainability.

Total Quality Management

Total quality management (TQM) is a process by which companies strive for zero defects while delivering high quality products. By understanding the process, a company can identify the causes of defects and work toward eliminating them. Companies monitor and improve the development of a product or service with the use of statistical process control (SPC), control charts, process capabilities, Six Sigma, and other tools. Six Sigma is a tool that involves the whole company, especially top management, with the intent of reducing defective workmanship to 3.4 parts per million transactions. This is not a quick-fix program but a long-term, corporate culture mindset that strives to eliminate defects completely so they do not return.

Scenario

Suppose that you were recently hired as the operations manager for ABC Manufacturing, a small manufacturing company founded two years ago. The company has been reasonably successful since it was founded, but it has recently experienced several production issues. You were hired to recommend and implement improvements to get the company back on track.

Problems

Complete the following problems based on the ABC Manufacturing scenario above. For each question, briefly describe the operations management issue and describe how you would approach an analysis, then provide answers to the algebraic equations.

Question 1

ABC Manufacturing is unsure of the ideal price to quote for one of their products, a pump. ABC’s president has asked you to do a break-even analysis for the pump and to recommend the optimal price. The fixed costs (FC) associated with manufacturing this particular product are $100,000, and the variable costs (VC) are $50 per unit. ABC’s president is considering a selling price (P) for this product of $100. The president wants to know how many units have to be sold in order to break even (BEU).

• Analyze this operations management issue.
• Provide the algebraic equation (using BEU, FC, P, and VC as variables) for the break-even analysis.
• Calculate and provide the numeric break-even value.

Question 2

ABC’s president believes there is substantial competition for this type of pump, and that price is a significant factor in potential customer’s purchase decision. He estimates that the company will sell 3,600 pumps (unit volume or UV) if they are priced at $100, and he will sell 2,900 pumps if they are priced at $110. He wants to know what contribution to profit (CP) would result from each of those two selling prices, and thus which is the better price.

• Analyze this operations management issue.
• Provide the algebraic equation (using CP, UV, P, and VC as variables) for this analysis.
• Calculate and provide the numeric contribution to profit (in dollars) for each of the two price points.

Question 3

Another issue ABC is facing is reliability of their products, in part because they are manufacturing increasingly complex products. One such product is designed and manufactured with five different subassemblies combined in series. It was determined through testing that those subassemblies have reliabilities, which are R1, R2, R3, R4, and R5; of .997, .998, .995, .999, and .990, respectively. (Refer to the Question 3 Flowchart below). ABC’s president has asked you what the reliability of the overall product (RP) is, given those subassembly reliabilities utilized in series.

• Analyze this operations management issue.
• Provide the algebraic equation (using RP, R1, R2, R3, R4, and R5 as variables) for this analysis.
• Calculate and provide the overall product reliability, given those subassemblies utilized in series.

Question 4

ABC’s president has also asked you what the overall reliability of a different product (RP) is. That product has four subcomponents (SC1, SC2, SC3, and SC4). The components are organized as SC1, followed by SC2 in parallel with SC3, which are then both followed by SC4. (Refer to the Question 4 Diagram below). Their respective reliabilities are SC1R=.97, SC2R=.98, SC3R=.95, and SC4R=.93.

• Analyze this operations management issue.
• Provide the algebraic equation (using RP, SC1R, SC2R, SC3R, and SC4R as variables) for this analysis.
• Calculate and provide the overall product reliability given those subassemblies.

Question 5

ABC Manufacturing is also concerned about the quality of its manufacturing processes. One of the products the company sells is a bottle of liquid lubricant associated with the pump product line. ABC’s president is familiar with the operations management concept of control limits (determining an upper and lower numerical threshold such that a process is considered in control as long as it stays within those limits).

The president has asked you to take samples of the amount of liquid in those bottles and determine the upper control limit (UCL) and lower control limit (LCL) of three standard deviations. He told you that, based on previous testing, the standard deviation (SD) for this process is 0.035. You took sample measurements of the volume of liquid in the bottles, done at different times of the day (in case that somehow impacted the volume), and this produced the data in the Sample Measurements Table below:

Sample Measurements Table

Time	Volume of Liquid in Bottles of Lubricant (in Ounces)
8:00 am	30.03
9:00 am	30.04
10:00 am	29.98
11:00 am	30.01
12:00 pm	30.00
1:00 pm	29.97
2:00 pm	30.08
3:00 pm	29.98
4:00 pm	29.99
5:00 pm	29.98
Mean (M)	30.006

• Analyze this operations management issue.
• Provide the algebraic equation for the UCL and for the LCL (using UCL, LCL, M, and SD as variables).
• Calculate and provide the numerical ULC and LCL values.

Additional Requirements

• Written communication: Written communication should be free of errors that detract from the overall message.
• APA formatting: Any references and citations should be formatted according to current APA style and formatting guidelines.
• Font and font size: Times New Roman, 12 point.

