Question on operational Management

PART I– Answer either Question 1 or Question 2.(Maximum length: 1½ single-space page for parts (a) and (b) of each question.

Question 1

• Congratulations!You have just been appointed the Operations Manager of XYZ Airline Company.In the first meeting you attended with the company’s senior executives, suppose the CEO said to you: “I am not sure if many staff members in our company clearly understand that effective management of operations is a powerful competitive weapon.I think it will be useful to make this clear to staff at next week’s meeting.”Briefly explain how XYZ can use operations as an effective tool for increasing its market share and competitiveness.
• Based on your reading of “United’s Quest to be Less Awful” article that was published in

Bloomberg.com in 2016, identify and explain the shortcomings related to poor operations management that contributed to the company’s problems at that time.For your convenience, the link to the article is given below.

To access the article, click on:
http://www.bloomberg.com/features/2016-united-airl…

[Note: If the above link does not open, please copy the above link and paste it onto your browser.]

OR

Question 2:

(a) In 1979 Philip Crosby wrote a bestselling book titled “Quality is Free”, and in 1995 he wrote another book titled “Quality is Still Free” emphasizing the importance of pursuing quality excellence and continuous improvement. Can quality be free?Explain.

• Suppose you are a member of a team of MSB students working on a project to assess the quality management practices of Eastern Shore Appliance Company. To develop better understanding of the company’s quality management practice, suppose your team has collected the data shown in Tables 1 – 4 below..

Instruction: Based on analysis of the above data, evaluate Eastern Shore Appliance Company’s current quality management practice, and recommend changes for improvement.

Table 1: Customer evaluation of the company’s product (based on last year’s survey results)

StyleGood

PriceExcellent

ReliabilityPoor

Recommend to friend?No

Table 2: Percent defective of the company’s products last year (from company records)

Fabrication10%

Assembly6%

Finished goods8%

Table 3: Quality Costs Last Year (from company records)

Training $25,000

Scrap cost $475,000

Inspection in plant $85,000

Rework (full shop cost)$1,200,000

Payment to cover warranty program$545,000

Processing and repairing returns$675,000

Table 4: Financial results Last Year ((from company records)

Annual sales$18,000,000

Total cost of goods sold$8,000,000

PART II:PROBLEMS–Please answer all three problems in this section

Problem 1:Productivity Measurement

The following data are given for a caterer in Washington, DC:

Last YearThis year

Total sales:$2,800,000 $2,840,000

Total cost of materials $450,000$480,000

Labor hours used:34,000 hours31,000 hours

Cost of labor (including fringe):$15.00 per hour$16.00 per hour

Energy & other overhead costs:$175,000$180,000

• Determine multi-factor productivity for labor & materials for each year.
• Determine the total factor productivity for each year.

(c)The company’s goal is to improve its total productivity performance by 5% each successive year.Explain if the company has achieved its goal of increasing its total productivity this year compared to the previous year, and show the contribution of each input for the productivity increase or decrease during this period.(Please show your work.)

PROBLEM 2:Process flow analysis

A health clinic in Columbia, MD, is staffed by two receptionists, five nurses, and three physicians.While actual patient experience during a visit to the clinic may vary, assume that the process described below is typical:

Upon arrival at the clinic one of the receptionists welcomes the patient, verifies insurance information, and collects required payment which takes about four minutes. The patient is then asked to take a seat in the waiting room. After about 11 minutes, one of the nurses leads the patient to an examination room, verifies and updates patient information, and takes temperature and blood pressure which takes about 12 minutes on average. After about 9 minutes, the physician comes in and spends an average of about 10 minutes examining and consulting the patient. The nurse returns with paperwork for prescription and a summary of the visit which takes about 2 minutes. The patient is then directed back to the receptionists to make follow-up appointment which takes about 3 minutes.

1. Which staff resource is the bottleneck and what is the capacity of the process?
2. What is the throughput time of a typical patient visit?
3. How many patients will be in the clinic if an average of 12 patients arrive at the clinic per hour?

1. Suppose each receptionist is paid $15/hour, the nurses are paid $25/hour each, and physicians are paid $85/hour each.In addition, assume fringe benefits costs about 20% of direct labor cost.What is the average cost of labor and fringe benefits per patient for the clinic if 12 patients are served per hour?

1. What will be the average cost of labor and fringe benefits per hour for the clinic operates at full capacity?

Problem 3:Production Planning

At the beginning of each operating year, Baltimore, Inc. develops quarterly production plan to meet projected demand at minimum cost.Demand forecast for the next four quarters is shown below:

QuarterDemand Forecast

1 20,000

2 26,000

3 34,000
4 24,000

Suppose at the beginning of the planning period (i.e., Quarter 1) there were 40 production workers and 6,000 units in inventory.Each worker produces 500 units per quarter and is paid $13,000 per quarter including fringe.If overtime is used workers are paid 150% of their regular pay.On average it costs $4,000 to lay off a worker and $2,000 to hire a new worker. Inventory carrying costs is $20 per quarter.At the end of the fourth quarter, the manager plans to have 2000 units of inventory on hand.

Instructions:

The operations manager is wondering if using the chase or level strategy will be a better option to minimize total cost.To assist the manager with this decision, please:

• Develop a production plan using Chase strategy to meet projected demand, and determine the total cost of this plan.

• Develop a production plan using Level strategy to meet projected demand, and determine the total cost of this plan.
• Suppose the manager is also wondering if using a mixed strategy that combines level with overtime for one quarter will result in lower total costs. Determine the number of workers that will be required if a mixed strategy of Level plus 20% overtime is used during the peak demand quarter (i.e., Quarter 3).

  [Please note: In the interest of time, you are ONLY expected to determine the number of workers the company needs to have during each of the four quarters if it chooses to use level plus 20% overtime strategy.You are NOT required to compute the total cost for (b) above.]

[(Using the table shown next page may help you organize your answers for Part (a) and (b)]