Operations Management Assignment I

1. Distinguish between production management and operation management.

What is Production Management?
Production management is the field of study that deals with planning, organizing, controlling
and directing the production activities of the organization.
It deals with the conversion of raw materials into finished products and also with
determining the quality of the finished good. Its primary objective is to produce goods and
services which are of the right quality, quantity and is produced at the right time with
minimum cost.
The importance of production management for an organization is as follows.
 Helps the organization achieve its production objectives.
 Helps in maintaining organization goodwill, reputation and image in the market.
 Introduces new products in the market.
 Ensures all production resources are used optimally.

What is Operation Management?

Operation management is the field of study that deals with supervision, design and planning
of business operations. The main objective of operation management is to enhance the
quality of business operations.
It is delivery-focused which means the emphasis is on successfully turning inputs into
outputs in the most efficient manner. Operation management involves the administration of
production, manufacturing and provision of services in an organization.
Operation management is focused more on processes and how they can be optimized so that
there is minimum wastage of available resources.
The following table will highlight the most important differences between production
management and operations management. It will be helpful for students to grasp the idea in a
better way.
Basis of Comparison Production Management vs Operation Management
I. Definition
Production management is about managing activities related to production only. Operation
management is about the management of overall business operations which includes
production and post-production stages
II. Area of Decision making
In production management it related to aspects of production only and operation
management related to the regular business activities in an organization.
III. Objective
The objective of production management is to produce the best goods or services that are of
the right quality, right quantity at the right time where the objective of operation
management is to utilize the resources in the most optimum way
IV. Found In
In production management it is found in enterprises where production is undertaken where in
operation management It is found in places like Banks, Hospital, Companies etc which are
providing service.
V. Capital Requirement
For Production management more capital requirement initially and in operation management
capital requirements is relatively fewer.

Key Differences between Production and Operation Management

The difference between production and operation management, are presented hereunder:
Production Management can be defined as the administration of the set of activities
concerning the creation of goods or transformation of raw material into finished
goods. Conversely, Operations Management is used to mean that branch of
management which deals with the administration both production of goods and
provision of services to the customers.
In production management, the manager has to make decisions regarding the design,
quality, quantity and cost of the product manufactured by the department. On the
contrary, the scope of operations management is larger in comparison to the
production management wherein the operations manager looks after the product
design, quality, quantity, process design, location, manpower required, storing,
maintenance, logistics, inventory management, waste management, etc.
 Production Management can only be found in the firms where production of goods is
undertaken. Unlike, one can find operations management in every organization, i.e.
manufacturing concerns, service-oriented firms, banks, hospitals, agencies, etc.
The basic objective of production management is to provide the right quality goods in
the right quantity at right time and best price. In contrast, operations management
aims at making the best possible use of organization’s resources, in order to fulfill the
customer’s wants.

