Midterm Exam

Course Title : Operations Management

Course Code : OPM 501
Semester : Summer

Submitted By : Shohana Akther Sinthia

Id : 211600020
Program : MBA
Section : 01

Submitter To : Prof. Dr. M. Ashraf Hossain

Faculty of Business Administration
& Director of IQAC.
Eastern University

Deadline: Aug 25, 2021

EASTERN UNIVERSITY
 ADMIT CARD

BuNnees
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(Contnfller of Examlnatlons)
 Ans. to the Q. No-1(A)

Difference between goods and service are given below:

Goods
Goods are tangibles items that can be
touched, seen or felt and they are ready
for sale to customers.
To evaluate goods it is very simple and
easy.
Goods can be returned.
Goods can be separated from sellers.
Services
Services are intangibles like amenities,
facilities, benefits or help provided by
other people.
To evaluate service it is complicated.
Service cannot be returned back once
they are used.
Services cannot be separated from
service holder.

Difference between core service and value-added service are given below:

Core Service Value-Added Service

Core services are basic things that Value-added services differentiate the
customers want from products they organization from competitors and build
purchase. relationships that bind customers to the
firm in a positive way.
Categories of core service are quality, Categories of value-added service are
speed, price and flexibility. Problem solving, sales support, field
support and information.
They make a substantial contribution to Value-Added service is a non-core
the perceived customer value of the service. All services are beyond
product or service. standard.

Logistics isn't about trucks and sheds. It is about integrating communications and
technology all the way from the manufacturer to the customer.
 Ans. to the Q. No-1(B)
The Physical Considerations in job design:

1. Work Physiology: Sets work rest cycles according to the energy expended in
various parts of the job. Harder the work, the more the need for rest periods.

2. Ergonomics: is a term used to describe the study of the physical arrangement

of the work space together with tools used to perform a task. Fit the body to
the work rather than forcing the body to conform to the work.

Vital Inputs of Work Measurement:

1. Manpower Planning.
2. Reducing labor costs.
3. Scheduling.
4. Budgeting.
5. Designing incentive systems.

Design Capacity: The maximum output rate or service capacity an operation,

process or facility is designed for.

Effective Capacity: The design capacity minus Personal and other allowances.
Effective Capacity maximum possible output with Scheduling difficulties, machine
maintenance & so on.

Efficiency and Utilization: Capacity utilization is of the utmost importance to

manufacturers. It affects cost, customer satisfaction, inventory — nearly every
aspect of the business. Utilization is always less than efficiency.\

Utilization = Actual Output / Design Capacity x 100%

Efficiency is how the work center is used in comparison with standard. It is

number of hour a work center can be used.

Efficiency = Actual output / Effective capacity x 100%

The Determinants of the Effective Capacity

 Facilities: The size and provision for expansion are key in the design of
facilities. Other
 Facility factors include locational factors The layout of the work area can
determine how smoothly work can be performed.
 Product and Service Factors: The more uniform the output, the more
opportunities there are for standardization of methods and materials. This
leads to greater capacity
 Process Factors: Quantity capability is an important determinant of
capacity, but so is output quality. If the quality does not meet standards, then
output rate decreases because of need of inspection and rework activities.
Process improvements that increase quality and productivity can result in
increased capacity. Another process factor to consider is the time it takes to
change over equipment settings for different products or services.
 Policy Factors: Management policy can affect capacity by allowing or not
allowing capacity options such as overtime or second or third shifts
 Operational Factors: Scheduling problems may occur when an
organization has differences in equipment capabilities among different
pieces of equipment or differences in job requirements. Other areas of
impact on effective capacity include inventory stocking decisions, late
deliveries, purchasing requirements, acceptability of purchased materials and
parts, and quality inspection and control procedures.
 External Factors: Minimum quality and performance standards can restrict
management's options for increasing and using capacity.
 Ans. to the Q. No-2(A)
The Least Squares Method is a mathematical technique that allows the analyst to
determine the best way of fitting a curve on top of a chart of data points. It is
widely used to make scatter plots easier to interpret, and is associated
with regression analysis.

