Operation Management


(Instructors’ name)



Operation Management

Question 1a: using examples discuss customer influence on performance objectives in operations and explain how different competitive factors imply different performance objectives.

Of all the influences on an organization’s priorities offers to its objectives of performance, the most significant and immediate are its customers. Operations in any organization seek to satisfy and meet the needs of the customers through the development of the organization’s five performance objectives. For instance, if customers specifically value products and services that cost less, the operation will impose more emphasis in its performance of cost. On the other hand, if they insist on products and services that are free of error, then an organization will focus more on its performance of quality. An emphasis of customers on rapid delivery will make speed essential with the organizations quality, while an emphasis from customers on delivery that is reliable will make dependability an essential operation to a company. The factors that define the requirements of a customer are what are referred to as competitive factors. How well a company meets the requirements of its customers is depended on how well its functions of operation excel at the performance objectives, which also determine the competitive factors (Pycraft, 2000).

Question 1b: using examples explain what is meant by ‘operations strategy’ and how it differs from operations management.

Operations strategy is a term used to refer to the business strategies in operations to make them efficient, successful and competitive. This term is different from operations management in that management of operation is used to mean the processes, tactics, and strategies a firm uses to make sure that its operations run smoothly (Chase et al., 2001).

Questions 2a: using examples discuss the application of inventory management tools in operations management.

Inventory management utilizes network definition information and other tools like local configuration databases, vital product data, and in other cases discovery applications for the purposes of arriving at inventory data and information. There are numerous ways these tools can be utilized in operations management to make processes efficient and effective. There is also a number of inventory management tools used in management operations. Some of these include VTAM and Net View, which are responsible for maintaining those linkages that are necessary to physical assets, whether they are within the system or out of the level of the server on the network. Another tool commonly used in operation management is centralized databases, which are used to store all the assets of an organization and their related information. The tool offers the user browsing and editing capability through a front end that is driven by an online menu, and it offers the user security access that is restricted. Network configuration application is another inventory tool that is used for moving stand- alone databases for inventory control to format that are based on the host. These are just a few examples of the available inventory management tools useful in operations management (Piasecki, 2003).

Question 2b: explain what vendor Management Inventory means and discuss fully how the application of VMI can help in reduction of demand implication.

Vendor managed inventory is a term used to mean a set of business models which are used by companies to derive information from their customers about a certain product after which the supplier assumes the full responsibility for maintaining an agreed material inventory, usually at the consumption location of the client. The vendor managed inventory makes the chances lesser for a business to become out of stock unintentionally, and at the same time decreases the available inventory in the business’ supply chain (Franke, 2010). Additionally, the supplier or the vendor representatives in the company benefit the supplier by making sure that the product or service is appropriately displayed and the sales staffs are familiar with the characteristics and features of the product, all while helping in the organization and cleaning of the product line in the business. It has been indicated that the key to making this inventory work is through shared risk. In certain cases when the inventory fails to sell, the supplier or the vendor can repurchase the product from the retailer or the customer. In some other cases, the product might be with the retailer but the ownership is never complete until purchases happen (Tempelmeier, 2006).

Question 3a: discuss the role of 4PL companies in supply chain operations. Critically examine how they differ from 3PL companies.

A 4PL can be defined as an integrator that uses its own technical expertise and capabilities in human resource, and technology solutions to leverage those of other companies, like providers of logistics that are third- party, so as to manage and design supply chains for their clients.4PLs have evolved to become alternatives for outsourcing in business process. These service providers make it possible for firms to manage a crucial part of their supply chain by offering them integration and visibility across a number of enterprises. These logistics service providers manage with three major elements of people, process and technology. Users of this service can emphasize on main competencies and better utilize and manage company resources and assets, as to personnel and inventory (Bauknight & Miller, 1999).

These are different from 3PL logistics service providers in that 4PLs are considered non- asset based, which is they are more of consultants as opposed to operators. They are also different from third party logistic providers because the 3PLs are considered to be experts in management of operations, transportation and warehousing services. In addition, using a 4Pl logistics services provider is different than using a 3PL one. The 4PL is a business process outsourcing provider. It will bring a new approach and value to the needs of the customer. The provider is neutral and has the ability to manage the process of logistics, regardless of the kind of forwarders, carriers and warehouses are utilized (JSI Logistics, n.d).

