Operations Management

Q1 How would operations strategy for a service industry be different if any from that for a manufacturing industry ? (Its an example & explain)
Consider that any manufacturer could incorporate (bring inside) any service endeavor and add that service to it's portfolio, either for internal use or for sale. Alternatively, another manufacturing model is to outsource all work efforts to design and build product where ultimately the holding company merely owns the rights and the profits of the venture. The manufacturing model must provide a horizontal spectrum of work efforts in support of the product-life-cycle within the company community. Conversely, service organizations focus on specific resources and / or talent (human resource and capital resources). This is true whether one are considering packaging and shipment, consulting professionals, the medical industry, or financial services. All these service industries have people and resources to provide the service. In this sense, the model is more vertical generally providing more diverse services to a broader community. So to compare strategy, I would suggest that the prime objective of the manufacture is to provide a cost effective quality product that exceeds the expectations of the consumer. For the service provider, the prime objective is to provide a cost effective quality service that (again) exceeds the expectations of the consumer. The manufacturer must make numerous choices that ultimately define a version of the product. The Key Performance Indicators (KPIs) are product centric. As such, they must consider the whole which ultimately leads to the profits versus quality dilemma. Note that it is common to base bonuses on company (product) performance. The service provider with the vertical strategy can focus KPIs on service specific performance. This would imply greater flexibilities, opportunities, and more lucrative compensation for individual performance. In the end, both strategies are more similar than different. But the differences lie within the implementation of overall cost management and the relationship to individual performance, recognition, and compensation. However contrast can be drawn on the following issues : 1. In Service industry Op. Strategy is directly focused on Customer and his behavior. In Manufacturing. industry main focus is on Customer too but through Product and its perceived value .So strategy is product oriented. e.g. In a Restaurant main focus will be on Responsiveness, Effectiveness , Efficiency of the Service whereas in a Car Factory ( lets assume) focus is on Kaizen,Lean,5-S etc. In service industry operational strategy can be of short term. i.e. Strategy can be changed based upon feedback/command in a week/daily basis. In Manufacturing. industry strategy is of longer term. Management take decision which is being followed for months/years . Though it also improve/change but that take minimum of 6 months/years . Operation Strategy of Services is comparatively lesser affected by technological advancements/changes than that of Manufacturing industry. Benchmarking play a big role in Manufacturing industry operations whereas in services Innovation/New concept have cutting edge.




For example A hospital processes patients. A bank processes loan applications. An accounting firm processes tax returns and audit reports. A distributor moves orders through the front-end of the process, inventory through the warehouse and finally via transportation to

customers. A retail store moves inventory from vendors to customers.

All can apply operational methods (time study, spaghetti-maps, value stream mapping, process flow mapping various statistical analyses) because they are repetitive. There may be significant variation in what they process but all are repetitive. In fact, off all of these, manufacturing, probably has the greatest variation since manufacturing is moving to everything being customized. So, in my opinion, there is no difference. All are trying to supply customers safely, providing higher quality, improving productivity, reducing lead-times and space requirements.

Q2 Consider the following two mutually exclusive projects. The net cash flows are given below If the desired rate of return is 10% which project should be chosen ?

If we apply the NPV criterion, and risk adjusted discount rates, we have Some definitions: Net Present Value: CF1 CF2 CF3 CF4 NPV = - CFo + --------- + ---------- + ---------- + ---------(1 + r)^1 (1 + r) ^2 (1 + r) ^3 (1 + r) ^4

-CFo = Initial Investment ; C = Cash Flow ; r = Discount Rate ; Net Present Value: NPV = PV - I where I = Initial Investment

NPV Decision Rule that says: -General Rule: Accept a project if NPV >= 0. -Mutually Exclusive Projects: Accept the project that has the largest NPV >= 0. For the project A the column A will have: NPV = -1,00,000 + (33003.30 + 42372.88 + 53262.31 + 65406.97) We have for Project A: NPV= Rs 94045.47 and for project B, the column B will have: NPV = -1,00,000 + (16501.65 + 21186.44 + 26631.16 + 32942.90 + 40257.65 + 48758.86 + 58479.53 + 69593.15) We have for Project B: NPV = Rs 2,14,351.34 In this case the required rate of return is 10%, then both projects are acceptable, but The project B is winning by this criterion.

