Operations Management

Revision Questions

Note: Processing edits and still haven’t checked the slides, will do later and mention.

1) Explain any 4 advantages and any 4 disadvantages of outsourcing. (25 marks) -

Checked

Advantages of Outsourcing

● Cost Savings: One of the primary advantages of outsourcing is cost savings.

Companies can outsource certain tasks or processes to lower-cost regions or
countries where labor is cheaper. This can lead to significant cost reductions in terms
of wages, operational expenses, and infrastructure. For example, a software
development company based in the United States might outsource its customer
support to a call center in India, where labor costs are lower.

● Access to Specialized Skills and Expertise: Outsourcing allows businesses to access

specialized skills and expertise that may not be available in-house. By partnering with
external service providers, companies can tap into a pool of talented professionals
with niche skills. For instance, a manufacturing company might outsource its product
design to a specialized engineering firm to leverage their expertise and develop
innovative products.

● Focus on Core Competencies: Outsourcing non-core functions enables companies to

focus on their core competencies and strategic activities. By delegating peripheral
tasks, organizations can dedicate more time, resources, and energy to activities that
directly contribute to their competitive advantage and overall growth. For example, a
marketing agency might outsource its IT maintenance and support so that it can
concentrate on creating effective marketing campaigns.

● Flexibility and Scalability: Outsourcing provides businesses with flexibility and

scalability. During peak seasons or when facing sudden spikes in demand, external
service providers can quickly ramp up operations to meet the increased
requirements. Conversely, during lean periods, companies can scale down
outsourced services, reducing costs accordingly. An e-commerce company might
outsource its order fulfillment and logistics during the holiday season to manage the
surge in orders effectively.

Disadvantages of Outsourcing

● Loss of Control: One of the main drawbacks of outsourcing is the potential loss of
control over the outsourced activities. When crucial functions are handed over to
external partners, the company may face challenges in ensuring quality control and
maintaining brand standards. For example, if a fashion brand outsources its
manufacturing to a third-party factory overseas, it might encounter difficulties in
monitoring product quality and labor conditions.
 ● Communication and Cultural Barriers: Outsourcing often involves working with teams
or individuals from different cultures and time zones. Language barriers and cultural
differences can lead to miscommunications, delays, and misunderstandings. For
instance, a company in Europe that outsources its customer service to a call center
in South America might face challenges in effectively resolving customer inquiries
due to language differences.

● Data Security and Privacy Risks: Sharing sensitive data and proprietary information
with external service providers can expose companies to data security and privacy
risks. In some cases, outsourcing partners may not have robust security measures in
place, leading to potential breaches and data leaks. For example, a healthcare
organization that outsources its medical billing processes may face legal
repercussions if patient data is mishandled by the outsourcing provider.

● Negative Impact on Domestic Employment: Outsourcing certain tasks to lower-cost

regions or countries can lead to job displacement in the home country. As companies
seek to cut costs by outsourcing, it may result in job losses for domestic workers.
This can have significant economic and social implications. For example, a
manufacturing company relocating its production to another country may lead to
layoffs for its local workforce.

2) Analyze the strategies/issues at ALL the 4 phases of the Product Life Cycle. (16
marks) - Checked

● Introduction Stage
During the introduction stage, the main focus of operations managers is on launching the
product successfully and establishing a strong market presence. Strategies used include
production planning and quality control. In production planning, operations managers need
to plan the production process carefully to meet initial demand while avoiding
overproduction. In quality control, operations managers ensure high-quality products during
the introduction stage to build a positive reputation. A tech company introducing a new
smartphone would use a strategy of limited initial production and rigorous quality control to
ensure a positive market reception and avoid excess inventory.

● Growth Stage
In the growth stage, the product experiences increasing demand and market share.
Operations managers need to scale up production to meet rising sales while maintaining
efficiency. Strategies include capacity expansion and supply chain optimization. Operations
managers invest in increasing production capacity to meet growing demand. In supply chain
optimization, operations managers work on optimizing the supply chain to reduce lead times,
minimize inventory carrying costs, and ensure timely delivery to meet customer demands. A
beverage company experiencing high demand for its new energy drink might invest in new
bottling lines and distribution centers to ensure a steady supply to retailers.