Question 3b: using examples discuss the factors for success and failure in outsourcing in the manufacturing and the service sector operations to Asia.

Asia to Us is considered the dominant lane or path of trade. One of the more complex and troublesome issues in logistics is Asia’s inbound supply chain. The question of how this critical supply chain can be managed and how the suppliers who are miles away can be managed is a challenge that has been limiting success of outsourcing. Managing this essential part of the supply chain can consume a lot of time and can be frustrating. Changing and expending orders, shipping dates of vendors, giving directions to the 3PLs and to consolidators as to the requirements of delivery are just some of the issues that can affect the success or failure of outsourcing processes. Suppliers from Asia often seek inexpensive rates of freight without necessarily coming into terms with the supply chain, as well as, the time demands of the purchasers of order – to- delivery. This is usually a challenge for most companies in the US with such complex, critical and dynamic part of their business processes. The difference in time limits communication through emails, brief calls, and faxes made at night made by either one of the parties, and this can lead to failure of outsourcing process. However, pulling of inventory, management of suppliers and purchase orders, management of forwarders of freight and ocean carriers of 3PL can proof to beneficial in enhancing the success of outsourcing processes (Bauknight & Miller, 1999).

Question 4: using examples discuss the recent trends in operations and supply chain management.

Supply chain management is continually changing and there usually are new issues and trends that must be of interest to businesses. There are a number of trends that constantly undergo changes, and, as a result, cause essential effects, and alter the design and performance of the supply chain. The main ones include planning of demand, increase in price pressures and competition, globalization, outsourcing, product life cycles that are more complex and shorter, and closer collaboration and integration with suppliers (Pilkington & Meredith, 2009). Manufacturing, developing and selling products can be complex and difficult even to the best-accomplished businesses in the best of the times. As the business drivers of a company change, as well as, processes in business, the general approach to the management of the supply chain in companies must also change. This is because a supply chain that is poor in functioning and one that is inefficient can jeopardize the performance and success of a company in long- term (Hitachi Consulting, 2009).

Part 2

Question 1a: discuss how products and services are differentiated in operations management. Using examples discuss the use of batch processing and continuous processing in operations.

In operations management, the main difference between services and goods is based on their tangibility nature. As a result, if there is a characteristic of tangibility in manufacturing, then the outcome becomes a good or a product. However, when the outcome of a business process has an intangible aspect, then it is said to be a service. Tangibility of the outcome of a business process is the main way in which businesses differentiate between a good and a service. In production, there are two methods of production used; the continuous production and the batch production processes. The continuous manufacturing process is the process used to produce, manufacture, and process raw materials continuously, without interruption. On the other hand, batch production involves interruptions. There are a number of uses for each. For example, continuous manufacturing is used in cases where the products are needed in bulk, or in large amounts, or when the demand for a product is insatiable. Batch production, however, is used only when the market for a certain product is low, and when the products needed are lesser (Wilson, 1995).

Questions 2a: using examples discus the applications of mass customization and postponement in supply chain management

The objectives of mass customization are to produce goods that are customized at a cheaper cost. Postponement strategies, on the other hand, emphasizes on delaying processes of customization as near to the consumers as possible. The extent to which postponement and customization processes of products are rooted in the modulation of the architecture of the product design. The customization of products can take place either depended on a platform that is common with amore options or depended on mixing and matching and combining modules to attain a wide variety of product attributes. It also needs a strategy in supply chain to facilitate logistics, assembly and outsourcing decisions. For companies to satisfy the increasing demands of customers for product offerings that are more diverse, companies are revising their structures of supply chains to allow mass customization. These new structures usually involve the delaying of the product delivery until after the orders of the customers arrive, known as time postponement; or delaying of the product differentiation until later stages in production called form postponement (Su, Chang. & Ferguson, 2005).

