23rd Batch EV Chapter 01 Introduction EV233072006

Chapter 01: Introduction

Question 01: What are operations and operations management? Give some typical examples of
operations.
Question 02: Define supply chain management?
Question 03: What are the new trends of operations management? Or Today's operation is
associated too many recent trends. What are those trends?
Question 04: Explain the functions of operations management.
Question 05: Why is supply chain important for an organization?
Question 06: Briefly explain significant role of SCM in business today.
Question 07: As a business graduate, why is it necessary to study operations management? Or
briefly elucidate the importance of supply chain.
Question 08: How operations management differs from supply chain management?
Question 09: "The objective of supply chain management is to maximize the supply chain
profitability rather than individual profitability" -Justify the statement.
Question 10: Distinguish between production of goods and delivery of services.
Question 11: Distinguish between operations and supply chain management.
Question 12: Compare between manufacturing operations and service operations.
Question 13: Narrate the ethical issues in operations management.
Question 14: What are the different measures of productivity? State the factors affecting
productivity.
Question 15: Explain two basic types of aggregate planning strategies.
Question 16: State the different drivers of supply chain.
Question 17: State the relationship between productivity and profitability.
Mathematical Problem 01: You are given below the data details.
i) Cost data:
Regular time labor cost per hour- Tk 30, Overtime labor cost per hour Tk 44, hiring cost per
employee- Tk 1,000, firing cost per employee- TK. 1,500, inventory holding cost per unit per period-
Tk. 10, shortage cost per unit per period- Tk. 15, material cost per unit- TK. 60.
ii) Capacity data:
Beginning workforces- 31, beginning inventories- 4,800 units, production standards per units 0.65
hours, regular time available per period - 180 hours, overtime available per period- 20 hours.
iii) Demand Data:
Units are for November, December, January, February, March, April and May, 2017 are 6000, 12000,
4000, 15000, 7000, 10000 and 2800 units respectively. Develop the aggregate plans and evaluate the
effectiveness of the derived plans.
Mathematical Problem 02: A company produces small motors at a processing cost of $40 per unit. The
company produces 120 motors per day and average 80 percent good quality motors, resulting 20 percent
motors are defective, 50 percent of which can be reworked prior to shipping at an extra cost of $15 for
each motor rework.
i. What is its current productivity?
ii. If processing cost is reduced to $35 and rework cost to $10, what is the impact on productivity?
iii. If good quality motors are increased to 90 percent and original cost and conditions prevails, what is
the productivity?
iv. What is the productivity when good quality motors are increased to 90 percent and processing cost
reduced to $30 and rework cost is reduced to $10.

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23rd Batch EV Chapter 01 Introduction EV233072006
Chapter 01: Introduction
Question 01: What are operations and operations management? Give some typical examples of
operations.
Solution: Operations refer to the processes and activities involved in transforming inputs (such as
materials, labor, and capital) into outputs (goods and services) to fulfill customer demands.
Operations management involves planning, organizing, and controlling these processes to ensure
efficiency and effectiveness.
Examples of operations include manufacturing processes in factories, food production in kitchens,
package delivery services, healthcare services in hospitals, and customer service in call centers.

Question 02: Define supply chain management?

Solution: Supply chain management (SCM) involves the coordination of all activities involved in
the sourcing, procurement, conversion, and logistics management of goods and services, from the
point of origin to the point of consumption, to meet customer requirements effectively.
Examples include:
Procurement: Sourcing raw materials from suppliers.
Production: Manufacturing goods using the sourced materials.
Logistics: Transporting finished products to distribution centers.
Inventory management: Ensuring optimal stock levels to meet demand.
Distribution: Delivering products to customers.
Reverse logistics: Managing product returns and recycling.

Overall, SCM aims to optimize efficiency, minimize costs, and enhance customer satisfaction
throughout the entire supply chain process.

Question 03: What are the new trends of operations management? Or Today's operation is
associated too many recent trends. What are those trends?

Solution: Some current trends in operations management include:

1. Sustainability and green operations.
2. Digitalization and Industry 4.0 technologies.
3. Lean and agile methodologies.
4. Supply chain resilience and risk management.
5. Omni-channel distribution and fulfillment.
6. Data analytics and predictive maintenance.
7. Automation and robotics.
8. Circular economy principles.
9. Outsourcing and globalization.
10. Customer-centric operations.