● Maturity Stage
In the maturity stage, the product reaches its peak market saturation, and competition
intensifies. Operations managers focus on cost efficiency and process improvement.
Strategies include lean manufacturing and continuous improvement. Implementing lean
principles helps operations managers eliminate waste, reduce production costs, and improve
overall productivity. Operations managers encourage continuous improvement efforts to
optimize processes, reduce defects, and enhance product reliability. For instance, An
automobile manufacturer in the maturity stage might adopt lean manufacturing practices and
engage in continuous improvement initiatives to cut down production costs and compete
effectively in the crowded market.

● Decline Stage
During the decline stage, product demand starts to decrease due to market saturation or
obsolescence. Operations managers aim to minimize costs and manage inventory efficiently.
Strategies include inventory reduction and product rationalization. During inventory
reduction, operations managers work to reduce inventory levels by adopting just-in-time (JIT)
inventory systems to avoid excess stock. Rationalizing the product line by phasing out less
profitable or outdated variants helps cut costs and focus resources on more viable products.
For Example, A digital camera manufacturer experiencing declining demand due to
smartphone camera advancements might reduce inventory levels and discontinue less
popular camera models.

3) Explain the 6 phases of the generic product development process. (25 marks) -
Checked
Lecture 4: slides 22-24

● Planning
● Concept and Development
● System-level Design
● Detail Design
● Testing and Refinement
● Production Ramp-up

4) Explain the 3 general factors to consider in service design. (10 marks) - Checked
Lecture 4: slides 34-36

● Similarity to Current Services

When designing a new service, considering its similarity to existing or current services is
crucial. Understanding how the new service aligns or differs from what is already available
helps in positioning and differentiation. Consider the introduction of Airbnb. Before Airbnb,
travelers primarily had the option of hotels or traditional bed-and-breakfast establishments.
Airbnb introduced a new service that allowed people to rent out their homes or spare rooms,
creating a unique accommodation experience for travelers.

● Similarity to Current Processes

Examining how the new service aligns with or deviates from current processes is essential
for a smooth transition and integration. It involves understanding how the service fits into
existing workflows and operations. The introduction of digital banking by traditional banks.
As technology advanced, many traditional banks integrated digital banking services into their
existing framework. This allowed customers to perform banking tasks online, reflecting a
shift from traditional in-person transactions to digital transactions while retaining the core
banking processes.

● Financial Justification
Assessing the financial viability and justification for the new service is crucial. This involves
analyzing the costs involved in developing and delivering the service and comparing them to
the expected returns and benefits. For example, Amazon invested in offering Prime
Membership, providing customers with faster shipping, access to a vast library of digital
content, and exclusive deals. The annual membership fee covered the costs of expedited
shipping and the additional services, while encouraging customer loyalty and increased
spending on the platform.

5) Explain any 5 key success factors in selecting a country. (20 marks)

● Market Potential
The size and growth potential of a country's market are crucial factors to assess. Analyze the
size of the market, growth trends, purchasing power of the population, and specific market
needs. For example, a tech company developing a new smartphone app targets countries
like India or China with their large and rapidly growing smartphone user bases can provide
substantial market potential.

● Political and Economic Stability

A stable political environment ensures consistent policies and regulations, reducing risks
associated with sudden policy changes or unrest. Instability can lead to regulatory changes
and economic downturns. For example, investing in a country like Switzerland, known for its
political stability and strong economy, can be attractive for financial services companies
seeking a secure environment.

● Regulatory and Legal Environment

Understand the legal and regulatory framework of the country, including tax laws, trade
policies, intellectual property protection, and business regulations. For example, in a
pharmaceutical industry, selecting countries with robust regulatory agencies like the U.S.
Food and Drug Administration (FDA) can ensure a smoother path to product approvals.

