Individual Assignment 2

BUSI414: Operations Management

Question One

1. Features: Known as the “bells and whistles” of products and services, features are

discrete areas of new and upgraded functions that deliver value to customers. Broadly,

features may refer to components, user interface design, and performance upgrades.

Additionally, a product feature has a corresponding benefit or set of benefits for the

customers. For instance, a feature that adds value to an automobile customer may be

reverse automatic braking (Garvin, 1987).

2. Reliability: One of the most crucial parts of product quality is that of product

reliability. This dimension suggests the likelihood of a product malfunctioning or

failing within a specified period. Essentially this measurement is critical to customers

who need the product to work with little or no-fail (Garvin, 1987).

3. Performance: The product’s primary operating characteristics are referred to as its

performance. For a television media set, performance encompasses sound and picture

clarity. Since performance involves measurable attributes, brands are usually judged

objectively by customers (Garvin, 1987).

4. Aesthetics: How a product looks, feels, sounds, tastes, and smells reflect how a

customer may think about the product. Aesthetics is more subjective since it is up to

personal judgment. Therefore, aesthetic product preferences may be perceived

differently based on culture, age range, and other variables (Garvin, 1987).
 5. Conformance: The degree to which a product operating characteristics and design

meets established standards is known as conformance. For example, if the product is

based on a performance specification, the product should perform as specified

(Garvin, 1987).

Question Two

Given the current global environmental climate, the preponderance of evidence

highlights that sustainability is now mainstream. Multinational organizations are now on the

front line of restructuring their operations to sustainable models. According to Alexandra

Spiliakos, sustainability refers to doing business without harming the environment and

society (2018). Below are five initiatives that organizations can implement to promote

sustainability in their operations.

1. Install and promote the use of recycling bins: As little as it may sound, this

initiative can aid in reducing waste and environmental pollutants. By having

recycling bins around the office and company buildings, waste can be reused,

alternately eliminating or reducing an organization's waste contributions

exponentially.

2. Using renewable energy: Installing solar panels or wind turbines to power

operations in factories and corporate buildings can help reduce the impact of

climate change globally.

3. Fostering green innovation within corporate culture: Implementing a green

plan is no easy task: however, it can be more efficient if companies instill and

nurture green innovation and sustainability into operations and company

processes. For instance, tech companies such as Apple can encourage engineers to

find green, efficient ways to produce phones and other devices (Spiliakos, 2018). 
 4. Creating waste reduction manufacturing methods: Manufacturing companies

can endorse and implement the use of lean manufacturing to reduce waste

contribution. The reduction of defects and excess processing can be achieved by

effectively using lean methods to produce goods (Spiliakos, 2018).

5. Encouraging responsible consumption: Utilizing recyclable cups and plates in

the office can be implemented along with using energy-efficient appliances. 

Question Three
Question Four

a)

b) The items were classified based on the typical total percentage of materials in inventory

and consumption rates. Therefore, items classified under A account for approximately 20% of

total inventory, which showed the highest annual consumption values, whereas items

under B are approximately 30% of total inventory and were more interclass items with

medium consumption rates. Additionally, C items are 50% of the total inventory, accounting

for the lowest consumption rates. 

c)

Based on the Pareto Chart analysis above, Greg’s Store roughly earns 80% of their

profit from Item 3,5 and 4, which only constitutes approximately 20 percent of the inventory.

This suggests that Greg should pay close attention to these vital materials.

Question 5

i. If the firm currently orders 500 units per order, what is the current total annual

cost (TC)?
 Q = 500 units

Annual holding cost = (Q/2) (H)

= (500/2) (4)

= 250 * 4

= $1000.00

Annual ordering cost = (D/Q) (S)

= (5000/500) (12)

= 10 * 12

$120.00

Current total annual cost = total holding cost + annual holding cost

= $1000.00 + $120.00

=$1120.00 (Current total annual cost)

ii. What is the economic order quantity (EOQ)?

EOQ = sqrt(2 * demand * ordering cost / holding cost)

√(2 ( 5000∗12 )¿¿ 4) ¿

= 173.2050808 units

iii. What is the total annual cost (TC) at the economic order quantity (EOQ)?

Annual holding cost = (EOQ/2) (Holding cost)

= (173.2050808/2) (4)

= 86.6025404 * 4

= 346.4101616

Annual ordering cost = (Demand/EOQ) (Ordering Cost)

= (5000/173.2050808) (12)
 = 346.4101614

Total Annual Cost = annual holding cost + annual ordering cost

= 692.8203229 ($692.82 rounded two decimal places)

iv. How much can be saved if John adopts ordering the EOQ versus their current
order quantity, Q = 500?

Savings = current order quantity – EOQ

= $1120.00 - $692.82032229

= $427.1796777 ($427.18 rounded two decimal places)

v. What is the reorder point?

= Daily demand – demand/ number of working days

Daily demand = 5000/250

= 20

ROP = d * l

= 20 units * 5 days

= 100 units (at this level stocks must be replenished)

References

Garvin, D. A. (1987, November 1). Competing on the eight dimensions of quality. Harvard

Business Review. https://hbr.org/1987/11/competing-on-the-eight-dimensions-of-

quality

Spiliakos, A. (2018, October 10). What is sustainability in business? | HBS online. Business

Insights - Blog. https://online.hbs.edu/blog/post/what-is-sustainability-in-business