MBB3533

OPERATIONSMANAGEMENT

Mohammed
gamal
TUTORIAL 1

CHAPTER 1: INTRODUCTION TO OPERATIONS AND COMPETITIVENESS

1. Briefly describe the term operations management.?

Operations management is the administration of business practices to create the highest level of
efficiency possible within an organization. It is concerned with converting materials and labor into
goods and services as efficiently as possible to maximize the profit of an organization. Operations
management involves utilizing resources from staff, materials, equipment and technology.
Operations managers acquire, develop and deliver goods to clients based on client wants and the
abilities of the company.

2. Identify the three major functional areas of business organizations and briefly
describe how they interrelate?
The three primary functions are operations, finance, and marketing. Operations is concerned with
the creation of goods and services, finance is concerned with the provision of funds necessary for
operation, and marketing is concerned with promoting and/or selling goods or services.

3. Describe the operations function and the nature of the operations manager’s job?

The operations function consists of all activities that are directly related to producing goods or
providing services. It is the core of most business organization because it is responsible for the
creation of an organization’s goods or services. Its essence is to add value during the
transformation process (the difference between the cost of inputs and value and price of outputs).

4. List five (5) important differences between goods and service operations?

The important differences between

manufacturing and service operations are: Now the similarities are:

· Tangible output · Forecasting and capacity planning to match

supply and demand.

· Inventory · Process management.

· Labour · Managing variations.

· Location · Monitoring, controlling costs and productivity.

· Production environment · Supply chain and management.

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5. A company that processes fruits and vegetables is able to produce 400 cases of
canned peaches in one-half hour with four workers. What is labour productivity?

➢ 1. Productivity= output/Input
➢ = 400/(0.5*4)= 200 cases per hour.
➢ 2. Productivity= output/input
➢ = 400/(2*4)= 50 cases per rial.

6. A wrapping-paper company produced 2,000 rolls of paper one day. Standard price is
RM1/roll. Labour cost was RM160, material cost was RM 50, and overhead was
RM320. Determine the multifactor productivity?

We know that,

➢ Multifactor productivity
➢ = Quality produced at standard price/(Labor cost + Material cost + Overhead)

2,000 rolls x RM1roll / (RM160 + RM 50 + RM320 )

= 3.77 rolls per RM input

7. Suppose that a company produced 300 standard bookcases last week using eight
workers and produced 240 standard bookcases this week using six workers. In which
period was productivity higher? Explain.

Labor Productivity is the number of units produced per resource.

P = No. of units produced/Number of resources

➢ P1 = 300/8 = 37.5 bookcases/worker

➢ P2 = 240/6 = 40 bookcases/worker

✓ As P2 >P1, the productivity of the company is higher during this week

compared to last week. This means that the cost of production this
week is lesser compared to last week.
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8. KayKay Sweets produces candy with 10-person assembly line. On average, 40,000
candies were produced during an 8-hour shift.

a. Calculate the labor productivity of the line?

The labor productivity per labor hour

>> labor productivity = output / input
here, output refers to 40,000 values produced and input is in term of total time taken as
-10 x 8
labor productivity = output / input
= 40,000 candies / 80
= 500 candies per labor hour

b. Kartini, the manager at KayKay Sweets, changed the layout and was able to
increase production to 48,000 units per 8-hour shift. What is the new labor
productivity per labor-hour?

New output = 48,000

new labor productivity = / 80 = 600 candies per labor hour

c. What is the percentage of productivity increase?

productivity at 40,000 candies is 500 candies per labor hour, productivity at 48,000 units is
600candies per labor hour

= [ new labor productivity - labor productivity / labor productivity ] x 100

[ 600-500/500 ]x 100 =
[500/500] x 100 = 100

9. Lori Cook produces “Final Exam Care Packages” for resale her sorority. She is
currently working a total of 5 hours per day to produce 100 care packages.
a. What is Lori’s productivity?

Number of working hours per day = 5 >> ( Total production per day = 100
units )

Labor Productivity = Total production per day/ Number of working hours per
day = 100/5 = 20 units per hour.
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b. Lori thinks that by redesigning the package, she can increase her total
productivity to 133 care packages per day. What will be her new productivity?

➢ Revised production per day after redesigning = 133 units

Revised Labor productivity = Revised production per day after redesigning / Number of working
hours per day = 133/5 = 26.6 units per hour

% Increase in Labor Productivity = ((Revised Labor productivity – Old Labor Productivity) / Old
Labor Productivity)*100 = ((26.6-20)/20)*100 = 33%

So if Lorry makes the change then there will by 33% increase in Labor productivity.

c. What will be the percentage increase in productivity if Lori makes the

change?
Labor rate per hour = $20
Number of working hours per day = 5
Total Labor cost per day = Labor rate per hour * Number of working hours per day
= $20*5 = $100
Utility cost per day = $400
Total cost per day = Total Labor cost per day + Utility cost per day = $100 + $400 = $500
Total production per day = 100 units
Multifactor Productivity = Total production per day / Total cost per day
= 100/$500 = 0.2 pkg per $

10. Define mission.

A Mission: The purpose for an organization’s existence –> Where it is going?

Mission is defined as the purpose or rationale for an organization’s existence. Its purpose
is to identify what it will contribute to society. Moreover, mission statements provide
boundaries and focus for organizations and the concept around which the firm can rally

11. Define strategy.

A Strategy: How an organization expects to achieve its missions –> How to get there?
Strategy is defined as how an organization expects to achieve its missions and goals
because with the mission established, strategy and its implementation can begin.
Each functional area has a strategy for achieving its mission and for helping
the organization reach the overall mission
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12. There are three primary ways to achieve competitive advantage. Provide an
example.

➢ Cost leadership - The example of Cost leadership is Wal-Mart via low overhead,
vicious cost reduction in the supply chain.
➢ Differentiation - The example of Differentiation can be any premium product, all fine
dining restaurants, up-scale autos—Lexus.
➢ Response - The examples of response can be your local pizza delivery service, FedEx.