An example of the least squares method is an analyst who wishes to test the
relationship between a company’s stock returns, and the returns of the index for
which the stock is a component. In this example, the analyst seeks to test the
dependence of the stock returns on the index returns. To achieve this, all of the
returns are plotted on a chart. The index returns are then designated as the
independent variable, and the stock returns are the dependent variable. The line of
best fit provides the analyst with coefficients explaining the level of dependence.

From the equation yi = a + bxi, how to get the value of ―a‖ and ―b‖ given below:

Linear Regression is the way to model the relationship between two variables.
The equation has the form Yi= a + bXi where Y is the dependent variable. b is the
slope of the line and a is the y- intercept. Let’s see the formula to find out a and b.

MAD: Mean Absolute deviation measures the accuracy of the prediction by

averaging the alleged error. It is the useful when measuring prediction errors in the
same unit as the original series.
MSE: Mean squared error, or MSE, is calculated as the average of the squared
forecast error value. The forecast error values forces them to be positive. It also the
effect of putting more weight on large error.

TS: A tracking signal monitors any forecasts that have been made in comparison
with actuals, and warns when there are unexpected departures of the outcomes
from the forecasts. Forecasts can relate to sales, inventory, or anything pertaining
to an organization’s future demand.
The tracking signal is a simple indicator that forecast bias is present in the forecast
model. It is most often used when the validity of the forecasting model might be in
doubt.

Ans. to the Q. No-2(B)

Qualitative method: qualitative as judgmental method. It used when situation is

vague and little data exist. It offers subjective results as it is comprised of personal
judgments by experts. The weakness of this method is it can be inaccurate. For
example: forecasting sales on internet.

Quantitative method: quantitative method of forecasting is a mathematical

process. Making it consistent and objective. It steers away from basing the results
on opinion and intuition, instead utilizing large amounts of data and figures that are
interpreted. Example: forecasting sales of color televisions.

Exponential Smoothing is a time series forecasting method for data. Exponential

smoothing forecasting methods are similar in that, a prediction is a weighted sum
of past observations, but the model explicitly uses an exponentially decreasing
weight for past observations. It requires smoothing constant (a). It angels from 0 to
1 and it is subjectively chosen. It involves little record keeping of past data.

Exponential smoothing formula is given

by: st = αxt+(1 – α)st-1= st-1+ α(xt – st-1)

Here,
st = smoothed statistic, it is the simple weighted average of current observation xt
st-1 = previous smoothed statistic
α = smoothing factor of data; 0 < α < 1
t = time period
Predicted sales for the next two year:
 Ans. to the Q. No-4(A)

Time series components:

Trend component: The trend shows the general tendency of the data to increase or
decrease during a long period of time. A trend is a smooth, general, long-term,
average tendency. It is not always necessary that the increase or decrease is in the
same direction throughout the given period of time. It is observable that the
tendencies may increase, decrease or are stable in different sections of time. But the
overall trend must be upward, downward or stable. For Example: The population,
agricultural production, items manufactured, number of births and deaths.

Seasonal component: These are the rhythmic forces which operate in a regular and
periodic manner over a span of less than a year. They have the same or almost the
same pattern during a period of 12 months. This variation will be present in a time
series if the data are recorded hourly, daily, weekly, quarterly, or monthly.

Cyclic component: The variations in a time series which operate themselves over a
span of more than one year are the cyclic variations. This oscillatory movement has a
period of oscillation of more than a year. One complete period is a cycle. The cyclic
variation may be regular are not periodic.

Random component: There is another factor which causes the variation in the
variable under study. They are not regular variations and are purely random or
irregular. These fluctuations are unforeseen, uncontrollable, unpredictable, and are
erratic. These forces are earthquakes, wars, flood, famines, and any other disasters.

