Emi Ameerul Addin BIN EMI SUFFIAN – BIB2

Operations Management (BIB) Assignment

1. Introduction to Operations Management (Productivity)

Title: Self-Service Kiosks are revolutionizing the hotel industry

Date: July 4,2023
Author: Kostuch Media Ltd.
Link: https://www.hoteliermagazine.com/self-service-kiosks-are-revolutionizing-the-
hotel-industry/?cn-reloaded=1

The following article talks about the proliferating demand for self-service technology,
particularly self-service kiosks, in the hotel industry, that is driven by the need for contactless
transactions and improved customer satisfaction. Since 2019, investment by companies in self-
service kiosks have increased by more than 15%. Business owners argues that although it
increases economic performance. On the other hand, operations costs incurred would rise as
well. These kiosks machines offer benefits such as faster service, eco-friendliness, and revenue
generation. However, they may require assistance for guests that are unfamiliar with the
technology which would lead to inefficiency, hence why some hotel branches would rather
prefer the conventional human interaction.
In relation to the course, we have learnt that productivity can be expressed as multifactor
productivity when taking into account all inputs in hand (labor, capital & materials). Albeit the
quantity of inputs is large in quantity, the output quantity must also simultaneously match the
inputs in order to ensure positive economic performance. Automation in business should also
consider the feasibility and acceptance from the consumers. If it is hard for consumers to adapt
with, then it might not be as feasible as desired.
 2. Facility Location Decisions

Title: ‘Ok, Mexico, Save me’: After China, This is where Globalization may lead
Date: January 1, 2023
Author: Peter S. Goodman
Link: https://www.nytimes.com/2023/01/01/business/mexico-china-us-trade.html

This article conveys the dilemma faced by the companies in the United States where they
are recalibrating efforts in shifting their manufacturing activity from China to Mexico. An
approach that is called “near-shoring”, as demonstrated by Walmart where they have been
buying company uniforms worth $1 Million from a family business in Preslow, Mexico.
Although Mexican companies have still been counting on the acrimony of US and China trade,
the US government have imposed heavy tariffs on imported goods from China in order to foster
trade and supply chain relationship between their neighboring country. On top of that, Mexican
suppliers also lack numerous basic materials that they don’t even produce in Mexico, but are
produced in China such as synthetic fabrics.
In relation to the course, facility location decisions are pivotal in ensuring long-term
accessibility and practicality to where products are stored, assembled or fabricated. When going
from country to country, factors such as proximity to the companies’ markets, infrastructure
factors and political factors must be taken into account when deciding where to locate their
plants. As with USA-China, we can see that the US are aware of how cost-inefficient it would be
if their manufacturing activities are based in China as that would mean higher logistics (import-
export) costs and further proximity to their targeted markets. Hence, locating their plants to a
nearer country would be feasible. However, Mexican companies have their constraints in term of
not having every material that the US wants to acquire. Thus, it is up to the US companies to
balance out the two options and make the decision.
 3. Theory of Constraints

Title: Nestlé sells peanut allergy business after insufficient demand

Date: September 4, 2023
Author: Madeleine Speed
Link: https://www.ft.com/content/436756c9-80c5-499a-bddf-e7f56defe844

The following article talks about how Nestlé has divested its peanut allergy treatment
business, Palforzia, which it acquired as part of its $2.6 billion purchase of Aimmune
Therapeutics in 2020. The treatment, aimed at reducing allergic reactions to peanuts in children,
failed to gain traction due to slower-than-expected adoption by patients and healthcare
professionals as Nestlé wrote off the majority of its investment, amounting to a $2.1 billion
impairment. Thus, Nestlé has identified its health science division as a growth driver,
emphasizing vitamins, supplements, and specialized nutrition for individuals with health
conditions. This move towards health-related products serves as a hedge against potential
backlash over unhealthy foods. The divesting approach allows Nestlé to refocus on core
strengths and growth drivers while receiving milestone payments and ongoing royalties from
Stallergenes Greer.

This situation relates to the theory of constraints, which highlights the importance of identifying
and addressing bottlenecks or constraints in a business process. In this case, Nestlé initially
invested in the peanut allergy treatment market, believing there was an unmet medical need.
However, the constraint was the slow adoption of Palforzia due to various factors, including the
need for regular doctor visits, which created a bottleneck in its adoption. Nestlé's recognition of
this constraint led to the decision to divest the business and refocus on more promising growth
areas within its health science division. This shows how companies must address both internal
and external constraints in their operations activities as well as assigning priorities between each
of their products. In Nestlé’s instance, we can see how the market constraint (low demand from
health professionals) affects Nestlé’s business activity. Rather than making the most out of the
bottleneck as we have learnt in the course, Nestlé took the approach of abandoning the
investment. Hence, if that is truly the better approach in addressing constraints, then, it would be
feasible enough.
 4. Optimization Problems

Title: Amazon’s profit margin nears record after CEO Andy Jassy’s dramatic cost-cutting
efforts
Date: October 26, 2023
Author: Annie Palmer
Link: https://www.cnbc.com/2023/10/26/amazons-profit-margin-nears-record-high-after-
ceo-jassys-cost-cuts.html

