OPERATION MANAGEMENT - 1

1. Explain operations management as a functional area.
Ans:
Large companies generally assign each function to a separate department, which assumes responsibility for certain activities. However, many of these functions are interrelated. Thus co-ordination and effective communication are essential to achieving organizational goals. In large organizations, the operations department is usually responsible for the actual transformation of inputs into finished products or services. Accounting collects, summarizes, and interprets financial information. Marketing generates demand for the company's output. Finance secures and invests the company's capital assets. Human Resources hires and trains employees. Distribution transports inputs and outputs. Engineering develops product and system designs and production methods. However, some organizations never need to perform certain functions. Other organizations may save money by contracting for a function, such as engineering, when they need it, rather than maintain an in-house department. In small businesses, the owner might manage one or more functions, such as marketing or operations, themselves.
Operations managers draw on many skill areas: quantitative analysis to solve problems; knowledge of information system to manage vast quantities of data concepts of organizational behavior to aid in designing jobs and managing the work force; and an understanding of international business methods to gain useful ideas about facility location, technology and inventory management.

2. What is market segmentation? What are the factors used to determine market segments?
Ans:
One key to success id formulating a customer-driven operation strategy for both manufacturing and service firms is understanding what the customer wants and how to provide it better than competition does. Market analysis first divides the firms customers into market segments.
 Market Segmentation
Market Segmentation is process of identifying groups of customers with enough characteristics in common to make possible the design and presentation of products or services that the group needs. In general, to identify market segments the analyst must determine the characteristics that clearly differentiate each segment. A sound marketing program can be then be devised and an effective operating system developed to support the marketing plan.


The following characteristics are among those that can be used to determine market segments.
 Demographic Factors
Age, income, educational level, occupational and location are examples of factors that can differentiate markets.
 Psychological Factors
Factors such as Pleasure, fear, innovativeness, and boredom can serve to segment markets.
 Industry Factors
Customers may utilize specific technologies or participate in a particular industry. These factors are used for market segmentation when firm's customers use the firm's products or service to produce another product or service for sale.


3. Processing data availability of resources and profit margin for 2 products are shown.



a. Create a set of linear equations to describe the objective function and the constraints.
b. Use graphic analysis to find the visual solution.
c. Use algebraic method to find exact solution.


P Step 1

To define the decision variables that determine product mix,We let X1 = amount of type A product to be produced and sold next week.

X2 = amount of type B product to be produced and sold next week.

P Step 2

Next, We define objectives function. The goal is to maximize the total contribution that the two products make to profit and overhead. Each unit of type A yield Rs 23 and Rs 32. For specific values of X1 and X2 we find the total profit by multiplying the number of units of each product produced by the profit per unit and adding them. Thus, our objective function becomes
Maximize Z = 23X1 + 32 X2


P Step 3

Final step is to formulate the constraints. Each unit of X1 and X2 produced consumes some of the critical resources. In cutting department, a unit of X! Requires 10 hrs and a Unit of X2 requires 6 hrs. The total must not exceeds the 2500 hrs of capacity available, so we use <= sign.
Thus first constraint is
10X1 + 6X2 <= 2500 (cutting)
Similarly we can formulate constraints for packaging and folding.
5X1 + 10X2 <= 2000 (folding)
X1 + 2 X2 <= 2500 (Packaging)
Add non-negativity restriction to the model
X1>=0 and X2>=0 (non-negativity restrictions)
We can now state the entire model, made complete with the definitions of variables
Maximize : 23X1 + 32X2 = Z
Subject to : 10X1 + 6X2 <= 2500
5X1 + 10X2 <= 2000
X1 + 2X2 <= 500
X1 >= 0 and X2 >= 0
The equation of the line for the cutting process
10X1 + 6X2 = 2500
For the X! axis intercept X2 = 0 and so
10X1 + 6(0) = 2500
10X1 = 2500
X1 = 2500/10 = 250
To find the X2 axis intercept X1= 0
10(0) + 6X2 = 2500
X2 = 2500/6 = 416.6

Two points(0,250) (416.6,0).
Draw a straight line.

P For further Constraints
The equation for folding process line is
5X1 + 10X2 = 2000
To find the X1 intercept, set X2=0
5X1 = 2000
X1 = 2000 /5 = 400
To find the X2 intercept set X1 = 0
5(0) + 10 X2 = 2000
10 X2 = 2000
X2 = 2000/10 = 200
The equation for the packaging m9ix is
X1 + 2X2 = 500
To find the X1 intercept set X2 = 0
X1 + 2(0) = 500
X1 = 500
To find the X2 intercept set X1 = 0
0 + 2X2 = 500
X2 = 500/2 = 250
With a straight line we connect points (0,400),(200,0) For folding constraints and points(0,500) (250,0) for packing constraints.


P Identify the feasible reason

Because there are only <= constraints and the parameters on the left hand side each constraints are not negative, the feasible portions are to the left of an below each constraints. Are not negative, the feasible portions are to thee left of and below each constraint. The feasible region, shaded in Figure, statistics all three constraints simultaneously.

P Plot an Objective Function Line

The five corner points are marked A,B,C,D and E. Point A is the origins each of the other corner points in the objective function and select the one that maximizes Z. For example corner point 'B' lies at (0,250). If we substitute these values into the objective function the resulting Z value is

23 X1 + 32X2 = Z
23 * 0 + 32 * 250 = 8000

However,we may not able to read accurately the values of X1 and X2 for some of the points.

Let's pass a line through E(200,0). This point is a corner point. It might even be the optional solution because it is far from the origin. To draw a line first identify its Z value as
23 * 200 + 32 (0) = 4600
Therefore the equation for the objective function line passing through E is
23X1 + 32X2 = 4600
To find a second point on this line,let's use the X2 intercept where X1 = 0

23 * 0 + 32 * 2 = 4600
X2 = 71.8

In the fig the iso-profit line that6 connects point (200,0) and (0,71.5)


P Find the visual solution

For this problem in fig second iso profit line is shown. The optimum solution is the last point touching the feasible reason point c. It appears to be in the vincity (150,200) but the visual solution is not exact.





P Find the algeberic Solution

Step 1

10X1 + 6X2 = 2500 (1)
5X1 + 10 X2 = 2000 (2)
Multiply 2 by eq by 2
10X1 + 20 X2 = 4000 (3)
Subtract eq (3) from eq (2)
10X1 + 20X2 = 4000
10X1 + 6X2 = 2500
===========================
26X2 = 1500
X2 = 1500/26
= 250
Now put the value of X2 in eq1 we get

10X1 + 6 *250 = 2500
10X1 + 1500 = 2500
10X1 = 2500 - 1500
X1 = 1000/10 = 100
The total Profit
23 * 100 + 32 * 250 = Z
2300 + 8000 = Z
Z = 10300 Rs