Q3 What are the levels of aggregation in forecasting for a manufacturing organization? How should this hierarchy of forecasts be linked and used ? In demand planning terminology, Forecast Reconciliation is also referred to as Bottom-up and Top-down Forecasting or Proportional Forecasting. Forecast Reconciliation, however, could also stand for reconciling the demand forecast with a modeled forecast vs. a judgmental forecast or a financial forecast. we can reconcile a top-down forecast and Bottom-up forecast through aggregation and disaggregation methodology. The second title is more direct in referring to this process as “Bottom-up/Top-Down forecasting”, but we may also call it “Proportional forecasting” since this method involves using proportions to develop the disaggregated detail level forecasts into the future.

Typically, forecast reconciliation is sought after in cases where you need to forecast multiple levels of the product hierarchy, so in some sense it’s aligned with product grouping and product hierarchy. If you are also forecasting at the customer level, then the levels of aggregation multiply by the customer dimension. Customers may roll up into a sales territory, sales district, and sales region to the national level. In this article, we are going to limit ourselves to illustrating forecast aggregation and disaggregation just using the product hierarchy. We would abstract away from further disaggregation at the customer SKU level. When one develops their forecasting process, they have a choice to make – at what level do we develop the forecast? one could forecast at SKU level or slightly higher (at brand or sub-brand level) or, given a simpler supply chain one could get away with forecasting at the category or division level. When forecasting for the supply chain, as a general rule, you forecast at the SKU level. When one has a process focused on this type of detailed forecasting, it could aggregate an SKU level forecast to a higher level forecast, dollarize it, and use it for financial planning, which is the typical methodology for Bottom-up forecasting.

In Top-Down forecasting, the forecasts are developed at the brand, category or division level, and then allocated down to the lower levels (to SKU, then to SKU/Warehouse). There are different schools of thought, arguing that either method is superior. We approach says that forecasting at the detail level results in a much more accurate forecast because information at the detail level is more precise. Aggregating this detailed forecast with a time series of prices produces a realistic view of the financial plan. The alternate view, which is equally plausible and fair, states that forecasting at the SKU level becomes complex. At the SKU level, volumes could be very light; some of the SKUs could be shipped very infrequently. So the lower the level, the more difficult it becomes to create any useful statistical model because of sketchy and intermittent demand data. If that is the case, forecasting at the SKU/customer level will magnify the complexity and data infrequency. Forecasting at the customer SKU level also means aggregating not only at the customer SKU to the SKU level, but also aggregating all the way to the top, to the division level.

Q4 How would forecasting be useful for operations in a BPO (Business processes outsourcing) unit ? What factors may be important for this industry ? Discuss .
Forecasting would be very important for operations in a BPO unit. Forecasting, in essence, makes for the ability to be proactive, intuitive and strategic, and it may very well be the differentiating factor between success and failure. You can have cash-flow forecasts, operating budget forecasts, call/e-mail/chat volume forecasts, forecasts for attrition and absenteeism of phone agents...anything! By properly-assessing historical information (whether that be cash-flow, sales, refunds, attrition, phone/e-mail/chat volume, absenteeism...anything!) you can develop some sort of expected trend or pattern for future time periods and make decisions based on what that forecast means to your business. Here is a very simple, rudimentary example. It can be applied to any part of your business, as an example let’s use the staffing of a contact center as the basis: For "ABC Toy Company", when we look back at historical call volumes, It was noticed that the call volume in December is quadruple what it is in August, and that this trend has been apparent for the last 3 years. If August of 2008 provided for 100,000 calls, then based on this information, one can expect around 400,000 calls in the month of December. Based on that forecast, what do one need to do in order to provide adequate service to his customers? Do we need to hire more phone agents? How many? Do we need to expand physical space to allow for such a ramp-up in hiring? Perhaps there are ways other than by phone that one can address their customers' needs By developing a forecast, one can deal with the answers to these questions bring about, ahead of time making for smoother, more costeffective business operation.

