OPERATIONS MANAGEMENT 1

Members : Dayanghirang, John Nielsen

Escobar, John Rafael
Goswami, Vasu
Mishra, Sandeep
Parroco, Joanna Marie
Puspita, Aji
Perez, Catherine

1) What objective did your group set at the beginning of the exercise? Explain your
group’s strategy and organization to achieve its objective.
Ans :1) The goal of the team was to anticipate the demand and stay as close to the demand
line so we can avoid any kind of excess cost such as shortage or surplus inventory cost.
However, we did not take the historical data of demand into consideration which affected the
anticipation of sales for the coming period. This affected the team in terms of constraints such
as shortage cost, scrap cost and production level change costs.
The strategy of the team was: we tried to make inventory zero. At the same time, we also
wanted to avoid any kind of shortage. So we were trying to chase the sales and our target
was to overlap our production on the actual sales forecasted. We started the production with
maximum capacity and were moving in the right direction with a little in surplus. However,
after few days we reduced the production level. having too much in surplus the team had
decided to reduce the production level even further to 20 units and shut down the plant. Which
turn out to be the wrong decision and we suffered with a shortfall in the later days. we treated
all constraints as variable and tried to minimize all instead of just focusing on lowering or
eliminating the ones that cost more (e.g. shortage cost and set up cost). We ended up with
incurring costs for each type of penalty.

2) Explain your group’s results in terms of final costs, rank and deviation from your
objective.

production vs sales
70

60

50

40
level

production
30
sales
20

10

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
 The team had a final operational cost of 22,730.00 with a final inventory stock of 63
shortfall and stood last in among all the learning teams. We are taking it as great leaning
experience for our team and utilize this experience in our future endeavors. We deviated
a lot from our objective of overlapping the sales and ended up with a lot of shortfall in
inventory. Which also turn out to be the highest cost for us.

3) What decisions or actions helped your group achieve its objectives.

The group could not follow the desired objective. Even so we were more concerned about
the shortage cost and we had the clear goal “ having surplus is better than shortage” that
was keeping us on the right track and also the cost of shortage is higher than surplus
Inventory.

4) What decisions or actions hindered your group from achieving its objectives?

The first decision that made us deviate from our objective was not to consider the demand
trend of the previous periods and not taking the seasonality of demand into consideration.
Post that we also ignored the process of the manufacturing since it takes three days to
produce the production of today will affect three days later. Another reason of our failure
was shutting down the plant for three consecutive days thinking about the current sales.
Which made us having shortage of items that we couldn’t recover from until the end.

5) How did the way you organize your group affect its performance?
we had started the simulation with same thinking that we will produce the maximum capacity
at beginning and then maintain a average production rate while maintain some amount of
inventory but our group deviated from our original strategy in the later stage because of
multiple inputs from all team members and we ended up making the bad decision.

6) If you were to go through this exercise again, what are the things you will do or not
do.
If the team gets a chance to redo this exercise, the group will start the same way with
maximum capacity and then maintain an average level of production with very little
variation in production as per the historical sales trend. The group will not have a shutdown
period in case here is a surplus of inventory.

7) What were the most important lessons did you learn from this exercise about production
planning and control and operations management in general? Give three.

a) The goal of the team was to anticipate the demand and stay as close to the demand
line. However, the actual sales remained unstable which affected the team in terms of
constraints such as shortage cost, scrap cost and production level change costs. This
is one of our most important lessons learned: know the business model or environment.
We knew the costs of each constraint however we did not account for the potential
complications of each. Likewise, we treated all constraints as variable and tried to
minimize all instead of just focusing on lowering or eliminating the ones
b)
c) that cost more (e.g. shortage cost and set up cost). We ended up with incurring costs
for each type of penalty. If you can follow the demand, that’s the better!

d) The team coursed to group-think wherein we collectively agree on the most logical
option after validating and debating the pros and cons of whether to increase or
decrease production order based on an arbitrary sales figure for the day. This approach
narrowed our options because we did not take the whole picture into consideration
therefore, we were not able to give the most applicable solution or strategy since our
perspective was already limited to begin with. The team just responded/reacted to
every round adjusting our production orders along the way which resulted to the
high penalty cost described previously.

e) Do not chase the demand blindly. Although this is possible if the environment is very
stable (including extensive knowledge of the customer) and we only need to plan for
short duration (e.g. 1 day max). The production line has to be stable. Any changes will
be costly particularly in the real world setting. Do not go to planning without
understanding the business environment, process and the customers. We learned that
“it takes more than a planning” to improve a production plan. Understanding of the
business, processes and the customer could give a lot of insights into coming up with a
viable production plan that actually supports the business objectives. It is our job to cut
the set up time!

f) React faster and accurately, ‘Just in Time’ production is very beneficial in production
process.