Characteristics of Services :

1. Intangibility : Services are intangible : they cannot be touched, gripped, handled, looked at, smelled, tasted. Thus, there is neither potential nor need for transport,storage or stocking of services. 2. Time-perishable Capacity : which means that if capacity to produce a service is not consumed by present demand, that capacity is lost forever. For example, a resort hotel may have 100 rooms, with only 20 rooms occupied on a given day in the off season. The hotel's product is "rested and refreshed guests," with a capacity to produce 100 "rested and refreshed guest groups" every day. If they only produce 20 such products, the remaining capacity is lost forever even though they may have demand well above 100 guest groups per day during the tourist season. 3. Simultaneous Production and Consumption, which means that services are produced at the time they are consumed. For example, a car wash produces washed cars at the same time the customer is receiving a washed car. This is different from manufacturing, where items are produced many weeks or months before the customer receives them. 4. Heterogeneous Production, which means that every unit of production is somewhat unique. For example, think of an education institution: The product is educated students, however, it is unlikely that any two students go through the exact same educational experience. 5. Customer-based Site Selection, which means that the decision of where to locate the service facility is often driven by customer factors. This is why bank branches, restaurants, and shopping centers are often located in high-rent areas of cities. Even though it would be less expensive to locate the facilities in industrial areas or the outskirts of the city, customers are not as likely to travel to an inconveniently located service facility. 6. Inseparability : The service provider is indispensable for service delivery as he must promptly generate and render the service to the requesting service consumer. Additionally, the service consumer is inseparable from service delivery because he is involved in it from requesting it up to consuming the rendered benefits. Examples: The service consumer must sit in the hair dresser's shop & chair or in the plane & seat;

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correspondingly, the hair dresser or the pilot must be in the same shop or plane, respectively, for delivering the service.

Process Selection Types : Process selection type is based on following considerations

Managers can select from five different types of processes : job shop, batch, line, continuous and projects. Job shops are used to produce a low volume of each of a large variety of products or services. Equipment flexibility must be high to handle the high variety of jobs. Batch processing involves less variety, less need for equipment flexibility, and higher volumes of each type of product. Line processing has even less variety, less need for equipment flexibility, and higher volume. Continuous processing has the lowest variety, the lowest need for equipment flexibility, and the highest volume. Project processes are used to make one-of-a-kind products exactly to customer specications. These processes are used when there is high customization and low product volume, because each product is different. Examples can be seen in construction, shipbuilding, medical procedures, creation of artwork, custom tai-loring, and interior design. With project processes the customer is usually in-volved in deciding on the design of the product. The artistic baker you hired to bake a wedding cake to your specications uses a project process. Batch processes are used to produce small quantities of products in groups or batches based on customer orders or product specications. They are also known as job shops. The volumes of each product produced are still small, and there can still be a high degree of customization. Examples can be seen in bakeries, educa-tion, and printing shops. The classes you are taking at the university use a batch process. Line processes are designed to produce a large volume of a standardized product for mass production. They are also known as ow shops, ow lines, or assembly lines. With line processes the product that is produced is made in high volume with little or no customization. Think of a typical assembly line that produces everything from cars, computers, television sets, shoes, candy bars, even food items. Continuous processes operate continually to produce a very high volume of a fully standardized product. Examples include oil reneries, water treatment plants, and certain
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paint facilities. The products produced by continuous processes are usually in continual rather than discrete units, such as liquid or gas. They usually have a single input and a limited number of outputs. Also, these facilities are usually highly capital intensive and automated.

Difference between Intermittent and Continuous Operations

Particulars Product variety Degree of Standardization Organization of resource Grouped by function and the product is routed to each resource as needed. Line ow to efciently accommodate production of the product. Path of Products Factor driving production Resource Equipment Labor General to satisfy different processing requirements Automation less common because automation is typically product-specic high to improve efciency and increase output rather than on labor skill Throughput Time Longer due to reliance on labor and product specific orders WIP Inventory More Shorter due to automation and standardized production Less Capital Specialized Depends on product Customer orders Line flow Forecast of demand Intermittent High Low cuz of variety products Continuous Standardized High

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Data Process Flow :

1st Step : Customer walks in the cinema hall 2nd Step : Customer places an order to an operator 3rd Step : Operator asks to customer which movie 4th Step : Operator completes the order by taking full details regarding date, show and which cinema hall 5th Step : Customer selects the type of seats and seating arrangement 6th Step : Operator asks customer if hes interested in taking combo offers including snacks 7th Step : After selecting seats and choosing the combo offers, customer makes the payment 8th Step : Operator asks for mode of payment : Cash or Card 9th Step : If it is card then operator swipes card 10th Step : Customer collects the receipt and movie tickets. Thus, process is complete

