operations management case study

1
CENTRE FOR BUSINESS,
INFORMATION TECHNOLOGY AND
ENTERPRISE
BIBM
672
OPERATIONS MANAGEMENT SEMESTER 1: 2018
ASSESSMENT THREE: ASSIGNMENT (40% of Final Grade)
DUE DATE: Friday 8 June, 2018 at 12.00noon
This is an individual assignment.
This assessment corresponds to Learning Outcomes 1, 5 and 6 (see course
outline) and contributes 40% towards your final course mark.
The assessment focuses on the following areas:
 Operations management and strategy,
 Productivity,
 Forecasting Demand
 Supply Chain Management,
 Inventory Management,
 Capacity Management, and
 Resource Planning
Read the CASE STUDY attached, then complete the first TWO (2) parts of this
assignment:
Part A: Focuses on understanding and analysing Dough Bakery’s current
business environment, and
Part B: Focuses on potential future opportunities for Dough Bakery.
NOTE: This assessment s a compulsory component of the BIBM672 module.
You must achieve a minimum result of 40% in this assessment, plus achieve a
minimum C grade pass overall to receive a passing grade for the module.
2
ASSESSMENT FORMAT:
There are three main sections to this assessment. 6
Assessment Submission:
The assessment must be submitted electronically through Turnitin, and a hardcopy placed
into the tutors CBITE drop box, on the due date as indicated above.
The CBITE tutor drop boxes are located on the ground floor of D block near the D block – E
block overbridge.
NB: The hardcopy must have a signed cover sheet attached.
PART A: 70 marks
Question One: Operations Management 5 marks
Question Two: Productivity 7 marks
Question Three: Forecasting Demand 20 marks
Question Four: Capacity Management 11 marks
Question Five: Inventory Management 27 marks
PART B: 18 marks
Question Six: Material Resource Planning 9 marks
Question Seven: Integrated Supply Chain 9 marks
PART C: 12 marks
Overall Presentation (Format, Grammar, APA) 12 marks
Total Marks 100 Marks
3
The Background:
You have almost completed your tertiary studies majoring in Operations and Production
Management. Whilst studying you took a part time job at Dough Bakery, a new commercial
bakery established in 2011, located in Te Rapa, Hamilton.
Dough Bakery produces good quality sliced bread. The business owners realised that if they
compromised the production capacity they could use some of the machinery currently used
to quickly produce traditional supermarket sliced bread, in the “Chorleywood bread process”
to produce better quality artisan style bread.
You have been asked by the Dough Bakery management team to investigate a number of
operational problems they face, and they have agreed that you can undertake this as part of
your Cooperative Education Project course.
In late 2016 Dough employed a new Sales Director, Amanda. She persuaded the business
owners to change the direction of the business to sell good quality sliced bread directly to
dairies and other stores competing with supermarkets such as petrol stations. Dough Bakery
has borrowed to invest in the trucks and new delivery staff to distribute this bread to the retail
outlets. More and more customers are placing orders with Dough Bakery resulting in a 40%
growth in sales volume over the 12 months to the end of February 2018.
Your initial investigations have discovered that the main problems currently faced by Dough
Bakery are
1. An increasing number of customer complaints as consumers return bread to the
retail outlets because of poor quality issues.
2. A significant decrease in the overall profit margin experienced by Dough Bakery.
3. Production problems including breakdowns of machinery installed in 2013 when the
factory was new, and internal quality problems resulting in wastage as poor quality
bread is sold off to pig farmers, or destroyed.
4. An increasing staff turnover in the bakery.
You have undertaken some early investigations and you have found that:
1. The bakery was set up with machinery with a design capacity of up to 1400 loaves
of bread per hour.
2. When the business started to expand in February 2017 the factory was operating
two 8 hour shifts, 6 days per week. with baking commencing 2 hours after the start
of the first shift to enable preparation and for the ovens to heat up, and ending 2
hours before the end of the second shift to allow staff to clean up ready for the first
shift the following day.
CASE STUDY : Dough Bakery
4
3. The monthly sales data for the last year was:
TABLE 1: Dough Bakery Monthly Sales
Products Feb 17 Mar 17 Apr 17 May 17 Jun 17 Jul 17 Aug 17 Sep 17 Oct 17 Nov 17 Dec 17 Jan 18
White Bread 75, 656 78, 195 80, 006 87,900 90,600 91,450 93,000 94,999 96,263 97,863 98,547 99,266
Wholemeal
Bread
7,105 7,148 7,255 7,350 7,500 7,533 7,680 7,750 7874 7,911 7,982 8,001
French Bread 1,600 1,690 1,730 1,770 1,800 1,798 1,860 1,888 1,891 1,905 1,950 2,000
Nazareth
Bread
700 726 745 768 780 775 806 825 837 855 876 891
Coffee Cake 259 272 287 295 300 310 330 335 341 346 357 364
Chocolate
Cake
396 403 418 421 434 450 465 481 496 505 527 541
Banana Cale 369 387 396 404 411 420 422 434 465 475 482 501
Muffins 409 415 428 436 444 450 465 487 496 510 515 524
Cupcakes 389 401 412 421 434 450 465 473 489 496 506 519
Scones 436 455 463 372 384 390 403 412 427 434 451 460
Total 87, 319 90,092 92,140 100,137 103,087 104,026 105,896 108,084 109,579 111,300 112,193 113,067
Assumptions:
1. There are 4 weeks in each calendar month
2. Calculate production based upon sales (make no allowance for wastage).
5
Table 2: Individual Product Contributions to the Dough Bakery Annual Turnover
Products Cost per Item Sales Quantity Annual Turnover
($)
White Bread $ 5.00 1,083,745 $ 5,418,725. 00
Wholemeal Bread $ 6.50 91,089 $ 592,078. 50
French Bread $ 7.00 27,882 $ 195,174. 00
Nazareth Bread $ 8.00 9,584 $ 76,672. 00
Coffee Cake $ 28.00 3,796 $ 106,288. 00
Chocolate Cake $ 35.00 5,537 $ 193,795. 00
Banana Cake $ 26.00 5,166 $ 134,316. 00
Muffins $ 4.00 5,579 $ 22,316. 00
Cupcakes $ 6.00 5,455 $ 32,730. 00
Scones $ 3.50 5,087 $ 17,804. 50
TOTAL 1,242,920 $ 6,789,899. 00
6
The
Based on the information provided in the CASE STUDY, complete the following tasks.
Note: Make sure you clearly label your answers to avoid any confusion, for the maker.
QUESTION 1: Operations Management [5 MARKS]
1.1 Define the term ‘Operations Management’. (2 marks)
1.2 Critically discuss the role of an Operations Manager in an organisation AND describe
how they help an organisation to achieve its strategic objectives. (3 marks)
QUESTION 2: Productivity [7 MARKS]
Productivity is defined as the ratio of outputs (goods and services) divided by the
inputs (resources) and that an improvement in productivity means an improvement in
efficiency (Heizer, Render and Munson, 2017).
Dough Bakery is worried about increased costs – particularly energy. Last year’s
records (2017) can provide a fairly good estimate of the parameters for this year
(2018). The owner does not believe things have changed much, but t hey did invest
an additional $3,000 for modifications to the bakery’s ovens to make them more
energy efficient. The modifications were supposed to make the ovens at least 15%
more efficient.
The owner has asked you to check the energy savings of the new ovens and also to
look over other measures of the bakery’s productivity to see if the modifications were
beneficial. You have the following data to work with:
Table 3:
Last year (2017) Now (2018)
Production (dozen) 1,500 1,500
Labour (hours) 350 325
Capital investment ($) 15,000 18,000
Energy 3,000 2,750
PART A: CURRENT BUSINESS ENVIRONMENT [70 Marks]
7
2.1 Using the information in the table 3, calculate the single-factor productivity for
2017 and 2018, with energy as the common dominator. (2 marks)
2.2 Using the information in the table 3, calculate the multi-factor productivity for 2017
and 2018. (2 marks)
2.3 Using the calculations from 2.1 and 2.2 above, determine if modifications to the
bakery ovens have improved the overall productivity by 15% or more.
Justify your answer. (3 marks)
QUESTION 3: Forecasting Demand (Moving Averages) [20 MARKS]
3.1 What is the role/purpose of forecasting? (1 mark)
3.2 Using the monthly sales data provided on page 3:
a) Calculate the 3-month simple moving average (SMA) for the months May 2017
to February 2018. (3 marks)
b) Calculate the 3-month weighted moving average (WMA) for the months May
2017 to February 2018, using the weightings of 0.5, 0.3, and 0.2. (3 marks)
NOTE: Use the table templates provided on pages 11 and 12 to present your
findings for both SMA and WMA, AND include your supporting calculations in the
appendix of your document.
3.3 Using the actual sales data provided and your calculations from 3.2 above draw a line
graph illustrating the actual sales, 3SMA and 3WMA for the months of May 2017 and
February 2018.
Use a different colour for each graph line (Sales, SMA and WMA), and remember to
clearly label the graph (title, axes, etc). (5 marks)
3.4 Forecasting Error:
a) Explain the purpose of forecasting error. (1 mark)
b) Calculate the forecasting error for the months of May 2017 to January 2018
using the Mean Absolute Deviation (MAD) for both the SMA and WMA you
calculated in 3.2 above.
8
Present your findings in the table template provided and include your
calculations in the appendix (clearly labelled). (4 marks)
3.5 Methods of Forecasting Demand:
Based on your calculations in 3.2, 3.3 and 3.4, identify AND explain which moving
average forecasting methods (SMA or WMA) is the most appropriate to use for
forecasting sales/production for Dough Bakery. Justify your answer based on your
findings and the literature. (3 marks)
QUESTION 4: Capacity Management [11 MARKS]
Capacity Management is the “throughput or the number of units a facility can hold, receive,
storage, or produce in a given time ….. Capacity decisions determine capital requirements
and whether demand will be satisfied or whether facilities will be idle” (Heizer, Render &
Munson, 2017 p. 346).