Q5 A good work study should be followed by good supervision for getting good results. Explain with an example.

In fact changing the order of the question can make that more of the answer -- i.e. Good supervision leads a good work study to get good results. I'll relate a personal experience. In one of the companies try to identifying the major problems, it was discovered that one of the biggest problems was determining from the individual staff members what they actually did as part of their normal job. They had been so "beat up" from the former management team that they had withdrawn into little "domains" that had erected defensive positions around their departments. The key to evaluating the functions of the department and therefore the effectiveness would come through a work study, but how to do this without completely replacing the entire department (which would have been devastating to the company given the lack of cross training and work instructions). The way to get this done was to let the individuals in the department become part of the "turn around team". Get the key leader (not always the same as the department manager) to buy in to the turnaround goals, establish objectives and let them figure out how they will reach the objectives. This part takes a little time but if it is presently correctly and they can see how their efforts will 1) you are committed to helping them succeed, 2) benefit the organization as a whole and 3) they will be rewarded for their efforts, you will get their support. Often people forget how their department fits into the "big picture".

Let them know and influence how their efforts will help the entire company. Using the above process could revitalize the lagging departments into top-notch functioning groups. It takes time and more than a little patience but it is well worth the effort.

Q6 What is job evaluation ? Can it be alternatively used as job ranking ? How does one ensure that job evaluation evaluates the job and not the man ?Explain with examples ? Job evaluation, in my experience, is used to measure the relative 'size' of jobs - which would indeed then enable them to be ranked within a pay and grading structure. It is a good way for an organization to minimize risk of equal pay claims as it is able to measure the relative size/value of jobs across many different functions, e.g.' it can be used to 'size' or 'rank' jobs across finance, HR, H&S, customer services, audit etc. No account is taken of the person in the job, and thus gender is left out of the equation.

Job evaluation is a practical technique, designed to enable trained and experienced staff to judge the size of one job relative to others. It does not directly determine pay levels, but will establish the basis for an internal ranking of jobs. The two most common methods of job evaluation that have been used are first, whole job ranking, where jobs are taken as a whole and ranked against each other. The second method is one of awarding points for various aspects of the job. In the points system various aspects or parts of the job such as education and experience required to perform the job are assessed and a points value awarded - the higher the educational requirements of the job the higher the points scored. The most well known points scheme was introduced by Hay management consultants in 1951. This scheme evaluates job responsibilities in the light of three major factors know how, problem solving and accountability. Some Principles of Job Evaluation         Clearly defined and identifiable jobs must exist. These jobs will be accurately described in an agreed job description. All jobs in an organization will be evaluated using an agreed job evaluation scheme. Job evaluators will need to gain a thorough understanding of the job Job evaluation is concerned with jobs, not people. It is not the person that is being evaluated. The job is assessed as if it were being carried out in a fully competent and acceptable manner. Job evaluation is based on judgment and is not scientific. However if applied correctly it can enable objective judgments to be made. It is possible to make a judgment about a job's contribution relative to other jobs in an organization. The real test of the evaluation results is their acceptability to all participants.

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Job evaluation can aid organizational problem solving as it highlights duplication of tasks and gaps between jobs and functions. When JE is carried out the information fed into the process is about the content of the as job required by the organization. Therefore the person currently in it is irrelevant. E.g. I work in HR but have a degree in Chemical Engineering, that doesn’t mean you need that degree to do my job, it just so happens I am the current job holder and have that degree. Managers need to decide what qualifications etc the organization requires that job holder to have. In my case that would be my CIPD qualification, as that is directly related to my job. JE uses factors like 'physical demands' - in my job this would score really low as I sit at a comfy desk all day in my office. Also things like knowledge requirement (quite high in my job), budget responsibility (i.e. how much money the post holder is responsible for) and so on. The information is usually gathered by collecting together relevant documents, like Job Description, Person Specification and getting the current post holder to fill out a questionnaire, structured to elicit the relevant details. This will all then be verified by management to ensure it reflects the job they need the job holder to do. This is because as it is nearly always linked to pay, people tend to over egg their responsibilities - so checks are needed!