Delphi method:

The Delphi method was invented by Olaf Helmer and Norman Dalkey of the
Rand Corporation in the 1950s for the purpose of addressing a specific military
problem. The method relies on the key assumption that forecasts from a group
are generally more accurate than those from individuals. The aim of the Delphi
method is to construct consensus forecasts from a group of experts in a
structured iterative manner. A facilitator is appointed in order to implement and
manage the process. The Delphi method generally involves the following stages:

A panel of experts is assembled.

 Forecasting tasks/challenges are set and distributed to the experts.

 Experts return initial forecasts and justifications. These are compiled and
summarized in order to provide feedback.
 Feedback is provided to the experts, who now review their forecasts in
light of the feedback. This step may be iterated until a satisfactory level of
consensus is reached.
 Final forecasts are constructed by aggregating the experts’ forecasts.

Ans. to the Q. No-4(B)

Month Demand 3-month Moving Average 3-month Wt. Moving Average
(weights: 0.2, 0.3, 0.5)
1 650 - -
2 700 - -
3 810 - -
4 800 (650+700+810)/3 = 720 0.2*650+0.3*700+0.5*810 =745
5 900 (700+810+800)/3 = 770 0.2*700+0.3*810+0.5*800 = 783
6 700 (810+800+900)/3 = 837 0.2*810+0.3*800+0.5*900 = 852
7 - (800+900+700)/3 = 800 0.2*800+0.3*900+0.5*700 = 780

Ans. to the Q. No-4(C)

Forecasting is the process of making predictions based on past and present data
and most commonly by analysis of trends. A commonplace example might
be estimation of some variable of interest at some specified future date. It is
generally considered good practice to indicate the degree of uncertainty attaching
to forecasts. In any case, the data must be up to date in order for the forecast to be
as accurate as possible
The steps of forecasting system:

1. Determine the purpose of the. This step is quite tricky because there aren’t
actually any tools that can help here. It requires knowing who the forecast is
directed too. How the market work, and what customer base and competition
are. Spend some time evaluating these issues together with the people who
will be responsible for maintaining data bases and gathering the data.
2. After collecting data’s and selecting the technique prepare the forecast.
3. Establish time horizon.
4. Monitor the forecast. Every step is checked, refinement and modifications are
made.
5. Gather and analyses relevant data. If data is available on the subject, a model
is used to analyze the data and predict future values.
The elements of good forecast:

1. The forecast should be accurate. This sounds a little obvious, but any
forecasting needs to be as accurate and researched as possible.
2. The forecast should be timely. A certain amount of time is going to be
needed to respond to a new forecast.
3. The forecast should be reliable. In a similar vein to being accurate, a forecast
system needs to produce the same results every time.
4. The forecast should be in the correct units. The forecast needs to be in a unit
of measurement that is the most meaningful to whoever will be using it.
5. The forecast should be simple to understand and use. Forecasts that are
overly complicated tend not to instill a lot of confidence in users.
 Ans. to the Q. No-4(H)
The activities of operations management:

 Understanding the operation’s strategic performance objective.

 Developing an operations strategy for the organization.
 Planning and controlling the operation.
 The social responsibilities of the operation.
 Improving the performance of the operation.
Transformation processes is given below:

1. Physical - Manufacturing.
2. Locational - Transport/Storage.
3. Exchange - Retail.
4. Physiological - Healthcare.
5. Psychological - Entertainment.
6. Informational - Communication.

Ans. to the Q. No-4(J)

BEP1 = FC/ (R-U)
= 9600/ (40-10)
= 320 unit.
BEP2 = FC/ (R-U)
= 15000/ (40-10)
= 500 unit
BEP1 = FC/(R-U)
= 20000/ (40-10)
= 667 unit
Here,

I should select the option 2 i.e. to buy 2 machines – capacity option.