● Infrastructure and Access to Resources

Evaluate the quality of infrastructure, including transportation, communication, energy, and
logistics. Well-developed infrastructure ensures efficient operations and connectivity. The
Netherlands is attractive to logistics companies due to its well-developed ports and
transportation infrastructure, facilitating efficient distribution across Europe.

● Consumer Behavior and Trends

Analyzing consumer behavior and market trends in the chosen country is essential for
tailoring your products and marketing strategies. For example, when entering the Korean
beauty market, understanding the preferences for skincare products and makeup trends
among consumers can guide product development and marketing campaigns.

6) Analyze any 5 constraints on Human Resource Strategy. (25 marks)

● Legal and Regulatory Constraints:

Compliance with labor laws, employment regulations, and workplace standards is a
significant constraint on HR strategy. Failure to adhere to these regulations can lead to legal
consequences and reputational damage. In the United States, HR departments must
navigate complex labor laws such as the Fair Labor Standards Act (FLSA), which governs
minimum wage, overtime pay, and child labor. Violations of these regulations can result in
costly lawsuits and fines.

● Budgetary Constraints:
Financial limitations can restrict HR's ability to implement strategic initiatives, such as talent
acquisition, training, and compensation programs. For example, a small startup with limited
funding may struggle to offer competitive salaries and benefits packages, making it
challenging to attract and retain top talent compared to larger, well-funded competitors.

● Labor Market Constraints:

The availability of qualified talent in the labor market can be a constraint, especially in
specialized industries or regions with skill shortages. For example, the technology industry
often faces a shortage of highly skilled software developers. Companies in this sector may
need to invest heavily in recruitment and employee development to bridge the talent gap.

● Cultural and Diversity Constraints:

Managing a diverse workforce while respecting cultural differences can be challenging.
Misunderstandings or insensitivity can lead to workplace conflicts and hinder HR strategies.
For example, a global corporation expanding into a new market must consider cultural
differences in work habits, communication styles, and management approaches to ensure
the successful integration of diverse teams.

● Technological Constraints:
Rapid advancements in technology can create challenges for HR, especially when it comes
to digital transformation, data privacy, and cybersecurity. For example, the adoption of
remote work due to the COVID-19 pandemic forced HR departments to quickly adapt to
remote recruitment, onboarding, and employee monitoring while addressing data security
concerns.

7) Discuss any 5 advantages of product-oriented layout. (15 marks)

● Efficiency in Mass Production:

Product-oriented layouts are ideal for high-volume production of standardized products.
They enable continuous and efficient flow, reducing the need for product changeovers and
minimizing downtime. For example, automobile manufacturing plants often use
product-oriented layouts. The assembly line in an automotive factory is designed to produce
the same model of car repeatedly, with each station performing specific tasks in the
assembly process.

● Reduced Material Handling:

This layout minimizes material handling since products move along a straight path, requiring
fewer transfers between workstations. This reduces the risk of damage and speeds up the
production process. For example, in a bakery, a product-oriented layout for bread production
would involve a sequence of stations where ingredients are added, dough is shaped, and
loaves are baked, all in a continuous line, reducing the need to transport ingredients or
partially finished products.

● Lower Labor Costs:

Product-oriented layouts often require less labor for handling and transportation, as workers
can focus on specialized tasks along the production line. This can result in reduced labor
costs. For example, electronics manufacturing facilities use product-oriented layouts to
assemble devices like smartphones. Workers at each station specialize in a specific task,
such as attaching components or quality control, leading to efficient production and reduced
labor requirements.

● Highly Specialized Equipment:

Product-oriented layouts can make use of specialized machinery and equipment tailored to
the specific product being produced, leading to higher production efficiency and product
quality. For example, semiconductor fabrication facilities (fabs) employ product-oriented
layouts. Each step in the semiconductor manufacturing process requires specialized
equipment to create microchips, and the layout is designed to ensure precise and efficient
production.