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Question 04: Explain the functions of operations management.
Planning: Setting objectives and determining the best approach to achieve them.
Organizing: Structuring resources and tasks effectively to meet goals.
Directing: Guiding personnel and resources towards achieving objectives.
Controlling: Monitoring performance and making adjustments as needed to ensure efficiency and
effectiveness.

Question 05: Why is supply chain important for an organization?

Solution: The supply chain is crucial for organizations because it ensures the efficient flow of goods
and services from suppliers to customers. For example, consider a company like Apple. Its supply
chain management ensures that components from various suppliers worldwide are delivered
timely and efficiently, allowing Apple to produce and deliver its products to customers globally,
maintaining its competitive edge in the market.

Question 06: Briefly explain significant role of SCM in business today.

Solution: Supply Chain Management (SCM) plays a crucial role in businesses today by optimizing
the flow of goods and services from the point of origin to the point of consumption. Supply chain
management (SCM) involves the coordination of all activities involved in the sourcing,
procurement, conversion, and logistics management of goods and services, from the point of origin
to the point of consumption, to meet customer requirements effectively.

For example, consider a multinational retail company like Walmart. Walmart's success heavily
relies on its SCM practices. By effectively managing its supply chain, Walmart ensures that products
are available at the right place, at the right time, and at the right price. This involves coordinating
with suppliers to maintain optimal inventory levels, streamlining distribution channels, and
utilizing technology to track and manage the movement of goods. As a result, Walmart can offer
competitive prices to its customers while maintaining high levels of product availability and quality.

Question 07: As a business graduate, why is it necessary to study operations management? Or

briefly elucidate the importance of supply chain.
Solution: As a business graduate, studying operations management is crucial because it provides
insights into optimizing processes, improving efficiency, and reducing costs within an organization.
Understanding supply chain management is equally important as it ensures the smooth flow of
goods and services from production to consumption, impacting a company's competitiveness and
overall success in the market.

Question 08: How operations management differs from supply chain management?
Solution: Operations management focuses on the internal processes and activities within an
organization to maximize efficiency and productivity. Supply chain management, on the other
hand, deals with the coordination of activities involved in sourcing, producing, and delivering
goods or services to customers, extending beyond the boundaries of a single organization to
encompass suppliers and partners.

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Question 09: "The objective of supply chain management is to maximize the supply chain
profitability rather than individual profitability" -Justify the statement.
Solution: Supply chain management aims to optimize the entire flow of goods and services from
raw material to end consumer, focusing on efficiency and cost reduction across the entire chain. By
maximizing overall supply chain profitability, companies can achieve economies of scale, reduce
waste, improve customer satisfaction, and enhance competitiveness, benefiting all entities involved
in the supply chain rather than just individual components.

Question 10: Distinguish between production of goods and delivery of services.

Solution:
Aspect Production of Goods Delivery of Services
Tangibility Tangible products Intangible experiences
Output Physical goods Service experiences
Inventory Tangible inventory No physical inventory
Customer interaction Limited direct contact Often direct interaction
Customization Standardized products Often customized
Quality assessment Product specifications Subjective evaluations
Production process Manufacturing processes Service provision processes
Distribution Physical distribution Direct provision to customer
Time factor Lead time is crucial Time of service delivery is crucial
Labor requirements May involve more manual labor May involve more interpersonal skills

Question 11: Distinguish between operations and supply chain management.

Solution:
Aspect Operations Management Supply Chain Management
Focus Internal processes External processes
Scope Narrow Broad
Objectives Efficiency Efficiency and effectiveness
Activities Production, Quality control, Inventory Sourcing, Procurement, Logistics,
management Distribution
Time Horizon Short-term Long-term
Coordination Within organization Across organizations

Question 12: Compare between manufacturing operations and service operations.

Solution:
Aspect Manufacturing Operations Service Operations
Output Tangible goods Intangible services
Customer Interaction Limited interaction High interaction
Inventory Management Often involves inventory Minimal to no inventory
Production Process Typically involves assembly line or Often customized or tailored to
batch production individual needs
Quality Control Focuses on product quality Focuses on service quality
Lead Time Longer lead times Shorter lead times
Capacity Utilization Equipment and labor intensive Relies more on skilled labor
Demand Forecasting Can be based on historical data and Often relies on real-time data and
trends customer demand

