OM Assignment

1. Why forecasting techniques are essential for the operation manager?

Which type of forecasting approach is superior, qualitative or
quantitative? Give your arguments.
Forecasting is the art and science of predicting what will happen
in the future. Sometimes that is determined by a mathematical
method; sometimes it is based on the intuition of the operations
manager. Most forecasts and end decisions are a combination of
both.
#Importance of Forecasting:

Importance of forecasting involves the following key points:

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 Forecasting provides relevant and reliable information about the past and present events and
the likely future events. This is necessary for sound planning.
 It gives confidence to the managers for making important decisions.
 It is the basis for making planning premises, and.
 It keeps managers active and alert to face the challenges of future events and the changes in the
environment.

Strategic Importance of Forecasts

Operations managers have two tools at their disposal by which to

make decisions: actual data and forecasts. The importance of
forecasting cannot be underestimated. Take a product forecast and
the functions of human resources, capacity, and supply chain
management.
A systematic attempt to probe the future by inference from known
facts helps integrate all management planning so that unified
overall plans can be developed into which divisional and
departmental plans can be meshed. It enables a company to
commit its resources with greatest assurance to profit over the long
 term. By helping to identify future demand patterns, it facilitates
development of new products.

The workforce is based on demand. This includes hiring, training,

and lay-off of workers. If a large demand is suddenly thrust upon
the organization, training declines and the quality of the product
could suffer.

When the capacity cannot keep up to the demand, the result is

undependable delivery, loss of customers, and maybe loss of
market share. Yet, excess capacity can skyrocket costs.

Last minute shipping means high cost. Asking for parts last minute
can raise the cost. Most profit margins are slim, which means
either of those scenarios can wipe out a profit margin and have an
organization operating at cost -- or at a loss.

These scenarios are why forecasting is important to an

organization. Good operations managers learn how to forecast, to
trust the numbers, and to trust their instincts to make the right
decisions for their firm.

Quantitative research – aims to measure and quantify information,

using numerical and statistical analysis. Working from a set of
prescribed variables, it samples a broadly based target group to measure
opinions, attitudes, and behaviors, and then quantify the results.

Using tools like online surveys, longitudinal studies, interviews, and

systemic behavioral observations, researchers ask quantitative questions
of the sample group, incorporating terms like “how long, how many, and
how much.” The result is a broad set of data that can be analyzed and
applied to a larger population.
Qualitative research – looks at information that often describes
emotional and subjective responses using words, rather than numbers.
Delving into motivations, opinions, and rationales, qualitative research
attempts to explore the reasons for certain choices and behaviors. It uses
a more open-ended approach than quantitative surveys, favoring market
research focus groups, observations, or interviews in malls, schools, and
homes.

Qualitative research is generally used with smaller groups, but examines

its subjects in more depth. Each of the two different approaches has its
own proponents, in part because researchers tend to specialize in one
direction or the other. A full understanding of the benefits and
drawbacks of market research requires a closer look at each method.

Pros and Cons – Quantitative Research

Quantitative research has the advantage of surveying random samples

and providing statistical data that can be quickly assessed, then applied
to a general, broader group. It has the scientifically valid aspect of
producing repeatable data that can be trusted for forecasting and other
planning purposes.

On the other hand, original quantitative research is not always possible

due to its higher cost. It can be difficult or impossible to probe beyond
the initial surface answers in order to examine responses in more depth.
The goal of taking a broad, representative sampling of a population may
not be fully accurate because there is self-selection going on toward
those who are willing to respond, leading to a potential bias.

Pros and Cons – Qualitative Research

Using qualitative research leads to more in-depth insights into subjects’

motivations and thinking. It does not require surveying as large a
number of people, instead selecting smaller groups, who share some
qualities or characteristics. Using tools such as online focus groups, it is
significantly less costly than quantitative research.
It does not set out to confirm previously held beliefs, but seeks to
uncover actual motivations and perceptions. It can reveal hidden trends,
providing valuable insight when determining product development and
marketing approaches.

Drawbacks of qualitative research include the basic fact that it is, in fact,
not quantitative—in other words, it does not give a specific measure of
the numbers of people who feel or choose one way or another. By the
same token, it does not allow for extrapolating results and applying them
to a broad public audience.

