Business Paper: Operation Management

Essay Questions

1. Define operations management. Is it true that good operations management is the most important part in manufacturing or service industries?

Operations Management is a branch of management that deals with the design and management of products, processes, services and the overall supply chain. It focuses on the acquisition, deployment, and development of the resources that the firms require to deliver the products and services that their consumers require. This concept is important since it ensures that a firm is efficient and effective in how it handles its resources. A good knowledge of operations management is more important in service industries since they use more resources such as the machines and the number of processes, which require efficient running. Manufacturing companies achieve a high level of efficiency through the adoption of operations management.

Effective utilization of operations management approaches has a number of advantages associated with it. They include the reduction in the cost of production, ensures that the consumer is satisfied. Apart from this, these approaches create room for innovation and they eliminate the risk associated with operational activities in the organization. In manufacturing a product, there is a need for developing more innovative products, which then meet the changing needs of the market. This is achieved within the manufacturing industry through the adoption of these operations management approaches.

2. What do PERT/CPM managing techniques include? What are their main advantages and disadvantages? Will you prefer these technique or some others? Why?

The program evaluation and review technique (PERT) is a technique used in the management of a project and it enables project managers to ensure that the said project runs according to the schedule and it meets the set standards and objectives. Some of the advantages associated with the use of PERT/ CPM, which include its benefits it brings when planning and monitoring the completion of major projects within the set time.

In spite of the mathematical expressions used in PERT, it is very straightforward review tool with few mathematical codes compared to other techniques. The projects also exist in an interconnected mode that requires a linked evaluation, which is an advantage presented using PERT. When using PERT, the projects have to be precisely defined, they also have to be independent, and in stable states which is one of the disadvantages that PERT presents.

This is a disadvantages since most projects cannot be effectively defined since they are limited to the flexibility of the managers as well as their personal abilities and in addition to this, the technique places too much emphasis on longer project cycles. PERT/ CPM are highly efficient ways of resource intensive projects which involve a large number of employees. This is because of its ability to allow for the sharing of the project’s progress with different employees within the organization.

Other techniques can be used in the implementation of projects, which are not based on the assumption of critical time and the overall duration of the project. Such a method that can be used is the Monte Carlo simulation technique, which can be used to manage a project as well. This technique has been shown to remove any possibility of systematic bias in the management of the project. It also provides the basis upon which the quantitative mistakes committed during the implementation of a project and evaluation s analyzed. This then reduces the possibility of errors by providing a combination of possible outcomes for a specific decision made by the management team.

3. Give definitions for economies of scale and diseconomies of scale for a manufacturing plant. How can you decide the optimal size of your hypothetical plant?

Economies of scale refer to those advantages that a manufacturing company acquires because of the company’s expansion. Expansion in this case refers to the production size, increased resources and capital and when using the economies of scale, a firm is in a position to reduce its overall costs of unit production. In spite of the advantages that a company obtains from the economies of scale, it still has its limits beyond which a company stops enjoying the advantages.

The economies of scale have a number of positive results on the consumers and this affects the demand of the product manufactured by the major companies. This is then attributed to the standard of such goods, which creates the limitation of the consumer’s choices. This then increases the economies of scale, which then results in increase in the market supply and decreased demand, which then causes a decrease in the prices o the goods.

When a company expands beyond its limit and operates beyond its maximum design point, its average cost of unit production increases thus causing diseconomies of scale. These diseconomies of scales are related to internal organization problems and can be quite costly for large manufacturing companies who eventually end up spending more to produce a single unit of the product as compared to smaller manufacturing companies in the same sector.

Apart from this, an increase in the unit cost of the natural resources required from the manufacturing process will also cause diseconomies of scale for the business. In establishing the optimal size of a plant, one has to determine the size of the firm and its expected profitability by using accurate cost analysis approaches. Determining the optimal size of a plant is determined by the size of the firm and its expected profitability using accurate cost analysis approaches.

4. What, in your opinion, are the 3 most important issues in supply chain management? Discuss why you think these are the key issues.

The three main issues in supply chain management are the need to reduce the operational and manufacturing costs. The company has to ensure that it decreases its costs while still providing quality products for its consumers. Reducing the operational costs of a company is done through the proper management of the resources used in the production process. The second issue in Supply chain management is the management of the channels.

SCM influences the channels that move the goods and services from the manufacturer through the suppliers and finally to the consumer. A firm is a position to reduce its operational costs and ensure that the goods and services reach the consumers on time by effectively managing the channels of distribution. Finally, ensuring effective management of the consumers’ demands for the services or products, this then results in the beneficial value addition. Understanding the market dynamics and the way in which the patterns change is an essential factor in determining the relevance to the supply chain management.

These three issues are considered the most relevant in supply chain management since they all influence the profitability of the company in the long- run. This leads to the utilization of effective demand approaches, better communication channels, and the success in the integration of all the services. The advances in technology contribute the most changing dynamics of the product market and this can have an effect on the company’s profitability. The growth of a business from the domestic sphere into the international market also influences the change, which is experienced in the market dynamics and the structure that in turn influences the current supply chain management approaches.

The current market is faced with the need to develop better and more innovative production skills to ensure the production of high quality products, which meet the demands of the market. Through this approach, companies develop proper mechanism of increasing their competitive advantage in the face of the high pressure that it faces from external players. Improvement in the efficiency and the productivity of the supply chain management is achieved through the adoption of proper communication approaches.

This in turn results in a situation where all the key players in the supply chain are then informed of the decisions made by the organization’s management with time. A reduction in the inventory cost influences the success that the supply chain process has and this is effectively achieved through the integration of the various supply chain management systems and approaches.

5. Are inventories still necessary? What are their main advantages and disadvantages?

Inventories refer to the collection of raw material and finished goods held by a company and they are considered as part of the firm’s assets. Either these products can be ready products or work in progress and their maintenance can then provide an estimation of the turnover ratio by the firm. The inventory held by a company has to be optimal such that it is not too much to increase the costs of the company and it should not be too little such that the company is not in a position to take care of the rising need of its customers.

Some of the benefits associated with holding inventory are that the company is in a position to meet the uncertain demand of its consumers. The inventory is also considered as the buffer stock for the company. The larger the uncertainty of demands and supply, the larger the amount of buffer stock needed by the company. With the appropriate amount of inventory, an organization is in a position to protect itself from future cist increases, the time lag in deliveries and the uncertainty in lead- time. In addition to this, having optimal inventory allows a company to forecast and plan for any future demands especially in a situation where the demand remains constant over a period.

When inventory levels are in excess, then this will lead to the company having high costs of carrying the inventory. In addition to this, having high inventory levels essentially indicates that the company is struggling to turn over its inventory and make sales. Holding inventory for too long renders it obsolete and this decreases its market value, which affects the expected returns that would have been because of their sale.

The inventories held by companies should be held for a predetermined period, which is dependent on their nature and expected shelf life. These are the most common disadvantages that a company faces when it holds inventory. Some companies build and maintain large inventories in an attempt to create artificial shortage that in turn increases the demand in the market that then pushes the prices of the commodities up. Holding inventory should therefore be maintained within a logical range, which is both profitable to the organization and reduces the possibility of lowered quality of goods…

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