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Question 13: Narrate the ethical issues in operations management.
Solution:
Ethical issues in operations management include:
Labor practices: Ensuring fair wages, safe working conditions, and respecting labor rights.
Environmental impact: Minimizing pollution, resource depletion, and waste generation.
Supply chain transparency: Addressing issues like child labor, forced labor, and unfair trade
practices.
Product quality and safety: Providing accurate information to consumers and ensuring product
safety.
Corporate social responsibility: Balancing profit motives with social and environmental
responsibilities.
Stakeholder relations: Maintaining fairness and transparency in dealings with suppliers,
customers, and communities.
Conflict of interest: Avoiding situations where personal interests’ conflict with organizational
goals.
Data privacy and security: Protecting sensitive information and respecting customer privacy rights.
Fair competition: Abiding by antitrust laws and ethical standards to ensure fair market practices.
Decision-making integrity: Making decisions based on honesty, integrity, and consideration of
broader impacts.

Question 14: What are the different measures of productivity? State the factors affecting
productivity.
Solution:
Different measures of productivity include:
1. Output per unit of input (e.g., labor hours, capital)
2. Total factor productivity (output compared to all inputs)
3. Partial productivity (output compared to a single input, like labor or capital)

Factors affecting productivity:

1. Technology and innovation
2. Workforce skills and training
3. Capital investment
4. Process efficiency
5. Management practices
6. External factors (e.g., government policies, market conditions)

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23rd Batch EV Chapter 01 Introduction EV233072006
Question 15: Explain two basic types of aggregate planning strategies.
Solution:
Two basic types of aggregate planning strategies are:
Chase Strategy: This strategy involves adjusting the workforce levels or production capacity to
match the demand.
For example, in a seasonal business-like ice cream production, the company may hire more workers
during summer months when demand is high and reduce the workforce during the off-season.
Level Strategy: This strategy maintains a steady workforce and production level regardless of
fluctuations in demand.
For instance, a furniture manufacturer may produce the same amount of furniture each month,
storing excess inventory during periods of low demand to meet higher demand later without
changing the production rate.

Question 16: State the different drivers of supply chain.

Solution:
The different drivers of the supply chain include:
Demand: Customer needs and preferences that determine the quantity and type of products or
services required.
Supply: Availability of resources and raw materials necessary for production.
Inventory: Management of stock levels to meet demand while minimizing costs.
Lead Time: Time taken for orders to be fulfilled from placement to delivery.
Transportation: Efficient movement of goods from suppliers to customers.
Information: Sharing of data and communication across the supply chain to coordinate activities
and make informed decisions.
Location: Strategic positioning of facilities to optimize production, distribution, and delivery
processes.
Pricing: Setting competitive prices that reflect market demand and supply dynamics.

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23rd Batch EV Chapter 01 Introduction EV233072006
Question 17: State the relationship between productivity and profitability.
Solution:
Productivity and profitability are closely linked in operations and supply chain management.
Higher productivity often leads to increased profitability because it means producing more output
with the same input or producing the same output with fewer inputs, thereby reducing costs.
For example, a manufacturing company that improves its production processes to produce more
units in the same amount of time will likely experience higher profits due to reduce per-unit
production costs.
Productivity Profitability
High productivity leads to lower costs per unit, Improved productivity allows for more
increasing profit margins. efficient resource utilization, leading to higher
profitability.
Enhanced productivity results in faster delivery Increased profitability can be achieved by
times, satisfying customers and potentially optimizing processes to enhance productivity
increasing sales. and reduce operational expenses.
Effective utilization of resources through Higher productivity enables companies to
productivity gains can create competitive generate more output with the same
advantages, boosting market share and resources, contributing to increased
profitability. profitability.

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23rd Batch EV Chapter 01 Introduction EV233072006
Mathematical Problem 01:
You are given below the data details.
i) Cost data:
Regular time labor cost per hour = Tk 30
Overtime labor cost per hour = Tk 44
hiring cost per employee = Tk 1,000
firing cost per employee = TK. 1,500
inventory holding cost per unit per period = Tk. 10
shortage cost per unit per period = Tk. 15,
material cost per unit = TK. 60.
ii) Capacity data:
Beginning workforces = 31,
beginning inventories = 4,800 units,
production standards per units 0.65 hours,
regular time available per period = 180 hours,
overtime available per period = 20 hours.
iii) Demand Data:
Units are for November, December, January, February, March, April and May 2017 are 6000, 12000,
4000, 15000, 7000, 10000 and 2800 units respectively.
Develop the aggregate plans and evaluate the effectiveness of the derived plans.