Part 3

Interview at least one real-world professional working in an operational area, and write an analysis addressing the importance of supply chain management and how it works within a company. In addition, calculate the total manufacturing cost for a provided scenario.

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Introduction

In today’s economy, companies can utilize suppliers to gain an advantage over their competitors. Effective supply chain management can lower the cost of a product, while maintaining or even improving qualitya benefit that can differentiate a company to consumers. Because of this, suppliers have become an integral part of most business plans.

The supply chain must be managed to reach organizational goals of sustainability. Many companies realize they cannot be experts in everything, so they form strategic alliances to tap into the expertise of the suppliers. Global competitiveness and customer demand have forced companies to constantly improve their products or services, and companies have turned to suppliers for help.

Just-in-time (JIT) and lean manufacturing are concepts companies have adopted to eliminate waste and shift focus to adding value in key areas. The concept of making just enough of a part to meet current needs only is foreign to a lot of U.S. companies, many of which are still operating with the idea that it is better to push the product through their processes and create the inventory needed to serve the customer. JIT utilizes a pull system, which is identified with small lot sizes, quick changeover, flexible resources, streamlined layout, and uniform plant production. Lean manufacturing works well with JIT because it focuses on streamlining the process and on strict adherence to eliminate waste.

Companies that utilize these tools discover quickly that it is not just the production area that has to work toward the elimination of waste. The marketing, engineering, and purchasing departments all have to coordinate their activities to produce a flexible but smooth flowing process that focuses on serving the customer. These best practices only work if the entire company works together.

Scenario

Suppose that you were recently hired as the operations manager for ABC Manufacturing, a small manufacturing company founded two years ago. The company has been reasonably successful since it was founded, but it has recently experienced several production issues. You were hired to recommend and implement improvements to get the company back on track.

ABC’s president has indicated that the company leaders have already done some preliminary planning associated with manufacturing a new valve product. They have a final product design and have done the preliminary planning to find suppliers for the individual components used in the valve.

However, the president is not sure about how best to set up the supply chain for this new product. For example, he thinks ABC might not have done an optimal job of designing the supply chain, including how and where inventory is managed for some of their current products. He is also generally aware of supply chain concepts such as just-in-time (JIT) manufacturing and outsourcing but knows there can be complications and tradeoffs associated with those options.

The president has asked for your recommendations related to the supply chain for this new product, in relation to a specific outsourcing decision. You have decided it would be helpful to interview at least one operations manager at a different company to better understand the key concepts.

Preparation

In preparation for completing this assessment, interview at least one real-world professional working in an operational area. The goal of the interview is to gain an understanding of the way in which the company transforms inputs into useable outputs for its customers. This can be a small or large company, family-owned or public, service-or product-oriented, a bakery, restaurant, or a car manufacturer. A good option might be your current employer. The purpose of this interview is to understand the importance of operations management through the eyes of the company. Many companies do not use all possible best practices, but they do incorporate some of themor they may be starting to.

Be sure to cover at least the following questions in your interview:

• Why is supply chain management important to a company?
• What operations management (including supply chain management) tools are used by the company to support best practices?
• What alliances or partnerships does the company have with other companies?
• How does the company receive components or materials for its product or service?
• How are component parts integrated into the production process?
• What are the key tradeoffs associated with JIT manufacturing?
• What are the key tradeoffs in making outsourcing decisions?

Components

Complete both of the assessment components outlined below.

Interview Component

Once you complete your interview, use the information to write an analysis that accomplishes the following:

• Explain why supply chain management is important to a company.
• Describe operations management (including supply chain management) tools used to support best practices.
• Discuss alliances or partnerships a company might have with other companies to support its operations management strategy.
• Describe how a company receives components or materials for its product or service.
• Explain how the component parts are integrated into the production process.
• Describe the key tradeoffs associated with JIT manufacturing.
• Describe the key tradeoffs in making outsourcing decisions.

Scenario Component

For the final component of this analysis, consider the following specific potential outsourcing situation:

ABC has determined it can manufacture the new valve product internally for $27,000 in fixed costs (FC) and $8 variable costs (VC) per unit. The company president has estimated ABC will sell 4,800 (unit volume = UV) of these valves each year. Jay Production, a small but highly reputable company specializing in outsourced mechanical manufacturing, has contacted ABC’s president, and offered to manufacture this new valve for ABC for an annual fee of $29,000 plus $6 per unit.

• Provide the algebraic equation for determining the total annual manufacturing cost (TC) of the valve (using TC, FC, VC, and UV as variables).
• Calculate and provide the total annual manufacturing cost if the valve is manufactured by ABC.
• Calculate and provide the total annual manufacturing cost if the valve is manufactured by Jay.
• Indicate which is better from a total annual manufacturing cost standpoint.

Additional Requirements

• Written communication: Written communication should be free of errors that detract from the overall message.
• APA formatting: Any references and citations should be formatted according to current APA style and formatting guidelines.
• Font and font size: Times New Roman, 12 point.