Level Aggregate Plan : A planning approach that produces the same quantity each time
period. Inventory and back orders are used to absorb demand uctuations. A level aggregate plan maintains a constant workforce and produces the same amount of product in each time period of the plan.One advantage of a level production plan is workforce stability. Your company sets labor and equipment capacity equal to average demand, rather than hire excess labor or buy additional tools and equipment just to meet peak demand. In addition, the labor force is not subjected to varying work levels during the year, such as periods of layoff or undertime followed by periods of hiring and/or overtime. The disadvantages of the level plan are the buildup of inventory and/or possible poor customer service from extensive use of back orders. The level plan is often used with make-to-stock products such as stereos, kitchen appliances, and hardware. Eg: Wavetop, Inc. currently has 10 employees, each producing 5 complete units per day, for a total of 50 units every workday. Calculate the number of employees needed in the companys

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level aggregate plan if the company has an average weekly demand of 500 units and plans on satisfying all of its demand. If average weekly demand is 500 units and employees work ve days per week, we need to produce 100 units per day. Thus, the workforce should be 20 employees (100 units needed each day divided by 5 units completed per employee per day). If we use this method, inventory accumulates when de-mand is below average and depletes when demand exceeds the average level. If we do not have enough inventory on hand to satisfy demand, then back orders result.

Chase Aggregate Plan : A planning approach that varies production to meet demand each
period. A chase aggregate plan produces exactly what is needed to satisfy demand during each period. The production rate changes in response to demand uctuations. Whereas the level aggregate plan sets capacity to accommodate average demand, the chase aggregate plan sets labor and equipment capacity to satisfy demand each period. The advantage of the chase plan is that it minimizes nished goods holding costs. This may be a better option when a company produces make-to-order products such as custom cabinets, special-purpose equipment, one-of-akind items, or highly per-ishable products. The disadvantages are constantly changing capacity needs and the need for enough equipment to meet peak demand. The additional equipment needed to meet peak demand creates excess capacity in nonpeak demand periods. Many op-tions for short-term capacity changes are expensive. Eg : Wavetop, Inc. decides to adjust its capacity by hiring and r-ing employees each month. We calculate the number of employees needed during each period based on the net demand. For example, January demand is 12,000 units, but since we have 6000 units in inventory, the net demand is only 6000 units. Each employee builds 500 units per month, so Wavetop, Inc. needs 12 employees (6000 units divided by 500 units per employee per month) in January. The company needs 18 employees in February, 24 employees in March, 30 employees in April, 36 employees in May, and 48 employees in June. How does this affect the space needed, the number of worksta-tions, the sets of tools, and so forth? When Wavetop, Inc. used a level aggregate plan, it needed space and equipment to accommo-date 28 employees. With the chase aggregate plan, however, the company needs space and equip-ment for 48 people.

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Hybrid Aggregate Plan : A planning approach that uses a combination of level and chase
approaches while developing the aggregate plan. A hybrid aggregate plan typically uses a combination of options. With this plan, your company might maintain a stable workforce supplemented by an inventory buildup and some overtime production to meet demand. Or the company may back-order a portion of its demand. Any combination of options is possible. Because of the number of options you can combine in a hybrid plan, you need to evaluate your companys current situation and limit the options you choose from.

Advantages of Using ERP :

1. It integrates the complete range of an organizations operations in order to present a holistic view of the business functions from a single information and IT architecture. 2. Improves the organizational information ow. 3. Because of improved information ow, an organization increases its ability to incorporate best practices that facilitate better managerial control, speedier decision making, and cost reductions throughout the organization. 4. The basic architecture of an ERP system builds upon a single database, one applica-tion, and a unied interface across the entire enterprise, thus allowing an integrated approach. 5. Replacement of disparate systems; improved quality and visibility of information; integration of business processes and systems; replacement of older, obsolete systems; and the acquisition of systems that can support future business growth. 6. Improving inadequate business performance, reducing high-cost structures, improving customer responsiveness, simplifying complex processes, supporting global expansion, and standardizing best practices throughout the enterprise. 7. Reductions in inventory and stafng, increased productivity, improved order management, quicker closing of nancial cycles, reduced IT and purchasing costs, improved cash ow management, increased revenue and prots, reduced transportation and logistics costs, and improved on-time delivery performance 8. Improved visibility of corporate data, improved customer responsiveness, better integration between systems, standardization of computing platforms, improved exibility, global sharing of information, and better visibility into the supply chain management process.
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Disadvantages of ERP :
1. The cost of an ERP system ranges from hundreds of thousands of dollars to several million dollars. 2. In addition to the software cost is the cost of outside consultants used in the selection, configuration, and implementation of the ERP system. 3. Additional costs include the human resources needed to work on the implementation of the system, new hardware to run the program, and the development of a new, integrated database. 4. Top management must clearly set the vision and direction for the business, as well as establish a culture that enables the business to benet by using the technological capabilities of an ERP system. Champions are needed to effectively implement change programs and promote best practices. 5. Service costs are for external professional services. These might include implementation, training, customization, or consulting, but do not include company employees. 6. Maintenance costs are based on average maintenance fees paid in aggregate and on a per user basis. Maintenance costs include technical support and bug xes as well as new product innovations. 7. Total cost of ownership varied based on size of the company. For companies with less than $50 million in annual sales, the average total was $366,583. Companies be-tween $50 and $100 million had an average total cost of $892,765. For companies with sales between $500 million and $1 billion, average total costs were $3,483,776. And for companies with sales exceeding $5 billion, the average total cost was $7,148,750.