● Improved Quality Control:

The linear flow of products in a product-oriented layout makes it easier to implement quality
control measures at each workstation. Defects can be identified and addressed promptly,
reducing the likelihood of producing faulty products. For example, in pharmaceutical
manufacturing, a product-oriented layout ensures that medications move through a
sequence of production steps with rigorous quality checks at each station. This helps
maintain product integrity and safety.

8) Explain any 5 key tasks of Random Stocking. (10 marks)

● Dynamic Slotting:
In a random stocking system, items are not assigned specific locations, so it's essential to
regularly assess and adjust the placement of products based on factors like demand
patterns, item popularity, and seasonal variations. In a retail warehouse, popular consumer
electronics like smartphones and laptops may be frequently moved to areas closer to the
shipping dock during holiday seasons to expedite order fulfillment.

● Inventory Tracking and Management:

Keeping track of inventory in a random stocking environment is critical. Warehouse
managers must implement robust inventory management systems, including barcode
scanning and real-time tracking, to monitor stock levels accurately. An e-commerce
fulfillment center relies on inventory management software that tracks item quantities and
locations in real-time to ensure accurate order picking and replenishment.

● Optimizing Retrieval and Order Picking:

Efficiently picking items from random locations requires well-defined order picking
processes. Warehouse staff must know how to navigate the warehouse to retrieve items
quickly and accurately. In a distribution center for spare parts, workers use handheld devices
with location guidance features to locate and pick items efficiently, even though the items are
stored randomly.

● Slotting Algorithms and Analysis:

Implementing slotting algorithms can help optimize the placement of products within a
random stocking warehouse. These algorithms consider factors like item size, weight, and
demand to determine the best storage locations. For example, a food distribution center
uses slotting software to ensure that perishable items are placed in locations that minimize
spoilage risks by considering temperature zones and expiration dates.
 ● Replenishment Strategies:
Items must be replenished as they are picked to maintain sufficient stock levels. Warehouse
managers need to establish replenishment strategies that ensure products are readily
available for order fulfillment. A clothing retailer's e-commerce warehouse uses an
automated conveyor system to transport items from bulk storage to picking zones as
needed. This system helps maintain efficient replenishment.

9) Analyze ALL the 4 production processes. (25 marks)

● Job Production:
Job production is a labor-intensive process that involves producing custom-made or unique
products. Each product is manufactured individually, and production is highly flexible to
accommodate variations in customer specifications. Custom-made furniture, bespoke
clothing, and handmade jewelry are examples of products produced using job production. In
these cases, each item is unique and tailored to the specific requirements of the customer.

● Batch Production:
Batch production involves producing a limited quantity of identical products in groups or
batches. It is more efficient than job production but still allows for some customization within
each batch. Setup times are incurred when switching from one batch to another. Bakeries
often use batch production to make bread, cookies, or pastries. In a bakery, batches of a
specific product, such as chocolate chip cookies, are made in a single production run, and
then the equipment is cleaned and set up for the next batch.

● Mass Production:
Mass production is characterized by the large-scale production of standardized products. It
utilizes automated machinery, assembly lines, and repetitive processes to achieve high
volumes at low unit costs. Products are often identical with minimal variation. For example,
automobile manufacturing is a classic example of mass production. Car manufacturers like
Toyota and Ford produce thousands of vehicles with identical specifications on assembly
lines. The aim is to achieve economies of scale and maximize efficiency.

● Continuous Production:
Continuous production is a non-stop, round-the-clock process that produces large quantities
of identical products without interruption. It is highly automated and efficient, with minimal
downtime. Oil refineries, chemical plants, and paper mills operate using continuous
production processes. In an oil refinery, crude oil is continuously processed to produce
various refined products like gasoline, diesel, and jet fuel.

10) Explain the 2 ways quality improves profitability. (10 marks)

● Customer Satisfaction and Loyalty:

When a product or service consistently meets or exceeds customer expectations in terms of
quality, it leads to higher customer satisfaction. Satisfied customers are more likely to
become loyal customers, which has a direct positive impact on profitability. Consider a
premium smartphone manufacturer that invests in quality control and rigorous testing to
ensure that its products are reliable and durable. Customers who purchase these
smartphones are more likely to recommend them to others, leading to increased sales and
brand loyalty. Over time, this loyalty can result in repeat purchases and a larger customer
base, contributing to higher profitability.