Both qualitative and Quantitative methods are often complemented each

other to arrive a better conclusion, through each of them have their own
limitation. There is no globally best or accurate forecasting methods or
techniques. As the same time, there is no forecasting techniques without
limitations or pitfalls. The extent may vary and a bit higher on
qualitative techniques than quantitative ones. There are also cases where
one better than the other. For example, in the absence of reliable
quantitative data and when we want to forecast technology, we mainly
rely on qualitative forecasting.

2. A computer repair service has a design capacity of 80 repairs per day.

Its effective capacity, however, is 64 repairs per day, and its actual
output is 62 repairs per day. The manager would like to increase the
number of repairs per day. Which of the following factors would you
recommend that the manager investigate: quality problems, absenteeism,
or scheduling and balancing? Explain your reasoning.

Given,
Design Capacity = 80 repairs per day
Effective Capacity = 64 repairs per day
Actual output = 62 repairs per day

Efficiency = Actual Output / Effective Capacity = 62 / 64 = 96.875%

Utilization = Actual Output / Design Capacity = 62 / 80 = 77.5%
I would recommend manager to investigate on scheduling and balancing
because effective capacity is the reason of the downfall. If he can solve
that then they can increase the number of repairs per day as their
efficiency is 96.875%.

3. What information does a decision maker need in order to perform an

expected-value analysis of a problem? What options are available to the
decision maker if the probabilities of the states of nature are unknown?
Can you think of a way you might use sensitivity analysis in such a
case?

A decision maker needs the following information in order to perform an

expected-value analysis of a problem:
1) Number of alternatives present in the analysis.
2) Number of states of nature for each of the alternatives.
3) The expected payoff for each of these states of nature for each
of the alternatives.
4) The probability of the each of the states of nature.

The options that are available to the decision maker if the probabilities
of the states of nature are unknown are:
– Maximin Criterion - pessimistic or conservative approach.
Choose the alternative with the best of the worst possible
payoff.
– Minimax Regret Criterion - pessimistic or conservative
approach.
Choose the alternative that has the least of worst regrets.
– Maximax Criterion - optimistic or aggressive approach.
Choose the alternative with the best possible payoff.
– Laplace
Choose the alternative that has the least of worst regrets.

Sensitivity analysis is a way to predict the outcome of a decision

given a certain range of variables. By creating a given set of
 variables, an analyst can determine how changes in one variable
affect the outcome. Both the target and input—or independent and
dependent—variables are fully analyzed when sensitivity analysis
is conducted. I don’t think we can use sensitivity analysis in this
case because sensitivity analysis is done in range and as we don’t
have it here, we can’t use it in this case.

4. As a manager, how would you deal with the possibility that customer
satisfaction does not always lead to customer retention? Explain.

As the name implies, customer satisfaction is essentially a representation

of how satisfied, or how happy your customer is with your product or
service. Customer satisfaction is the opinion of the customer, and as
such, is always reported in some way by the customers themselves.
Customer satisfaction deals with feelings, perceptions. There are
certainly arguments about whether a satisfied customer is sure of
returning there again; just because they’re happy with their current brand
doesn’t mean they won’t switch if a lower price is offered elsewhere.
The conclusion, then, is that ideally companies want customers who are
satisfied. A happy customer is more likely to recommend. A satisfied
customer is more likely to return. A return customer is more likely to
purchase additional items. A customer purchasing additional items with
which they’re satisfied is more likely to become brand-loyal. So, while
customer satisfaction doesn’t confirm customer retention, it can certainly
lead there.

I would make sure to remember that most customers who leave a

company are still leaving satisfied. I would also work on getting
customer feedback and separating it by level (influencer, decision
maker, and end user) to align with marketing needs. I would center my
efforts for improvement on the decision maker to work towards
achieving sustainable growth.
Client Retention Program Ideas
Customer Feedback Loop
Customer Loyalty Program
Corporate Social Responsibility Program

5. As a supermarket manager, how would you go about evaluating the

criticalness of an inventory shortage? Justify.

Criticalness in the context of supermarket inventory refers to the relative

importance of an inventory item. Supermarket managers need to balance
limited resources with the cost of holding stock inventory and the
marketing value of providing reasonable levels of customer service. To
do this they require a method that keeps track of inventory and
determines stocking and restocking policies based on how critical or
important an item is to the business and its clients. This is determined by
several factors, such as an item's shelf life, value to customers and
profitability margins.