Why seasonal variations to be considered in Forecasting ?

A seasonal pattern is any pattern that regularly repeats itself and is of a constant length. Such seasonality exists when the variable we are trying to forecast is inuenced by seasonal factors such as the quarter or month of the year or day of the week. Examples are a retail operation with high sales during November and December or a restaurant with peak sales on Fridays and Saturdays.

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One factor that can signicantly impact sales is the weather. In the past, there was little companies could do to plan for weather problems. However, new businesses have sprung up to help companies use weather data to pre-dict consumer behavior and manage weather risk. It could be as simple as predicting a hot summer, a cold winter, or an early spring. This type of information can help companies move the right inventories to areas where consumers will be more likely to buy them. Planalytics Inc. is a company that helps businesses use weather data to make their business plans. Its clients include Gillettes Duracell Batteries, Home Depot, and WalMart. In one example, Planalytics helped Duracell move a large number of batteries to areas expecting to be hit by hurricanes during the hurricane season. Although using weather data does not replace traditional forecasting methods, it is one additional tool that can help companies improve their forecasting and planning. Forecasting demand at ski resorts such as Snowshoe, Holiday Valley, and Seven Springs can be very challenging because data are highly seasonal. Multiple seasonal factors need to be considered, including the month of the year, day of the week, and holidays and long weekends, in addition to consider-ing the weather forecast. Historical data are used to develop the indexes for these seasons. In addition, the ski industry has been experiencing an upward trend over the past years, particularly with the growth of snow boarding. A simple way to make forecasts in this industry is to forecast the trend and then make adjustments based on developed seasonal indexes.

Reorder level : Reorder level (or reorder point) is the inventory level at which a company
would place a new order or start a new manufacturing run. Reorder Level = Lead Time in Days Daily Average Usage Lead time is the time it takes the supplier or the manufacturing process to provide the ordered units. Daily average usage is the number of units used each day. If a business is holding a safety stock to act as buffer if daily usage accelerates the reorder level would increase by the level of safety stock.

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Reorder Level = Lead Time in Days Daily Average Usage + Safety Stock Example : ABC Ltd. is a retailer of footwear. It sells 500 units of one of a famous brand daily. Its supplier takes a week to deliver the order. The inventory manager should place an order before the inventories drop below 3,500 units (500 units of daily usage multiplied with 7 days of lead time) in order to avoid a stock-out.

Safety Stock : Safety stock is the stock held by a company in excess of its requirement for the
lead time. Companies hold safety stock to guard against stock-out. Safety stock is calculated using the following formula: Safety Stock = (Maximum Daily Usage Average Daily Usage) Lead Time Example ABC Ltd. is engaged in production of tires. It purchases rims from DEL Ltd. an external supplier. DEL Ltd. takes 10 days in manufacturing and delivering an order. ABC's requires 10,000 units of rims. Its ordering cost is $1,000 per order and its carrying costs are $3 per unit per year. The maximum usage per day could be 50 per day. Calculate economic order quantity, reorder level and safety stock. Solution EOQ = SQRT (2 Annual Demand Ordering Cost Per Unit / Carrying Cost Per Unit) Maximum daily usage is 50 units and average daily usage is 27.4 (10,000 annual demand 365 days). Safety Stock = (50-27.4) 10 = 226 units. Reorder Level = Safety Stock + Average Daily Usage Lead Time Reorder Level = 226 units + 27.4 units 10 = 500 units.

