Master of Business Administration-MBA Semester 3

Name Registration No Learning Centre Learning Centre Code Course

: : : : : MBA

Subject Semester Assignment No Date Of

: Operations Management : : THIRD OM 0010 (SET 2)

OM0010/ Operations Management /SEM 3

Master of Business Administration-MBA Semester 3

Operations Management Subject Code OM0010 Assignment Set-2

I. One of the serious drawbacks of Indian manufacturing organisations compared to their counterparts in Japan and Korea was the predominant domestic focus in their approach to business. Elucidate. Site an example. One of the serious drawbacks of Indian manufacturing organisations operating in a controlled economy was the predominant domestic focus in their approach to business. In contrast, manufacturing organisations in small countries such as Japan and Korea developed good international focus, which helped them set tough targets and high standards for operations system performance. Quality Management Issues Reports have brought to light Indias poor performance with respect to customer care and quality. Indian organisations have fared badly on the customer orientation and Total Quality Management (TQM) drive when compared to other countries. It is interesting to note that in the 1996 ratings, China was ranked 16th with respect to customer orientation while India was placed at 43rd rank. Lead Time Issues Reports also put India almost at the bottom of the list with respect to time to market. Long lead time forces organisations to either carry large inventories or produce some plan, which may more or less be different from what the market wants. Further, bringing in new variations of the product to the market will also be delayed. All this will result in high cyst, large non-moving inventory, poor delivery reliability and eroded market share. Labour Productivity Issue The 1997 rating, points to several labour issues in India. While India is ranked 3rd on abundance of labour force, it occupies 46th position in employee training and 50th position in labour productivity. Several other studies have also indicated that low productivity levels largely offset the advantage of low labour cost. Therefore, improving productivity is a major concern. Emerging Trends in Business Several developments that affect Operations Management practices have taken place in the market due to economic policies at national and international levels like advent of new sectors of industry and new technology such as the Internet. Business organisations must be OM0010/ Operations Management /SEM 3

aware of these trends and take them into account in their strategic planning. Some major and important trends are mentioned below. Advancement in IT and global competition has influenced the major trends. Different organisations have different priorities, and hence are differently affected by various trends. A representative list of major trends includes: Dismantling of Trade barriers Outsourcing as a major wave The internet, e-commerce and e-business Management of Technology Globalisation Management of Supply-chains Agility

There are also other important issues that have become vital to organisations and must be addressed. These include greater emphasis on: Ethical behaviour II. Working with fewer resources Cost control and productivity Quality and process improvement Increased regulation and product liability issues Lean production

The entire world can be perceived today as a Global Village, wherein economic events in one country promptly affect other countries. Explain the statement citing an example.

Due to rapid globalisation, industries in most countries are facing intense competition. Developed countries look for new markets for their products in new countries as their own home markets are maturing, while the emerging economies churn out superior products offered at lower prices since the industries in their countries look for larger markets. Tremendous growth in transportation and communication has made accessing the modern and distant market easier. The entire world can be perceived today as a Global Village5, wherein economic events in one country promptly affect other countries. China and India, with their very large populations, have emerged as the biggest markets for the future. On the other hand, the same high population, coupled with improved education levels and experience in many industries, are also posing fresh competition to west-based industries.The above dynamics are giving birth to new international companies whose domain of operations spans several countries. Consequently, operations managers have to coordinate with geographically dispersed operations. On the other hand, several countries have broken trade barriers and are actively cooperating with other countries. For example, the European Union is one such example; even though the countries are separated geographically by thousands of miles they have set up bi-lateral agreements. These have given rise to more strategic alliances amongst individual companies. OM0010/ Operations Management /SEM 3