● Cost Reduction and Efficiency:

a. Reduced Rework and Waste: When products are made with higher quality standards,
there is less need for rework, repair, or scrapping of defective items. This leads to lower
production costs and less waste of materials and resources. In the manufacturing of
automobiles, using high-quality components and rigorous quality control processes reduces
the likelihood of defects. This, in turn, reduces the cost of warranty claims, recalls, and
rework.

b. Improved Operational Efficiency: High-quality processes often lead to more streamlined

and efficient operations. This can include faster production cycles, fewer breakdowns, and
reduced downtime. In a food processing plant, maintaining strict quality control measures not
only ensures the safety and quality of the products but also minimizes production delays and
equipment breakdowns, resulting in more efficient production processes.

c. Higher Pricing and Premium Positioning: When a product or service is associated with
quality, businesses can often command higher prices in the market. Customers are often
willing to pay a premium for products they perceive as high quality. For example, luxury
watchmakers like Rolex are known for their commitment to quality and precision. As a result,
they can charge premium prices for their watches, contributing to higher profit margins.

11) List down any 5 concepts for an effective TQM program. (5 marks)

● Customer Focus:
TQM places a strong emphasis on understanding and meeting customer needs and
expectations. Organizations should gather feedback, conduct surveys, and engage with
customers to ensure their requirements are met. For example, a hotel chain regularly
collects feedback from guests through surveys and online reviews. They use this information
to make improvements, such as enhancing room amenities or offering better customer
service.

● Continuous Improvement (Kaizen):

TQM encourages a culture of continuous improvement, where employees at all levels seek
ways to enhance processes, products, and services. For example, an automobile
manufacturer implements a Kaizen program on the factory floor, where assembly line
workers are empowered to suggest and implement small process improvements to increase
efficiency and reduce defects.

● Employee Involvement and Empowerment:

TQM recognizes that employees are valuable resources for identifying and solving
quality-related issues. Empowering employees to take ownership of quality encourages
innovation and commitment. A tech company holds regular brainstorming sessions where
employees from different departments can contribute ideas for improving software
development processes or enhancing customer support procedures.

● Process Management and Variation Reduction:

TQM emphasizes the need to manage processes effectively to reduce variations and
defects. This involves using data-driven approaches to identify and address root causes of
quality issues. For example, a pharmaceutical company implements statistical process
control (SPC) to monitor the manufacturing of medications. SPC helps identify variations in
the production process that could affect product quality and ensures timely corrections.

● Supplier Partnerships:
TQM extends the focus on quality to the supply chain. Building strong partnerships with
suppliers and involving them in quality improvement efforts can enhance the overall quality
of products and services. An electronics manufacturer works closely with its component
suppliers, providing them with quality standards and collaborating on continuous
improvement initiatives to ensure that the components meet the required specifications.

12) List down any of Deming’s 5 points for implementing quality improvement. (5 marks)

Point 4: End the practice of awarding business on the basis of price tag alone; instead,
minimize total cost.

This point emphasizes that organizations should not focus solely on selecting suppliers or
making business decisions based solely on the lowest price. Instead, they should consider
the total cost of a product or service over its entire lifecycle, taking into account factors such
as quality, reliability, and long-term relationships. An automobile manufacturer is in the
process of selecting a supplier for a critical component, such as engine parts. Instead of
choosing the supplier with the lowest initial cost, they consider factors like the supplier's
track record for quality, on-time delivery, and willingness to collaborate on continuous
improvement initiatives. They analyze the total cost of ownership, factoring in potential costs
associated with defects, delays, and disruptions in the supply chain. In the end, they may
select a supplier with a slightly higher upfront cost but a proven track record of delivering
high-quality components consistently, resulting in lower overall costs and higher customer
satisfaction in the long run. Deming's point highlights the importance of looking beyond the
immediate price tag and considering the broader implications for quality and total cost.