As a supermarket manager, I will evaluate the criticalness of an

inventory shortage in the following ways:

 Calculate the ideal number of items to be kept in stock based on

annual demand, order cost and the cost of keeping them in stock.
 Take into account the product delivery rate and use rate.
 Calculate the number of alternatives available in the same product
category in store.
 The ABC inventory model control method can be used to calculate
the criticalness of an inventory shortage.
6. Explain why each of these is critical for a successful supply chain
operation:
a. Integrated technology
Integrated technology produces real-time data and facilitates different
business units to access and use the data simultaneously. These real-time
data help business units in different ways such as controlling cost,
measuring and monitoring quality and productivity, analyzing and
responding to problems quickly, improving supply chain operations and
many more.
b. Information sharing
Information sharing helps supply chain operations become successful
and avoid potential problems. for example, if demand for goods
increases/decreases unexpectedly and such information is shared among
the concern units in supply chain, the responsible units will be able to
initiate necessary steps to tackle the situation effectively which will
otherwise not be possible if critical information regarding demand is not
shared timely.
c. Trust among trading partners
Trust among trading partners grows confidence in each-other and
helps to establish long-run relationship which ultimately helps manage
the supply chain operations smoothly. Trust among trading partners also
help them to work for mutual benefits and interests.
d. Real-time information availability
 It helps to increase supply chain visibility and improve response time
significantly since all units and trading partners can simultaneously
access to information and react to changes promptly.
e. Event-response capability

f. Procurement
Timely procurement is critical for producing goods and rendering
services. Procurement sources materials, parts, supplies and services
required to produce goods and services.
g. Risk management
Risk management is critical for identifying potential risks, their
potential sources, likelihood of risks, deciding the amount of risk that is
acceptable and finally developing strategies for addressing those risks.
Risk management is also important for planning Resiliency-the ability to
recover from an event that negatively impacts the supply chain.

7. Why might a person wish to be involved with a critical path activity?

What are some of the reasons one might have for not wanting this
association? Explain.
A critical path activity is an activity that is deciding the duration of the
project. It is essential and takes the most time. All other tasks are
considered associate and might have some slack but not in critical path.
A person might wish to be involved with a critical path activity for the
main reason that this path attracts more attention than the other paths in
the project because these sets of activities always start and finish on
time. All the tasks are important and cannot be ignored. This is always
the bottleneck as well, hence there is the scope of improvement and
workers can show their performance better and better rewards. This
person who might be involved in the critical path activity would often be
in the spotlight.

Some of the reasons one might have for not wanting this association are
as follows:
  The first and the main disadvantage of the technique is its
application on more complex and bigger tasks. When you have
bigger tasks involving large number of activities, you end up with
a big chart which looks more incomprehensible than
comprehensible.
 There isn’t much information about the resources and one has to
go and try other techniques to manage the resources. This results in
managing more work along with the project which could easily
become a reason for tiring a project manager and lowering his
efficiency.
 Another disadvantage of the technique is related with the large size
of sheets and charts that come into existence when you have to plot
thousands of activities for a complex project. You can always view
such activities and charts on the computer but if you want the chart
with you on-site, you can’t have it because the chart is too big to
be handled and carried along.
 One of the problems with the critical path method is that it doesn't
adapt well to making changes on the fly. If your project is stable
and reasonably predictable, then CPM can be useful, but if you
have to improvise a lot, then it's not very useful.
 Drawing a CPM diagram can take a lot of time and effort. In some
projects, identifying which of the paths is critical may be difficult.
 You may have to guesstimate a lot of the project task durations,
making the timetable less reliable and CPM less useful.
8. Why do waiting lines form even though a service system is under-
loaded? Justify.

Waiting lines occur when there is a temporary imbalance between

supply and demand. Waiting in lines may be due to overcrowded,
overfilling or due to congestion. Any time there is more customer
demand for a service than can be provided, a waiting line forms.

Waiting lines occur even in under loaded systems because of variability

in service rates and/or arrival rates. A system has one service facility that
can service 10 customers per hour and yet experience waiting lines even
though the average number of orders is only 5 per hour. The customers
arrive at a variable rate rather than at evenly spaced intervals which
leads to occur waiting lines. And because services cannot be performed
ahead of time and stored until needed, the system at times becomes
temporarily overloaded, giving rise to waiting lines. However, at other
times, the system is idle because there are no customers.

Deadline: 10th November, 2020