The following article looks at Amazon’s new CEO, Andy Jassy, that has been focusing
on optimizing profitability and reducing costs since taking over in 2021. Amazon have reported
an operating margin of 7.8% in its 2023 third-quarter earnings report, the highest since 2021.
This was thanks to the emphasis on cost-cutting initiatives where he had eliminated 27,000 jobs
and reshaping fulfillment network for efficiency. This shift comes in response to the changing
market dynamics where there is rising inflation and higher interest rates leading to a need for
cost optimization. Jassy repeatedly stressed the importance of optimization during the earnings
call, referring to both Amazon's cost-cutting efforts and customers' optimization of Amazon Web
Services (AWS) to reduce cloud bills while maintaining performance. While optimization being
a challenge, AWS is also experiencing some cost reduction as demand for generative artificial
intelligence grows. Amazon's cost-saving efforts have also extended to its shipping operations,
with a regionalization strategy leading to faster and cheaper deliveries. By dividing its shipping
network into eight regions, packages travel shorter distances and are handled by fewer
employees, reducing the "cost to serve."
In relation to the course, the article demonstrates the practical application of operations
management principles where Jassy's strategy aligns with the concept of optimizing processes to
reduce costs and enhance profit margins. By streamlining shipping operations, improving
advertising services, and maintaining careful control over their expenses, Amazon has become a
more efficient and profitable organization. This approach showcases the importance of
optimization and cost reduction in operations management, which is essential for achieving and
sustaining business success in a competitive market.
 5. Inventory Management

Title: Retailers’ biggest holiday wish is to get rid of all that excess inventory
Date: November 13, 2022
Author: Melissa Repko
Link: https://www.cnbc.com/2022/11/13/retailers-biggest-holiday-wish-is-to-get-rid-of-
all-that-excess-inventory.html

The following article presents on major retailers such as Walmart, Target, Gap, and
Kohl's that are grappling with excess inventory as they prepare for the holiday season. These
retailers know that managing inventory has taken on increased importance due to economic
factors such as rising credit card debt and the potential for a recession. Since 2020, the pandemic
has brought about a shift in consumer preferences, leading to a mismatch between the
merchandise that retailers have in stock and what customers are looking for. The root problem is
that retailers often place orders several months in advance, and some increased their orders to
meet high demand during the pandemic. However, they struggled to adjust the moment when
consumer preferences change rapidly. Hence, this has led to a surplus of goods in their
backrooms and warehouses. Clearing out this excess inventory is crucial, but it may require
discounts, which would in turn, impact profit margins. Moreover, mall-based retailers selling
apparel, home goods, and electronics are particularly vulnerable, as selling last season's items at
a discount in a new season can be challenging. Furthermore, the excess inventory may create a
crowded shopping experience, potentially driving customers to online competitors like Amazon.
In relation to the course, the article highlights the significance of inventory management
in operations management as effective inventory management is essential to prevent
overstocking and understocking. In the course, we have learnt that there are costing options when
managing inventories, one is the holding cost to cater the inventories store in the warehouses,
another one is the cost of ordering the products. Retailers such as Walmart must decide on the
trade-off between these two costs – which one delivers the best outcome and what is the EOQ
when ordering and holding products. On top of that, consumer demands are also vague and can
fluctuate especially approaching seasonal holidays. Thus, it is necessary for companies to have
the optimal quantity of inventory, avoiding both excess inventory and backlogs. Companies must
ensure product availability and can even offer price discounts if there is indeed extra inventory
that they’d like to get rid of.
 6. Scheduling

Title: US Air Travel Disruptions: The rule instead of the Exception?

Date: February 15, 2023
Author: James Kirby Easterling
Link: https://ominthenews.com/us-air-travel-disruptions-the-rule-instead-of-the-
exception/

The following article depicts the difficulties and disruptions faced by the airline industry
since December 2022, causing increased customer anxiety when booking flights. In December,
Southwest Airlines canceled more than 13,000 flights due to issues with their outdated and
unreliable flight scheduling system. In January, a nationwide ground stop, initiated by the
Federal Aviation Administration (FAA) due to a computer problem, led to a 90-minute stoppage
in all U.S. departing flights where it resulted in over 10,000 delays in a single day. This issue
stemmed from a systematic problem that prevented airports from communicating important
safety information to pilots, such as the “runway closures” and severe weather conditions. The
FAA had to ground all flights until the issue could be resolved, as it affected both the primary
and backup communication systems. In order to compensate the affected airline customers,
legislators have called for complete compensation. In the long run, many passengers now view
flight interruptions as commonplace. Thus, the need for significant technology upgrades and
investments in the U.S. airline industry is pivotal, both at the carrier and federal government
levels.
In relation to the course, the article underscores the crucial role of scheduling systems in
the airline industry. Outdated and unreliable scheduling systems can lead to flight cancellations
and delays, causing customer dissatisfaction and economic losses. We have learnt that job
sequencing and priority rule can be a useful tool in scheduling which job should or should not be
prioritized first. Several rules such as FCFS, EDD, SPT and LPT rule can be applied in a certain
company with respect to its’ operating system and the way one would handle orders/jobs. In the
airline industry, most of the airlines company apply first come first serve in customer priority,
but yet, often they are met with difficulties. Thus, companies should be wise to choose the most
convenient rule to be applied in the companies standardized operating procedure.