Solution to Casestudy: Hightone Electronics, Inc. A. Case Title: Hightone Electronic, Inc. (HEI) B.

Time Framework: (Not mentioned, recent time) C. Management Topic: Role and Scope of Operations Management D. Statement of the Problem: Case Questions: 1. Explain why operations management is critical to the success of a business. Why would developing an Internet-based business require different operations consideration for HEI? Is George Gonzales correct in his assessment that this would not be business as usual? 2. Recall that HEI wishes to continue its reputation of high quality and service. Identify key operations management decisions that need to be considered. How different will these decisions be for the Internet business? Outline Case Questions: 1.Why OM is critical to success of a business. Why it requires different operations consideration? 2. Identify key OM decisions to be considered. E. Main Problem/s: What are the key operations decisions to be considered by HEI for the internet based purchasing or transaction? F. Important Information / Areas of Consideration: F1. Persons Involved: George Gonzales - operations director HEI Board of HEI - have decided to start an Internet-based division of HEI F2. Significant facts:
HEI supplies radio parts, fuses, transformers, computers, and electrical testing equipment to repair shops Products were offered for sale through a catalog that was mailed to prospective customers every four months. Board of HEI had just announced their decision to start an Internet-based division of HEI. Mr. Gonzales believes that there are many operations decisions that need to be identified and addressed in order to sustain competitiveness (high quality and orders received within 48 hours) Excellent customer service is still a priority of the business and making it sure that the right product is delivered to the right location and time.

Outline
HEI supplies radio parts, fuses, transformers, computers, and electrical testing equipment Products were offered for sale through a catalogue which are mailed to customers HEI announced to start an Internet-based division.

Mr. Gonzales believes that there are many operations decisions that need to be identified and addressed in order to sustain competitiveness (high quality and orders received within 48 hours) Excellent customer service is still a priority of the business and making it sure that the right product is delivered to the right location and time.

G. Answers to Discussion or Guide Questions:

1. Explain why operations management is critical to the success of a business. Why would developing an Internet-based business require different operations consideration for HEI? Is George Gonzales correct in his assessment that this would not be business as usual?

1. Answer
Operations Management is critical because it determines the quality of the product and the delivery performance of the product. Operations considerations would occur for HEI with Internet division for several reasons. (pertains to the effect on operations or transformation process) 1. They would need some procedure for processing the orders from the Internet. The catalogue area probably takes orders over the phone and fax and enters the information into the computer for delivery. 2. The addition of the Internet division increases the customer base. This would change their demand. So now they have to adjust forecasts and production plans accordingly. 3. Orders may be received from abroad. So they would then have to deal with tariffs, duties and customs. Yes, Charles is correct that this would not be business as usual. Starting an internet based business is a complicated procedure

2. Recall that HEI wishes to continue its reputation of high quality and service. Identify key operations management decisions that need to be considered. How different will these decisions be for the Internet business?

2. Answer
Operations Management Decisions 1. Decision making will rely on qualitative forecasting techniques for the demand. The high level of service will be more difficult to deal with. They have built a reputation on delivering most items within 48 hours of the order. This will be more difficult since demand will change once the Internet division is added on. Demand will increase, but by how much? Forecasting can no longer rely on past demand since it is not known for this division. Quantitative technique will not work. 2. HEI need to be prepared by having excess capacity. 3. HEI should also increase their inventory levels before the new division is brought on line.

Other considerations: Hiring of sales and delivery personnel, installation of software and facilities. Outline Answer: 1. - OM is critical bec. it determines the quality of the product and its delivery performance to customer

- There are operations considerations with the internet division for several reasons (pertains to transformation process) 1. Procedure for processing the orders from the internet. 2. Addition of internet division requires management of the customer base. This would change the demand. Need adjustment in the forecast and production plans accordingly. 3. Orders may be received from abroad. Need to deal with tariffs, duties, customs and other consideration in supply chain management. 4. Hiring of sales and delivery personnel 5. Installation of softwares and facilities - Yes, its not be business as usual. Starting an internet based business is a complicated procedure.

1. OM Decisions. 1. Decision Making - demand will increase. Forecasting can no longer rely on past demand - initially quantitative technique will not work - things to be decided ( 2. Capacity Planning - HEI need to be prepared by having excess capacity - capacity to handle transactions and to handle inventory 3. Inventory Management - HEI should increase their inventory levels

H. Conclusion: Based on the key operations decision that have to be presented to the board of HEI in consideration of the internet based purchasing or transaction 1. Decision making will rely on qualitative forecasting techniques for the demand 2. Determination of capacity 3. Increase of inventory level before initiating the new system Outline Answer: The key operations decision that have to be presented to the board of HEI related to the internet based division are: 1. Decision making will rely on qualitative forecasting techniques for the demand 2. Determination of capacity 3. Increase of inventory level before initiating the new system

I. Recommendations and Plan of Action: Mr. Gonzales should present first to the board of HEI the operations management decision and show the serious impact. This will help HEI to prepare the resources (personnel and products) for the expected increase of demands, customers and inventory HEI should conduct market research on the preference of customers in online purchasing

H. Alternative Courses of Action: Mr. Gonzales to postpone the plan and conduct market research first. Mr. Gonzales will recommend to abolish the plan if the HEI wants to be conservative and stay with the traditional procedure