Fluctuating international stock markets, currency volatility, fluctuating interest rates, inflation and very high levels of trade imbalances have created turbulence in financial markets, thus affecting international business. III. List the assumptions on which Break Even Analysis is based. Explain breakeven point with a sketch. Break-Even Analysis This is also known as the cost volume profit analysis, and is typically based on the following assumptions: Cost can be divided into two broad categories: Fixed Costs and Variable Costs. Unit Selling Price is constant over the entire sales volume. This means that total revenue vary linearly with the volume of sale Inventory changes are Nil. In other words, whatever is produced during a particular period is sold during the same period The firm either produces a single product, or, if it produces more than one product, it maintains the same product mix. The cost-volume-profit analysis examines alternate levels of profit or loss for different levels (or numbers) of products sold/produced. The choice of the number of products sold/produced obviously depends on the anticipated demand. The point (of level of production/sales) where the total Costs equals the total Revenues is called the break-even point As cost is an important component in selecting processes and plant and equipment, some of the basics of costs should be examined. The total cost of a product can be seen to have two components if viewed from the perspective of manufacturing: Manufacturing Costs: Traditionally, costs classified as manufacturing costs include direct materials, direct labour and manufacturing overhead. Non-Production Costs: In addition to the manufacturing costs, there are non-manufacturing costs that constitute overhead, marketing and overhead costs. Costs can be classified on the basis of their relation to the volume of production. They are: Fixed Costs: These are costs that remain constant irrespective of the volume of production. They represent items of costs such as depreciation, insurance, taxes that are linked to the hiring/owning of the factory premises, plus other costs such as salaries of fixed personnel, interest on long-term debt, etc. Fixed costs arise as a result of capacity creation, and do not vary with the variations of activity (capacity utilisation). They are function (of essentially) of time. Variable Costs: Several important components of cost vary directly with output. For instance, the costs of materials that directly go into the product ,that is, costs of labour hours that are directly utilised for production, costs of power and other utilities that are incurred OM0010/ Operations Management /SEM 3

only during production but do not happen when production is not taking place. All such costs would vary directly with every additional unit produced, and are called Variable Cos To examine investment proposals in respect of plant and equipment and other fixed assets required for manufacturing, the cost-volume-profit analysis is significant since it indicates the level of capacity utilisation that is required in order to break-even and thereafter to contribute to the firms profits. As mentioned earlier, any manufacturing (whether of products or services) involves the application of human, capital and material resources. Some extent of use of these resources need to be made even before the commencement of production, and persisted within order to carry out production on an on-going basis. Hence, these costs become fixed, and have to be incurred month after month, or year after year, irrespective of the level of production. Apparently, these costs have to be recovered fully through revenue generation which takes place due to production and selling of the companys products and realisation of the money from customers. On the other hand, the revenue generation leads to profits only if the unit price at which the product is sold is (in most cases) greater than the total of the unit-related costs incurred to produce the product otherwise referred to the contribution margin. In other words, each unit produced and sold generates a surplus for the company, and higher the number of units of the product produced / sold, the larger is the total surplus. As a company is able to enlarge market demand for its products and sell more (by producing more), the surplus keeps increasing, and at some point equals the fixed costs incurred by the company month after month. This point (as related to the level of production/sales) is called the break-even point, since at this level of production, the company neither incurs a loss nor gains profit, that is, it breaks even. The significance of this analysis for decision making regarding investments on plant and equipment is that the investment should (preferably) be such that the break-even point is low as far as possible. Which means that the investment should be such that not only the ensuing fixed costs are as low as possible, but also the investment enables to keep the variable costs low on one side and to create larger value (through the resultant product or service) for the customer and thus realise a higher price. IV. List out the reasons why International companies come to developing countries and locate their business. Name few such companies and their locations in India. Rapid pace of economic reforms in most countries have led to globalisation of markets. These have made location decisions more significant in more recent times. Globalisation has opened up new opportunities for multi-national companies as far as location decisions are concerned. For instance, ABB1, a Swiss-Swedish multinational corporation with headquarters in Zrich, Switzerland, operates mainly in the power and automation technology areas, sought to set up plants capable of producing world-class products at internationally competitive prices. Such factories also required high levels of technical capability and domain expertise. This approach led them to identify Nasik and Vadodara as perfect locations for setting up plants for manufacturing circuit-breakers. ABB also set up a plant at Faridabad in Haryana (the only plant located east of Suez Canal2 to manufacture variable drive motors for global markets). The above example reflects the close relationship between globalising operations and location decisions. Some of the chief factors which cause globalisation of operations are discussed below, along with how each of these factors affects the location decisions: OM0010/ Operations Management /SEM 3

Regulatory issues: This is the most significant factor. In the early 90s, India initiated a number of regulatory changes that has rendered India as a very attractive destination for locating manufacturing facilities. Removal of entry barriers and reduction in manufacturing costs due to tariff reductions are two important reasons. Another reason is the emergence of regional trading blocs. Factor advantages: Certain specific locations offer organisations factor advantages which promote globalisation. For example, for developed countries in the west, cheaper labour or manpower costs attract them to locate facilities in developing countries. Sometimes, availability of skilled labour in certain locations also is a factor advantage. Some of the other advantages that companies may experience could be in the form of availability of cheaper water or power resources, or availability of better technical infrastructure in the form of ancillary industries. Expanding markets: Certain markets in developing or under developed countries are registering very high growth rate. Such countries offer new opportunities for multi-national companies for expanding into new markets. V. Define Statistical Quality Control and explain the various methods associated with it.