Let's start by calculating the regular and overtime production hours needed for each period based on
demand and capacity constraints:

Regular Production Hours Needed (RP):

Demand × Production standards per unit
RP =
Regular time available per period
6000 × 0.65
𝑅𝑃𝑁𝑜𝑣 = ≈ 21.67
180

Overtime Production Hours Needed (OP):

If demand exceeds regular capacity:
𝐷𝑒𝑚𝑎𝑛𝑑 − (𝑅𝑃 × 𝑅𝑒𝑔𝑢𝑙𝑎𝑟 𝑡𝑖𝑚𝑒 𝑎𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑝𝑒𝑟 𝑝𝑒𝑟𝑖𝑜𝑑)
𝑂𝑃 =
𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑𝑠 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
6000 − 21.67 × 180
𝑂𝑃𝑁𝑜𝑣 = ≈ 85.38
0.65

Similarly, we calculate for other months.

Labor Costs:
Regular Labor Cost (RLC) = Regular time labor cost per hour × Regular Production Hours
Overtime Labor Cost (OLC) = Overtime labor cost per hour × Overtime Production Hours
Hiring and Firing Costs:
Determine if the workforce needs adjustment based on demand and capacity.
Calculate hiring and firing costs accordingly.
Inventory Holding and Shortage Costs:

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23rd Batch EV Chapter 01 Introduction EV233072006
Calculate ending inventory levels for each period.
Calculate holding costs and shortage costs based on inventory levels.
Total Cost:
Sum up all costs (labor, hiring/firing, inventory holding, and shortage) for each period to get the total
cost for each plan.
Finally, compare the total costs of different plans to evaluate their effectiveness.

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Mathematical Problem 02:
A company produces small motors at a processing cost of $40 per unit. The company produces 120
motors per day and average 80 percent good quality motors, resulting 20 percent motors are defective,
50 percent of which can be reworked prior to shipping at an extra cost of $15 for each motor rework.
i. What is its current productivity?
ii. If processing cost is reduced to $35 and rework cost to $10, what is the impact on productivity?
iii. If good quality motors are increased to 90 percent and original cost and conditions prevails, what is
the productivity?
iv. What is the productivity when good quality motors are increased to 90 percent and processing cost
reduced to $30 and rework cost is reduced to $10.
Given:
Processing cost per unit: $40
Good quality motors produced per day: 120 * 80% = 96 motors
Defective motors produced per day: 120 * 20% = 24 motors
Reworked defective motors: 50% of 24 = 12 motors
Rework cost per motor: $15
i. Current Productivity:
𝐺𝑜𝑜𝑑 𝑞𝑢𝑎𝑙𝑖𝑡𝑦 𝑚𝑜𝑡𝑜𝑟𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 =
𝑇𝑜𝑡𝑎𝑙 𝑚𝑜𝑡𝑜𝑟𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑
96
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 =
120
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 = 0.8
ii. Impact of Reduced Costs:
With reduced processing cost and rework cost:
New processing cost per unit: $35 New rework cost per motor: $10
Calculating Productivity:
Total motors produced=Good quality motors+Defective Motors−Reworked motors
Total motors produced = 96 + (24 − 12) = 108
96
New productivity= 108
iii. Increased Good Quality Motors (Original Costs):
Given:
Good quality motors increased to 90%
Calculating Productivity:
Good quality motors produced=120×90%=108
Total motors produced=108+24=132
108
Productivity= 132
iv. Increased Good Quality Motors and Reduced Costs:
Good quality motors increased to 90%
Reduced processing cost: $30
Reduced rework cost: $10
Calculating Productivity:
Good quality motors produced=120×90%=108
Total motors produced=108+24=132
108
Productivity= 132

Now, let's calculate the productivities for each scenario.

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Mathematical Problem 03:
A company that makes shopping carts for supermarkets and other stores recently purchased some new
equipment that reduces the labor content of the jobs needed to produce the shopping carts. Prior to
buying the new equipment, the company used five workers, who produced an average of 80 carats per
hour. Workers receive $10 per hour and machine cost was $40 per hour. With the new equipment, it was
possible to transfer one of the workers to another department, and equipment cost increased by $10
per hour while output increased by four carts per hour.

a) Compute labor productivity under each system. Use carts per worker per hour as the measure of
labor productivity.

b) Compute the multifactor productivity under each system. Use carts per dollar cost (labor plus
equipment) as the measure.

c) Comment on the changes in productivity according to the two measures, and on which one you
believe is the more pertinent for this situation.