Q7 What is the impact of technology on jobs ? What are the similarities between job enlargement & job rotation ? Discuss the importance of training in the content of job redesign ? Explain with examples ?
Technology's hold on the modern workplace cannot be seriously disputed. Since work stands at the core of vocationalism, few issues are as important to vocational educators as technology. As indicated earlier, technology might be a unifying theme in the convergence of technology education and vocational education. Despite the many obvious ways in which technology has improved our world, it is necessary to adopt a critical stance towards it. In workplaces, employing technology is an imperative, and could be a blessing for the owners of capital, if they can afford it. Technology engenders productivity. The jury remains out for workers, especially in these times of "re-engineering" when companies are finding it possible, mainly because of enabling technologies, to lay off experienced workers. As companies become more reliant on technology, long term mutual loyalties that were the basis of job security erode.

The new workplace remains a mysterious black box into which one send graduates and hope for the best. Providing them with technological acumen would appear to be a responsible course of action. Much ambiguity and confusion pervade the rhetoric as to what skills are needed out there. Sometimes it appears that no skills are needed, beyond a good attitude or the ability to be flexible. Other times it appears that one needs merely to be literate. Computerized environments are now the order of the day. What do students really need to exist in these environments? What should the curricular and instructional response be within vocational education and technology education with the life cycle of specific technologies becoming ever shorter?. “The impact of technology on jobs is increasing, especially because it has gradually been

helping or even replacing Man in a large number of tasks, such as communicating by email, online shopping, among others. As one can imagine, the world without the use of technology would be very difficult for us.” “Job rotation, as the name suggests means rotating the job. It involves the movement of employees through a range of jobs in order to increase interest and motivation. It can improve "multi-tasking" but also involves the need for continuous training. It reduces boredom and disinterest through diversifying the employee's activities. With the help of Job Rotation, the management can easily identify in which area the particular employee is best at work. Job Rotation also has certain drawbacks: Every time an employee is transferred to other department; it will cost a huge training cost. Employees may take time in adjusting with the new environment.

ii) Job Enlargement: Job Enlargement means the expansion of the number of different tasks performed by employee under a single job or in a horizontal manner. It attempts to add some similar tasks in the existing job. It enhances the interest of the employee. Job Enlargement is beneficial for employers as they are getting more amount of work in similar pay. There are few main reasons because of which an employee is motivated to continue with Job enlargement. They are:-Task Variety: There can be number of tasks to perform under the enlargement scheme; which tends to give a good variety to the workers to perform and it also helps them to be away from the boredom.”

Job redesign can improve performance through work intensification as fewer employees are responsible for performing jobs that are similar. Through effective job redesign, employee contribution, Training, performance and reward are being connected. Employees are given more responsibility in performing their jobs and they are able to deal with job-related issues. Increased responsibility motivates employees to perform better. Through job redesign work efficiency is increased. The relationship between job satisfaction, employee motivation Training and performance reveals that performance are affected by both job satisfaction and employee motivation. Job satisfaction and employee motivation have a significant impact on performance. Job redesign increases job satisfaction, which, in turn, increases motivation and better performance. Employee motivation is affected by factors such as challenging work, autonomy, responsibility, growth and development and a sense of accomplishment. Job satisfaction is affected by factors like task clarity, skill utilization, task significance and relationship with co-workers and supervisors. Redesigning jobs can improve performance if it is aimed at providing employees with satisfying jobs and fulfilling their needs.