Break Even Analysis : The break-even point is the point at which revenues equal expenses.
In investing, the break-even point is the point at which gains equal losses. The basic idea behind break-even point is to calculate the point at which revenues begin to exceed costs.

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The first step is to separate a company's costs in to those that are variable and those that are fixed. Fixed costs are costs that do not change with the quantity of output. Examples of Fixed cost include rent, insurance premiums, or loan payments. Variable costs are costs that change with the quantity of output. They are zero when production is zero. Examples of common variable costs include labor directly involved in a company's manufacturing process and raw materials. Setting a Price is critical to your breakeven analysis; you can't calculate likely revenues if you don't know what the unit price will be. Unit price refers to the amount you plan to charge customers to buy a single unit of your product. Breakeven Point = Fixed Costs/(Unit Selling Price - Variable Costs) This calculation will let you know how many units of a product you'll need to sell to break even. Once you've reached that point, you've recovered all costs associated with producing your product (both variable and fixed). Above the breakeven point, every additional unit sold increases profit by the amount of the unit contribution margin, which is defined as the amount each unit contributes to covering fixed costs and increasing profits. As an equation, this is defined as: Unit Contribution Margin = Sales Price - Variable Costs

Factors in consideration for selecting location

Starbucks :

1. Consider target market and type of customer you want to target. 2. Setting up in mixed area has its advantages. Choose area where homes and business are equally spread. So that you get mix of clients. Even if business crowd gets less in the evening, people from residential area can come by. 3. While selecting a property look for parking facilities. 4. Make sure your store is visible from the street.
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5. Choose a location which is easily accesible to customers 6. Selecting the area where awareness about your product is high and relatively low lease. Gold or Diamond jewellary manufacturing :

1. Generally close to the retail markets 2. Area where security is good 3. In the industrial estates where other manufacturing units are also present 4. Closer to actual production of raw materials if possible 5. Area where trasnportation is developed 6. Uninterrupted supply of electricity Ford cars manufacturing to distribution outlets

1. Manufacturing plant should be in SEZs where government provides subsidy 2. Manufacturing should be in the area where transportation is easy, labor should be easily available and also water & electricity. 3. Distribution outlet should be in the areas where they are easily visible and easily accesible. 4. Distribution outlets should be in retail areas. 5. If possible, distribution outlets can be in near proximity of warehouses

Capacity Planning :
Capacity planning is the process of establishing the output rate that can be achieved by a facility. If a company does not plan its capacity correctly, it may nd that it either does not have enough output capability to meet customer demands or has too much capacity sitting idle. Capacity planning is a three step process which is as follows :-

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1. Identify Capacity Requirements : There is no one way to measure it. Different people have different interpretations of what capacity means, and the units of measurement are often very different. To identify you need to forecast long term demand. Forecasting is another troublesome area. Here our capacity is 20 rooms but currently the occupancy rate is low. But we have to take into considertation long term factors also while making decision and not just present factors. In future demand can pick up. For forecasting qualitative measures such as executive opinions, delphi method, use of subjective opinions of experts. Quantitative forecasting models that can nu-merically compute patterns such as trends. Finally we need to consider how much capacity our competitors are likely to have. Capacity is a strategic decision, and our position in the market relative to our competitor is very much determined by our capacity. At the same time, plans by all major competitors to increase capacity may signal the potential for overcapacity in the industry. Therefore, the decision as to how much capacity to add should be made carefully. 2. Develop Capacity Alternatives : Once we have identied our capacity requirements for the future, the next step is to develop alternative ways to modify our capacity. One alternative is to do nothing and reevaluate the situation in the future. With this alternative, we may not be able to meet any demands that exceed current capacity levels. Choosing this alternative and the time to reevaluate the companys needs is a strategic decision. The other alternatives require deciding whether to purchase one large facility now or add capacity incrementally. 3. Evaluate Capacity Alternatives : There are a number of tools that we can use to evaluate our capacity alternatives. These tools are only decision support aids. Ultimately, we have to use many different inputs, as well as their judgment, in making the nal decision. One of the most popular of these tools is the decision tree. Decision trees are useful whenever we have to evaluate interdependent decisions that must be made in sequence and when there is uncertainty about events. For that rea-son, they are especially useful for evaluating capacity expansion alternatives given that future demand is uncertain. A decision tree is a diagram that models the alternatives being considered and the possible outcomes. Decision trees help by giving structure to a series of decisions and providing
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an objective way of evaluating alternatives. With the help of decision tree we can find out that do we need to expand our hotel in large way or big way. We can also find out profit made by exapnding in large way or small way and accordingly decide what to do.

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