s 4014 assess 4-5

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.

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