Q8 What is an internet connectivity ? How is it important in to days business would with respect to materials requirement planning & purchasing. Explain with examples ?
"Internet connectivity" in the simplest terms means connection to the internet; having a live website, being able to access/surf the web. The internet has a global reach and millions of businesses around the world take advantage of that by maintaining and advertising their own little space on it -- their website. A website can be an informational tool, a marketing tool, an order processing tool, investor relationship management tool, vendor relationship management tool and customer relationship management tool all in we. In most cases, it is simply a virtual facade of a company with a physical presence elsewhere - enabling them to communicate to people and markets in a cost effective manner. With regard to materials requirements planning and purchasing, a company could use its internet connectivity -- i.e., its website, to facilitate supply chain management functions within the organization -- linking up a company's purchasing department with its vendors for specific products it needs, maintaining an inventory of those products, applying them to internal business units and projects as needed, and maintaining records of purchase requisitions, invoices, inventory movements, and order receipts -- which can be fed to project costing systems and its corporate financial systems to create its balance sheets, income statements, and other required regulatory financial documents. It can also give the status of shipments in transit, work in progress, and product reorder quantities to ensure it always has the required inventory levels (materials) at any time for its business needs.

Connecting the world and bringing the world internally for the individuals individually for various activity.. It is quite important nowa-days for almost all the practices.

Even for the planning and Purchasing.. Planning is varied for country with country. With the help of internet, you can view worldwide planning.. You can make online purchase. You can sell your products in online.. You can advertise utmost for colorful appearance for your products... Example: If you get into a website, you can see some many advertisements with regard to so many worldwide products...before signing into that website.

Q9 Would a project management organization be different from an organization for regular manufacturing in what ways. Examples.
A project management organization starts with the projects and ends with the project. Maybe the same people will start another project, maybe some of them will be different, but they do not belong to the original project because it's finished. A manufacturing organization works normally with programs, tasks that never end. Let me put you an example: Suppose you are going to manufacture T-shirts, designing the models, choosing the colors, selecting the cotton, etc. for the first time is a project, once the organization learns how to manufacture T-shirts its no longer a project but a program. Designing new T-shirts or jeans in this organization will be new projects, but as soon as the organization learn how to manufacture the new things the project ends. Projects are associated with introducing changes in an organization. Program managers don't like changes All organizations blend a little project management and a little traditional management in their organization. Often "traditional" management is called "operations management" and was developed around manufacturing business models. A classic operational manager will try to repeat the same basic process, like manufacturing a product, over and over again. They try to optimize for cost, quality, and other variables. Often they have clear, separate departments, like Sales, Marketing, Operations, Manufacturing, HR, and so on. Each department interacts in a limited way, and typically each tries to optimize their group towards a certain goal. Sales and Marketing optimize for revenue. Ops for production capacity and efficiency. In a projectized or project management organization, the main unit of work is the project. Projects have a clear beginning and end. Consulting companies often run this way. Each consulting engagement will draw in the needed experts into the team, and when the engagement ends, the team disperses. They try to do the best they can with the project, and are not necessarily looking to repeat that project ever again. Both of these descriptions are stereotypes, though, not reality. Every manufacturing company has projects. Even repeated production processes can be managed as projects, because each production run has a clear beginning and end. Even projectized organizations need some operations expertise. The consulting companies need to run their facilities, accounting, and other repeated processes, and optimize them for efficiency. Rather than looking for a PM organization vs. a manufacturing organization, I would recommend looking at each company and seeing how much it takes advantage of each style of management. Some companies really emphasize their project management. Others emphasize operations management. Some try to do both. Almost every company can profit from both styles of management. Some quality-improvement disciplines, like Kaizen and Six Sigma, can help join the two points of view. All of the qualityimprovement methods are used by both project managers and operations managers. The academics from each field both claim that quality management is essential to both camps. Many other topics like leadership and motivation are also shared.