Mathematical Problem 04:

A manager checked production records and found that a worker produced 160 units while working 40
hours. In the previous week, the same worker produced 138 units while working 36 hours. Did the
worker’s productivity increase? Explain.

Mathematical Problem 05:

Posey Ceramics makes ceramic vases for a chain of department stores. The output and cost figures over
the past four weeks are shown here. Labor costs $10 an hour, and materials are $4 a pound. Calculate
the (a) labor productivity (in hrs.), (b) material productivity (in lbs.), and (c) multifactor productivity
for each week. Comment on the results.

Mathematical Problem 06:

A company produces small motors at a processing cost of $30 per unit. The company produces 100
motors per day and averages 80% good quality motors, resulting 20% motors are defective, 50% of
which can be reworked prior to shipping at an extra cost of $12 for each motor rework.
1. What is its current productivity?
2. If processing cost reduced to $26 and rework cost is reduced to $10 what is the impact on
productivity?
3. If good quality motors are increased to 90%, and original cost and conditions prevails, what is the
productivity?
4. What is the productivity when good quality motors are increased to 90% and processing cost
reduced to $26 and rework cost is reduced to $10?
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Mathematical Problem 07:

Student tuition at Boehring University is $150 per semester credit hour. The state supplements school
revenue by $100 per semester credit hour. Average class size for a typical 3-credit course is 50 students.
Labor costs are $4,000 per class, materials costs are $20 per student per class, and overhead costs are
$25,000 per class.
1. What is the multifactor productivity ratio for this course process?
2. If instructors work an average of 14 hours per week for 16 weeks for each 3-credit class of 50
students, what is the labor productivity ratio?

Mathematical Problem 08:

The manager of a crew that installs carpeting has tracked the crew’s output over the past several weeks,
obtain these figures:
Week Crew Size Yards Installed
1 4 960
2 3 702
3 4 968
4 2 500
5 3 696
6 2 500
Compute the labor productivity for each of the weeks. On the basis of your calculations, what can you
conclude about crew size and productivity?

Mathematical Problem 09:

Compute the multifactor productivity measure for each of the weeks shown. What do the productivity
figures suggests? Assume 40-hour weeks and an hourly wage of $12. Overhead is 1.5times weekly labor
cost. Material cost is $6 per pound. Standard price is $140 per unit.

Week Output (units) Workers Material (lbs)

1 300 6 45
2 338 7 46
3 322 7 46
4 354 8 48

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Mathematical Problem 10: Over the past year, a small restaurant has average 224 customers served
each day. Hours are 6.00 am to 2.00 pm. and three employees make up the total staff. What is the labor
productivity? On Tuesday of this week, 264 customers served by full staff. On Wednesday, 232
customers were served with two employees working full days and one working out two hours. What is
the labor productivity for each day?

To calculate labor productivity, we need to determine the number of customers served per employee-
hour.
First, let's calculate the total number of employee-hours worked:
Total Employee-Hours = Number of Employees × Hours Open
For the small restaurant:
Total Employee-Hours = 3 employees × (2:00 PM - 6:00 AM)
Total Employee-Hours = 3 employees × 8 hours
Total Employee-Hours = 24 employee-hours

Now, let's calculate labor productivity for each day:

Tuesday:
Customers Served = 264
Labor Productivity = Customers Served/Total Employee-Hours = 264/ 24 = 11 customers per employee-
hour
Wednesday: Customers Served = 232 Total Employee-Hours = (2 employees × 8 hours) + (1 employee ×
6 hours) = 16 hours + 6 hours = 22 employee-hours Labor Productivity = Customers Served / Total
Employee-Hours = 232 / 22 ≈ 10.55 customers per employee-hour
So, the labor productivity for Tuesday was 11 customers per employee-hour, and for Wednesday, it was
approximately 10.55 customers per employee-hour.

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Mathematical Problem 11: Compute multifactor productivity measure for each of the week's shown.
What do the productivity figures suggest? Assume 40-hour weeks and an hourly wage of Tk. 12.
Overhead is 1.5 times weekly labor cost. Material cost is Tk. 6 per pound.
Week Output (units) Workers Material (Ibs)
1 300 6 450
2 338 7 470
3 322 7 460
4 354 8 480

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