Question 2b: explain what is meant by factory gate pricing and discuss its application in the retail sector

The term factory gate pricing can be used to mean a basic price that uses the gate of the factory as the point of pricing that is the product’s price made available at the factory, exclusive of any delivery or transport that is charged or billed separately. One of the major applications of the concept is within the grocery sector. Starting in 2001, it is one of the series of initiatives in the past few years that have resulted to the transformation in the operation and organization of the distribution of groceries in most markets. The focus of the concept and other related concepts has led to the increase in transport efficiency, and a further reduction in costs. Some examples of the strategies involved include improvement in transport scheduling and consolidation of loads (Potter, Mason & Lalwani, 2006).

Question 4a: discuss the reasons for imbalance between the rates of supply and demand at different points in any operation. Using examples discuss how bullwhip effect can be reduced in supply chains.

Inventory only exists because of the difference that occurs between the rate or timing of demand and supply. Therefore, when the rate of supply increases and surpasses the rate of demand, increases in inventory are seen. Inventory decreases with an increase in demand and decrease in supply. However, imbalances do occur between the rates of demand and rates of supply at different points in business operations. Some of the reasons that affect those balance by affecting supply include the number of suppliers, costs of production, the production technology used, the prices of associated goods, and the expectations of the firm about prices in the future. Factors that affect demand can also cause imbalances in the rates of demand and supply. Some of the factors might include income, preferences and tastes, number of possible customers, prices of associated goods and the expectations of the customers of the prices in future (Slack, Johnston & Chambers, 2007).

If these imbalances are not controlled then the bullwhip effect results, this is a phenomenon that arises in the management of supply chains when customers overbuy, products and services, regardless of the needs and wants they have of the good and services. This can be reduced through better knowledge and information either through forecasts or from the supply chain. Another way one can reduce the effect is through the elimination or reduction of the delays that occur in the supply chain (Cannella & Ciancimino, 2010). This ensures that customers are well supplied with goods and services such that they do not feel the need to overbuy. Other solutions include allocation of demand between customers based on past purchases and orders, and maintenance of stable prices for goods and services. These solutions ensure that customers do not feel that the supply of the products and goods are threatened, and, as a result, they will not need to buy extra products for bad days (Lee, 2010).


Bauknight, D. & Miller, J. (1999). Fourth Party Logistics: The Evolution of Supply Chain Outsourcing. CALM Supply Chain & Logistics Journal.

Cannella S. & Ciancimino E. (2010). On the bullwhip avoidance phase: supply chain collaboration and order smoothing. International Journal of Production Research, 48 (22), 6739-6776.

Chase, R. F. et al. (2001) Operations Management for Competitive Advantage. New York: Wiley.

Franke, P. D. (2010). Vendor-Managed Inventory for High Value Parts. Results from a survey among leading international manufacturing firms.

Hitachi Consulting. (2009). Six trends changing supply chain management today. Choosing the optimal strategy for your business. Hitachi Consulting Corporation.

JSI Logistics. (n.d). 4P – A business process outsourcing option for international supply chain management. JSI.

Lee, H.L. (2010). Taming the bullwhip. Journal of Supply Chain Management 46 (1), pp. 7–7.

Piasecki, D. J. (2003). Inventory accuracy: people, processes & technology. New York: OPS Publishing.

Pilkington, A. & Meredith, J. (2009). The Evolution of the Intellectual Structure of Operations Management. Journal of Operations Management, 27(3), 185-202.

Potter, A., Mason, R. & Lalwani, C. (2006). Analysis of Factory Gate Pricing in the UK Grocery Supply Chain. International Journal of Retail and Distribution Management.

Pycraft, M. (2000). Operations management. Cape Town: Pearson South Africa.

Slack, N., Johnston, R. & Chambers, S. (2007). Operations management. New York: Prentice Hall.

Su, J., Chang, Y. & Ferguson, M. (2005). Evaluation of postponement structures to accommodate mass customization. Journal of Operations Management 23 (3-4), 305- 318.

Tempelmeier, H. (2006). Inventory Management in Supply Networks—Problems, Models, Solutions. Norderstedt: Books on Demand.

Wilson, M. (1995). An historical perspective on Operations Management. Production and Inventory Management Journal.

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