Operations and supply chain management fundamentals

OPERATIONS & SUPPLY CHAIN Management

Question 1 a) I don't think that business schools have competitive priorities: I think that they have common or similar priorities, but competitive means by which to achieve these, mainly because of the limited number of clients that are available at any point on the market to be enrolled in the business schools. The common priorities I am pointing out could be listed as ensuring a highly qualitative educational level, providing the students with a first-class educational experience, making sure that the graduates are actually prepared to be enrolled in the work field etc. From the perspective mentioned here, these are certain competitive priorities, in the sense that they are useful for society in itself.

At the same time, as mentioned, they are competitive in the ways by which they try to reach these priorities. For one thing, for example, they will be competitive on educational resources, notably teachers, by trying to hire the best available teachers for the different courses at the respective business schools. Some of the business schools may, in fact, focus more on creating an appropriate curriculum that can combine theory with a practical approach, again, with the same goal of fulfilling the priorities mentioned in the first paragraph.

A b) (i) the partial labor is calculated by dividing the volume of output by the labor input. In the U.S., the volume of sales was 100,000 units, while the input of labor was 20,000 hours. This means that the partial labor in the U.S. was 100,000/20,000 = 5

At the same time, in the less developed country, the partial labor was 20,000/15,000 = 1.33

The capital productivity is calculated in a similar manner, by dividing the total output by the total capital equipment in each case. In the U.S., this will amount to 100,000/60,000 = 1.67, while in the LDC, it will be calculated as 20,000/5,000 = 4

There seems to be some sort of disparity between the two results, which could be considered somewhat misleading: the capital productivity figures are larger in the less developed country, while the labor is more productive in the U.S. However, since the American economy is a capital intensive country and the LDC is expected to be a labor intensive country, we would expect the results to be the other way around (higher capital productivity in the U.S.).

A ii) the multifactor productivity is calculated as Output divided by the sum of Labor and Capital values in each case. In the case of the United States, the multifactor productivity is 1.25, while in the less developed country, it is only 1.

Obviously, these results are much better. First of all, from an objective perspective, such a result takes into consideration both the capital and the labor as inputs and will present an overall productivity figure. At the same time, the result better reflects reality in this particular case: by combining both capital and labor, the U.S. company will be more productive.

The Raw Material Productivity Figures are calculated by dividing the total output to the raw material values. In the case of the United States, the raw material productivity is 100,000/20,000 = 5 units for each dollar; while in the less developed country it is 20,000/2,000 = 10 units for each dollar.

At times, these figures might appear greater in the subsidiary because of cheaper raw materials and, especially, an easier access to these materials, which eliminates or reduces the cost of transport.

Question 2 a) i. First of all, it is important to note that it is probably difficult to have all of these together for the same supply chain, but that some of these characteristics may actually be grouped together. For example, a responsive supply chain could also be risk hedging, because it will take into considerations the inputs of the market, adapt to them (responsiveness) and, at the same time, ensure that it minimizes the risk (risk hedging). An efficient supply chain is one that allows production to be done at a low unit cost, which means larger inventories etc.

At the same time, a responsive supply chain is one that is more oriented on the developments on the market and is agile to quickly adapt to the changes on the market. However, this responsiveness to the market comes at the price of higher unit costs. Risk hedging is also essential. The business is subject to a wide range of risks going from financial to operational risks and a risk hedging supply chain minimizes these.

A ii. In my opinion, the two notions seem to be excluding one another, but it is possible for a supply chain to be both efficient and responsive. As mentioned in the previous paragraph, one proposes a high unit cost, the other a low unit cost, with different levels of responsiveness to the market as well.

The answer in this case could be a decentralized supply chain. First of all, with all the elements forming the supply chain acting as autonomous entities and units, the flexibility of the supply chain would be extraordinary, because all these small units can quickly adapt to the challenges of the market. At the same time, this type of supply chain can also be efficient, but the condition for this is the perfect coordination between the different entities forming the supply chain, as well as the implication of the management for a good top-down managerial approach and a functional monitoring mechanism.

A iii. Obviously both agile and risk-hedging are characteristics that a supply chain should probably have to some degree. Risk hedging will, however, propose a model that encourages an approach that ensures that the company never lacks supply. This, in turn, can sometimes mean buying supply off the market at a lower price, but not being able to take advantage of the apparition of a new product on the market, for example. An agile company will keep its inventory levels low, similar to the responsive supply chain management, making it apt to react easily and quickly to any changes on the market that may advantage or disadvantage the company. This goes even as far as simply selling the remaining inventory at a low price, in case the demand on the market for a certain product that the company is producing is no longer at the same levels. This is possible because of an agile approach.

A b) First of all, 4,000 quarter pound hamburgers is equal to 1,000 pound hamburgers. The inventory turnover is calculated by dividing the total volume of sales by the total inventory, but can also be expressed as the cost of goods sold divided by the average inventory. The latter formula is more advantageous in our case.

Here, the cost of good sold = 1,000 times $1.00 = $1,000.00

Average inventory = 350 pounds

Inventory turnover = 1,000/350 = 2.857

This means that the inventory turns every 2.857 days or that there are 2.857 days of supply on hand.

Question 3 a) a very important capacity consideration in a hospital is that the number of clients/patients is much harder to determine than in the case of a factory, for example. There are many external factors that can upset the initial capacity estimates for the hospital, including, for example, a certain epidemic at some point. At the same time, the capacity consideration of a hospital also needs to take into consideration the opinion of the physicians, who are sometimes not necessarily business orientated, but take into consideration almost exclusively the medical factors and a medical evaluation on deciding whether a patient should remain over night in a hospital or not.

A b) on the other hand, a factory is strictly directed towards attaining the primary and most important objective for a business organization: maximizing its profits. This means that any capacity considerations will only refer to the means by which this objective can be reached. The main capacity consideration in the case of a factory will refer to efficient or responsive supply chain management to building inventories to levels that are not too costly, but that can make the activity of the factory efficient etc. The actual input of the management, for example, is less determinant than the doctors' decision, as most of the capacity considerations in a factory will be driven by the external factors and by the market, which will decide how much is needed of what and so on, thus also affecting the capacity considerations.

A b) is the probability in each case, as presented in the problem. We will use p to express the returns for each of the projects on each branch.

(not rezoning the land) = $4,000 times 600 homes = $2,400,000. This solution is excluded from the start, because the cost of land plus the additional costs is equal to $3,000,000, which means that the returns for any viable project will need to be larger than this.

(rezoning and building 1,500 apartments) = 0.6 times $3,000 times $1,500 apartments + 0.4 times $2,000 times $1,500 apartments = $2,703,500.4

(rezoning and building shopping center) = 0.7 times $4,000,000 + 0.3 times $5,000,000 = $4,300,000

The p (rezoning and building shopping center) is the best solution, with the expected return at 0.6 times $4,300,000 + 0.4 times $2,400,000= $3,540,000

This means that the expected net profit will be $540,000

Question 4 a) I am assuming that the greatest advantage of the work-in-process inventory is that the production is always associated and correlated with the supply of raw materials. By this, I mean that producing on stock, with larger quantities of products being manufactured without having necessarily an immediate demand or order for them will make the supply chain more efficient and will allow the company to produce at what is likely to be lower unit costs. It will also be using the labor factor more efficiently, because the workforce will not remain stagnated without clients, but will still produce, with these products being sold to clients in the future.