2. What are the differences between ISO 9001 and ISO 14001?

ISO 9001 and ISO 14001 are both standards (published by the International Organization for
Standardization) for management systems. ISO 9001 addresses quality management, ISO
14001 addresses environmental management.
ISO9001 and ISO14001 are very similar in their structure and in their approach, but one
focuses on product/service quality systems and the other on environmental system
management. However, if a company is ISO9001 certified, it’s not much more difficult to
implement 14001 too, since they are both based on a “Plan-Do-Check-Act” cycle and take a
process based approach to management systems.
In terms of value, in my opinion, if you are a product manufacturer, you’ll get more benefits
by achieving ISO9001, and then you can evaluate implementing a certified EMS next.
Customers, investors, suppliers and your employees will benefit more from ISO9001.
ISO 9001 and ISO 14001 are two different management system standards. ISO 9001
contains the requirements for a quality management system, ISO 14001 for an environmental
management system.
Obviously that’s quite different but since both are standards published by ISO, there are also
quite a lot of commonalities. There is much overlap with many similar or identical
requirements. Since the 2015 revision, both standards share the same structure and
numbering system, making it rather easy to spot the overlap.
ISO 9001 is often seen as the foundation of other management standards published by ISO.
In other words, if you have ISO 9001 in place, it is significantly easier to add another
standard like ISO 14001.
3. A Good Product Design Contributes To TQM in the Organization. Explain how this may
happen.
4. Selams Pizzas has a service guarantee that promises you will not pay for your pizza if it is
delivered more than 30 minutes from the order being placed. An investigation shows that 10
per cent of all pizzas are delivered between 15 and 20 minutes from order, 40 per cent
between 20 and 25 minutes from order, 40 per cent between 25 and 30 minutes from order, 5
per cent between 30 and 35 minutes from order, 3 per cent between 35 and 40 minutes from
order, and 2 per cent over 40 minutes from order. If the average profit on each pizza
delivered on time is A1 and the average cost of each pizza delivered is A5, is the fact that
Selams does not charge for 10 per cent of its pizzas a significant problem for the business?
How much extra profit per pizza would be made if 5 minutes was cut from all deliveries?
5. Potential locations X, Y and Z have the cost structures shown below. The ABC Company has
a demand of 130,000 units of a new product. Three potential locations X, Y and Z having
following cost structures shown are available. Select which location is to be selected and also
identify the volume ranges
 w h e r e e a c h l o c a t i o n i s s u i t e d ? (5 P o i n t s)

SOLUTION: at BEP, for the same production quantity or volume, we get:

Solve for the crossover between X and Y:
10 Q + 150,000 = 8 Q + 350,000
2 Q = 200,000
Q = 100,000 units
Solve for the crossover between Y and Z:
8 Q + 350,000 = 6 Q + 950,000
2 Q = 600,000
Q = 300,000 units
Therefore, at a volume of 130,000 units, Y is the appropriate strategy.
So, we can interpret that location X is suitable up to 100,000 units, location Y is suitable up
to between 100,000 to 300,000 units and location Z is suitable if the demand is more than
300,000 units.
6. The new Health-care facility is targeted to serve seven census tracts in Bahir Dar. The table
given below shows the coordinates for the Centre of each census tract, along with the
projected populations, measured in thousands. Customers will travel from the seven census
tract centres to the new facility when they need health-care. Two locations being considered
for the new facility are at (5.5, 4.5) and (7, 2), which are the centres of census tracts C and F.
Details of seven census tract centres, coordinate distances along with the population for each
centre are given below. Find the target areas centre of gravity for the Health-care medical
facility.
 Let us assume that a new medical facility, Health-care, is to be located in Delhi. The
location factors, weights, and scores (1 = poor, 5 = excellent) for two potential sites are
shown in the following table. What is the weighted score for these sites? Which is the
best location?

Centre of gravity
The Centre of gravity is defined to be the location that minimizes the weighted distance
between the warehouse and its supply and distribution points, where the distance is weighted
by the number of tones supplied or consumed. The first step in this procedure is to place the
locations on a coordinate system. The origin of the coordinate system and scale used are
arbitrary, just as long as the relative distances are correctly represented. This can be easily
done by placing a grid over an ordinary map.

The Centre of gravity is determined by the formula.

CX = ∑Dix.Wi/∑Wi and CY = ∑Diy.Wi/∑Wi
Where Cx = x-coordinate of the Centre of gravity
Cy = y-coordinate of the Centre of gravity
Dix = x-coordinate of location i
Diy = y-coordinate of location i
To calculate the Centre of gravity, start with the following information, where population is
given in thousands.
SI.No. Census tract (x,y) Population (I) Ix Iy
 1 A (2.5,4.5) 2 5 9
2 B (2.5,2.5) 5 12.5 12.5
3 C (5.5,4.5) 10 55 45
4 D (5,2) 7 35 14
5 E (8,5) 10 80 50
6 F (7,2) 20 140 40
7 G (9,25) 14 126 35
Total 68 453.50 205.50