Fig: Project Organizations Characteristics A project management organization is oriented toward delivering "we of" products or services that may be referred to as custom solutions. All direct and indirect costs (shared resources) are charged to the project and a profit then applied either as a function of total cost or negotiated with the customer. Cost and quality control are more difficult to control due to the unknowns associated with doing a custom product or service. That said: every custom product consists of repetitive standard processes that should be completed at known cost and quality but do not always benefit from the predictability of when they are to be performed - timing, order, length or duration, etc. - which affects the ability to assign qualified people each an every time these "common" tasks are performed. Scope creep is also a challenge - features, quality, delivery time frame, etc. - in a project management model to contain customer expectations within the negotiated terms of the contract. This can also be a problem with staff as they incorporate their own approach into the process as a result of misunderstanding the specifications, expanded conversations with customer project people and the variability between different professionals that may work in the project that they most likely did not define or quote. Regular manufacturing typically produces many of we product at a standard cost - material and labor with overhead applied to absorb sales and marketing, general and administrative expenses plus a markup to cover distribution and profit. In this model more attention can be applied to the repetitive operations producing the product to control cost and quality. In general the project model can result in higher margins if the organization has good discipline when quoting and specification development. The risk of a project losing money is higher due to the incurred risks of doing something that may not have been dwe exactly that way before. Managing downtime of your professionals between projects is also a factor that this model must account for either by load balancing the work or absorbing "bench" time into other projects as part of the labor overhead. Cash flow can also be interrupted by the size of the project, delays that may interrupt progress payments, disputes over performance specifications or quality that can affect product or service acceptance and final payment.

Q 10 How project evaluation different from project appraisal? Explain with examples.
Appraisal and evaluation are essential parts of good financial management. The general principles should apply to any proposal whether project, programme or policy related - with implications for expenditure / use of resources. The effort that should go into appraisals and evaluations and the detail to be considered is a matter of judgment. Appraisal involves the preparation of Pre-Expenditure Assessments (PEAs). PEAs must be undertaken for any proposal with significant resource implications.

Background Appraisal and evaluation are essential parts of good financial management. The general principles should apply to any proposal whether project, programme or policy related - with implications for expenditure / use of resources. The effort that should go into them and the detail to be considered however is a matter of judgment. For example, proposals involving modest expenditure / use of resources may merit less detailed appraisal and evaluation. Good appraisal entails being clear about objectives, thinking about alternative ways of meeting them, estimating and presenting the costs and benefits of each potentially worthwhile option, and taking full account of risks. Good evaluation after the event entails many of the same processes, together with a desire and willingness to look for better ways of doing things.

Appraisal Appraisal is normally the starting point for any proposal - but it is not a standard procedure. It is an ordered, but flexible, general approach to the analysis of proposals with implications for expenditure / use of resources. It should include not only economic analysis, but also other important information such as financing implications, arrangements for project management and plans for subsequent monitoring and evaluation. The principle of proportionality should be applied, so the scale of the appraisal will vary depending on the scale of the proposed project and its complexity, but an appraisal should normally include the following steps:    define the objectives; consider a range of options; identify, quantify and value the costs, benefits, risks and uncertainties associated with each option, including considerations of public private partnerships and the scope for shared services arrangements with other public bodies, optimism bias and distributional implications; Analyze the information; decide what evaluation should be performed at a later stage; and present the results.

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The analysis will not always point to a clear-cut recommendation. There may be risks and uncertainties attached to costs, benefits or both. There may be significant elements that cannot be easily quantified in mwetary terms. For each option, the impact of all relevant factors and related risks and uncertainties should be set out systematically and an assessment made of where the balance of advantage lies. A more detailed guidance and points to other sources which can help, for example, to deal with risk and uncertainty, and with costs and benefits not easily valued, such as environmental effects.

Pre Expenditure Assessments Appraisal involves the preparation of Pre-Expenditure Assessments (PEAs). PEAs must be undertaken for any proposal with significant resource implications. The process involves assessing:  the aims and objectives of the proposal;  the options for addressing these objectives;  the evidence base on the likely economic, social, and environmental impacts and value for mwey of the proposal, including costbenefit analyses where appropriate;  the financial and management arrangements for the proposal, including an assessment of the key risks to successful delivery;  the plans for monitoring and evaluation.

Evaluation Evaluation examines the outturn of a project, programme or policy against its objectives. It adds value by providing lessons from experience to help future management or development of a specific project, programme or policy. Evaluation should be planned from the outset of the project, and should normally include the following steps:      establish exactly what is to be evaluated and how past outturns can be measured; choose alternative states of the world and/or alternative management decisions as counterfactuals; compare the actual outturn with the target outturn, and with the effects of the chosen alternative states of the world and/or management decisions; draw up the results and recommendations; and disseminate and use the results and recommendations.

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