Statistical Quality Control Statistical Quality Control (SQC) is a method that uses various statistical sampling of units that are produced by a production process. These are further checked and verified for defectives called as variances. It determines whether the process is in control or not. If the process is not in control, then necessary and corrective actions are taken. Thus, the Statistical Quality Control (SQC) chart is used as a basic tool that formally distinguishes between the normal, as well the abnormal variances. These control charts further helps in distinguishing the random variances from the variances that need managerial investigation. Thus, the final analysis helps in obtaining the improvements in the products and the processes. Thus, this identification of the chance variances avoids unwanted and unnecessary investigations of variances and there by eliminating frequent changes. Some of the various tools and methods associated with the Statistical Quality Control (SQC) are: Descriptive Statistics Stem and leaf Plot Frequency Distribution and Histogram

Now let us discuss these tools and methods in detail. Descriptive Statistics Descriptive statistics is a process that is used to describe the features of data in terms of quantity. It is generally represented with formal analyses. For example, in a study involving human subjects, there appears a table that provides information such as the overall size of the sample, subgroup sample sizes, and information about the demographic or the clinical characteristics, such as the average age, the proportion of subjects with each gender. OM0010/ Operations Management /SEM 3

However, most statistics can be used either as a statistic that is descriptive or in an inductive analysis. For example, the average reading test score for the students in each classroom in a school can be reported. This could give a descriptive sense of typical scores and their variation. However, when a formal hypothesis test on scores is performed, we are doing inductive rather than the descriptive analysis. Some of the common examples of the descriptive statistical analysis include measures of central tendency, measures of dispersion and measures of association, cross tabulation, contingency table, and histogram. Thus, descriptive statistics provides various numerical and graphic procedures. This facilitates to summarise a collection of data in a clear and understandable way. Descriptiveness Measures Descriptive statistics provides various numerical and graphic procedures. There are various measures of the descriptiveness statistics. They are as follows: Central Tendency Measures: They are computed in such a way that, a center is achieved around which; the measurements in the data are distributed. However, there are various measures under central tendency measures such as: Mean: It computes the sum of all the measurements and divides by the number of measurements. Median: It is computed in such a way that half of the measurements are below it and half of the measurements are above it. Mode: It computes the most frequent measurement in the data. Variation or Variability measure: They are performed to compute how far away the measurements are from the center Relative Standing Measures: They are computed to describe the relative positions of specific measurements in the data The Stem-and-Leaf plot Statistics is the science of analysing data and drawing conclusions, taking variation in the data into account. However, no two units of a product that is produced by a manufacturing process are identical. Some variation is inevitable. For example, the net content of a soft drink can vary slightly from, can to can and the output voltage of a power supply is not exactly the same from, one unit to another. The Frequency Distribution and Histogram A frequency distribution is an arrangement of the data by magnitude. It is a more compact summary of data, than a stem-and-leaf display a histogram is a graphical representation showing a visual impression of the distribution of data. It is an estimate of the probability distribution of a continuous variable and was first introduced by Karl Pearson. A histogram consists of tabular frequencies, shown as adjacent rectangles, erected over discrete intervals (bins), with an area equal to the frequency of the observations in the interval. The height of a rectangle is also equal to the frequency density of the interval, i.e., the frequency divided by the width of the interval. The total area of the OM0010/ Operations Management /SEM 3

histogram is equal to the number of data. A histogram may also be normalized displaying relative frequencies. It then shows the proportion of cases that fall into each of several categories, with the total area equaling 1. The categories are usually specified as consecutive, non-overlapping intervals of a variable. The categories (intervals) must be adjacent, and often are chosen to be of the same size.[2] Histograms are used to plot density of data, and often for density estimation: estimating the probability density function of the underlying variable. The total area of a histogram used for probability density is always normalized to 1. If the length of the intervals on the x-axis are all 1, then a histogram is identical to a relative frequency plot.

VI.

An employees workplace environment is a key determinant of their level of productivity. Comment. List the workplace environment factors effecting workforce productivity. The work environments in which tasks are performed will definitely affect the productivity greatly. The combination of temperature, humidity, and air movements produce a level of comfort or discomfort considering whether they are within a range. All these factors depend on the conditions to which employees are accustomed. A temperature range of 24 to 32 degrees Celsius would be suitable. Good illumination at the workplace helps productivity. Using pleasing colours for the walls and surroundings may also help productivity. Noise levels, when they are continuous and high, affects the concentration of the employees and affects their work. They even become irritable and their interaction with other people produces confusion and conflict. If noise of the machines is inevitable, ear plugs must be supplied to the workmen.

OM0010/ Operations Management /SEM 3