13) Discuss the flow of activities that are necessary to achieve TQM. (25 marks)

● Leadership Commitment
TQM begins with strong leadership commitment. Top management must actively support
and champion TQM principles and practices. They set the vision and objectives for quality
improvement. Toyota's management, led by its founder, Kiichiro Toyoda, was committed to
quality from the beginning. This commitment led to the development of Toyota's renowned
Toyota Production System (TPS), which emphasizes continuous improvement and waste
reduction.

● Employee Involvement
Engaging employees at all levels is crucial. Employees are encouraged to contribute their
ideas and expertise to identify quality issues and suggest improvements. At General Electric
(GE), the "Work-Out" program encourages employees to participate in cross-functional
teams to solve problems and improve processes. This involvement has led to significant
quality and efficiency improvements.

● Continuous Improvement (Kaizen)

TQM emphasizes a culture of continuous improvement. Organizations must regularly review
processes and operations to identify areas for enhancement. For example, motorola
popularized the Six Sigma methodology, which focuses on reducing defects and variations in
processes. Motorola's commitment to continuous improvement helped the company achieve
high-quality products and services.

● Data-Driven Decision-Making
Data collection and analysis are central to TQM. Organizations should use data to make
informed decisions, identify trends, and monitor quality. Amazon uses data analytics
extensively to improve its customer service and logistics operations. They track customer
feedback, order accuracy, and delivery times to continuously enhance the customer
experience.

● Supplier Partnerships
TQM extends beyond the organization's boundaries. Developing strong partnerships with
suppliers is essential to ensure the quality of incoming materials and components. Apple
works closely with suppliers like Foxconn to maintain strict quality control standards for its
iPhone production. This collaborative relationship helps ensure product quality and timely
delivery.

● Customer Focus
TQM emphasizes understanding and meeting customer needs and expectations.
Organizations must gather customer feedback, conduct surveys, and act on customer
complaints and suggestions. Zara, a fashion retailer, is known for its customer-centric
approach. They have a strong focus on customer feedback, and their customer service team
goes to great lengths to exceed customer expectations, building brand loyalty.

● Training and Education

TQM involves training and educating employees at all levels to enhance their skills and
knowledge related to quality improvement and problem-solving. Boeing invests heavily in
training programs for its employees, including those involved in aircraft manufacturing. This
ensures that workers have the necessary skills to maintain high-quality standards in
aerospace production.

● Benchmarking
Benchmarking involves comparing an organization's processes and performance with
industry best practices or competitors to identify areas for improvement. Ford Motor
Company benchmarked Toyota's production methods and adapted them to create the "Ford
Production System," which helped improve efficiency and quality in its manufacturing
processes.

14) Explain any 3 reasons why quality is important. (10 marks)

● Customer Satisfaction
High-quality products or services lead to satisfied customers. When customers receive
goods or services that meet or exceed their expectations, they are more likely to remain
loyal and make repeat purchases. Apple is known for its commitment to quality in its product
design and manufacturing. The reliability and quality of Apple's products, such as the iPhone
and MacBook, have led to a loyal customer base, resulting in strong brand loyalty and repeat
business.

● Cost Reduction
Quality management practices, such as reducing defects and improving processes, can lead
to cost savings. By minimizing errors and rework, organizations can operate more efficiently
and effectively. Toyota's implementation of the Toyota Production System (TPS) emphasizes
quality at every stage of production. By focusing on reducing defects and waste, Toyota has
achieved cost savings and efficiency improvements, making it a competitive leader in the
automotive industry.

● Reputation and Brand Image

Quality contributes significantly to an organization's reputation and brand image. Companies
that consistently deliver high-quality products or services are more likely to be perceived as
trustworthy, reliable, and reputable in the eyes of consumers and partners. The Coca-Cola
Company has built its reputation on delivering consistent quality in its beverages worldwide.
The iconic brand image and consumer trust that Coca-Cola has established are closely tied
to its commitment to maintaining quality standards.