Next we find Cx and Cy

Cx= 453.5/68= 6.67
Cy= 205.5/68= 3.02
The Centre of gravity is (6.67, 3.02). Using the Centre of gravity as starting point, manages
can now search in its vicinity for the optimal location.
Weighted Factor Rating Method
In this method to merge quantitative and qualitative factors, factors are assigned weights
based on relative importance and weightage score for each site using a preference matrix is
calculated. The site with the highest weighted score is selected as the best choice.
The weighted score for this particular site is calculated by multiplying each factor’s weight
by its score and adding the results:
SI.No. Location factor Weight Scores
Location 1 Location 2
1 Facility utilization 25 3*25=75 25*5=125
2 Total patient per month 25 4*25=100 25*3=75
3 Average time per emergency 25 25*3=75 25*3=75
trip
4 Land and construction cots 15 15*1=15 15*2=30
5 Employee preference 10 10*5=50 50*3=30
Total 315 453.50 205.50

Therefore, weighted score location 1 = 75+100+75+15+50= 315, and

Weighted score location 2 = 125+75+75+30+30= 335
Location 2 is the best site based on total weighted scores.
7. Custom Furniture Co. currently has 100 employees and has forecast quarterly demand as
shown in Table 8.11. The historical average production rate is 40 units per employee per
quarter, and the firm has a beginning (safety stock) inventory of 1,000 units. The hiring and
training cost is Rs. 400 per employee, and the layoff cost is Rs. 600 per employee. Inventory
is carried at a cost of Rs. 8 per unit per quarter. Use the data to develop an aggregate plan
that uses variable employment and inventory to meet demand.
The planner has been chosen to build some extra inventory in quarter one with the works
already on the payroll. Producing at the rate of 40 units per employee, the first quarter
production of 4,000units is 500more than demand (3,500), so the ending inventory equals the
beginning 1,000 units plus 500 units or 1,500 units. This results in a carrying cost of Rs.
8(1,500) = Rs. 12,000. 20 employees are hired at the beginning of quarter 2 to help meet the
larger demand during the quarter. This results in a hiring cost of Rs. 400(20) =Rs.8, 000.
Employment is cut back again at the beginning of quarter 3, as the firm dips in to safety
stock, and the employment is restored to its original level at the beginning of quarter 4. (This
firm bases inventory costs on ending inventory balance.)
The total (comparative) cost for this is Rs. 34,800+Rs. 40,000 = Rs. 74,800. Note that
inventory and employment costs are not well balanced, and employment is the lowest during
quarter 3 when demand is relatively high. With some additional trials, the planner could
undoubtedly develop a plan that would result in a lower total cost. Large fluctuations in
production often result in more problems (and higher cost) than more steady- state
operations.
(1) (2) (3) No. of (4) (5)Total (6) Cum. (7) Cum. (8) (9) (10)
Qtr Forecas employee Chang production. prodn. Emp. Ending Inventor Empl.chg
t or e in inv. y cost @ cost @ Rs
demand empl. Rs.8 400 or 600
1 3,500 100 _ 4,000 4,000 3,500 1,500 12,000 _
2 5,000 120 +20 4,800 8,800 8,500 -1,300 10,400 8,000
3 4,000 80 -40 3,200 12,000 12,500 500 400 24,000
4 3,450 100 +20 4,000 16,000 15,950 1,050 8,400 8,000
Totals 34,800 40,000

7. Given the accompanying supply, demand, cost, and

inventory data for a firm that has a constant work force and
wishes to meet all demand (that is, with no backorders),
allocate production capacity to satisfy demand at minimum
cost.
8. A university registrar has adopted a simple exponential smoothing model ( a = 0.4) to
forecast enrollments during the three regular terms (excluding summer). The results are
shown in the following table (a) Use the data to develop an enrollment forecast for the third
quarter of year 2. (b) What would be the effect of increasing the smoothing constant to 1.0?

10. A food processing company uses a moving average to forecast next month’s demand. Past
actual demand (in units) is as shown in the following table.

A. Compute a simple 5-month moving average to forecast demand for month 52.

B. Compute a weighted 3-month moving average, where the weights are highest for
the latest months and descend in order of 3, 2 and 1.
Compiled by Asmamaw T. (PhD) Page 4
Operations Management Assignment
I
Compiled by Asmamaw T. (PhD)
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