4.1 Define the following terms AND outline the relationship between the factors.
 Design capacity (4 marks)
 Effective capacity
 Utilisation
 Efficiency
4.2 Complete the following calculations. Make sure you show all your calculations either
in-text or in your appendix.
a) The bakery was operating at 80% efficiency in February 2017. Calculate AND
explain the factory’s effective capacity, and its utilisation in that month.
(3 marks)
b) Calculate the efficiency of the bakery in January 2018, AND explain why the
increase in production over this period may have contributed to the problems
the bakery is now experiencing (as discussed on page 2). (4 marks)
9
QUESTION 5: Inventory Management [27 MARKS]
5.1 Explain the strategic importance of inventory management to a business.
Your answer should include a discussion of the types and functions of inventory, as
well as the overall objective of inventory management. (5 marks)
5.2 ABC Analysis:
Not all inventory items are of an equal value to an organisation.
a) Using the information provided in Table1 (page 3) and Table 2 (page 4) classifiy
the Dough Bakery products based on their annual dollar value, using the ABC
analysis model.
(5 marks)
b) Based on the anser to a) above, and if you were the Operations Manager at
Dough Bakery, what products would you monitor/manage moe closely and why?
(3 marks)
c) What are TWO (2) benefits to an organisation OF using a classification system
such as ABC analysis? (2 marks)
5.3 Economic Order Quantity (EOQ) Model:
Dough Bakery sells a gluten-free product for which the annual demand is 5,000
boxes. At the moment, it is paying $10.00 for each box; the holding costs are $3.00
per box per year; and the ordering costs are $25 dollars.
The formula for EOQ =
√𝟐 𝑫 𝑺
𝑯
a) State the primary aim or objective of the EOQ model AND outline at least TWO
(2) assumptions that the model is based on. (3 marks)
b) Determine the economic order quantity (EOQ) that Dough Bakery should
order. (NB: Show your calculations and clearly indicate your final answer).
(3 marks)
c) Using the answer for b) above, determine the expected number of orders Dough
Bakery will place each year AND calculate the overall yearly ordering costs.
(2 marks)
10
d) A new supplier (Supplier B) has offered to sell the same items for $7.50 per box
but the ordering cost will be $35.00. Should Dough Bakery stick with the older
supplier (Supplier A), or take advantage of the new supplier (Supplier B)?
(4 marks)
The business has been approached by Progressive Enterprises Ltd to investigate whether
Dough Bakery are interested in selling their products through Progressive’s Countdown
branded supermarkets in New Zealand. In order to accept this new opportunity Dough
Bakery will have to expand the factory considerably and bring in new operations
management systems.
You have been asked by the management team to:
QUESTION 6: Material Resource Planning [9 MARKS]
Explain how the business would benefit from the implementation of a Material
Resource Planning (MRP) system.
Your answer should demonstrate your understanding of what an MRP system is, its
key components, and the organisation could benefit in terms of the overall productivity
and profitability of the Dough Bakery. Support your comments with examples and
literature.
QUESTION 7: Integrated Supply Chain Management [9 MARKS]
Explain how an integrated approach to supply chain and inventory management
could benefit Dough Bakery.
Your answer should provide evidence of your understanding of what a supply chain is,
the benefits of having an integrated supply chain, AND the possibility of Dough Bakery
implementing JIT and Kanban systems (or other relevant process if applicable).
Support your comments with examples and literature.
PART B: RECENT OPPORTUNITIES [18 Marks]
PART C: FORMAT, GRAMMAR & APA REFERENCING [ 12 Marks]
11
TEMPLATE:
TABLE 4 : Forecast Demand – Summary of Simple Moving Average (SMA)
Month Sales Sub-total SMA Error Sub-total MAD
Feb – 17 87,319
Mar – 17 90,092
Apr – 17 92,140
May- 17 100,137
Jun – 17 103,087
Jul – 17 104,026
Aug – 17 105,896
Sep – 17 108,084
Oct – 17 109,579
Nov – 17 111,300
Dec – 17 112,193
Jan – 18 113,067
Feb – 18 —-
12
TEMPLATE:
TABLE 5 : Forecast Demand – Summary of Weighted Moving Average (WMA)
Weightings of 0.5, 0.3 and 0.2
Month Sales Sub-total SMA Error Sub-total MAD
Feb – 17 87,319
Mar – 17 90,092
Apr – 17 92,140
May- 17 100,137
Jun – 17 103,087
Jul – 17 104,026
Aug – 17 105,896
Sep – 17 108,084
Oct – 17 109,579
Nov – 17 111,300
Dec – 17 112,193
Jan – 18 113,067
Feb – 18 —-
13
TEMPLATE:
Table 6: Individual Product Contributions to the Dough Bakery Annual Turnover
Products Cost per Item Sales/Demand Annual Turnover Percentage of
Turnover
Accumulative
Percentage
Classification
White Bread $ 5.00 1,083,745 $ 5,418,725. 00
Wholemeal Bread $ 6.50 91,089 $ 592,078. 50
French Bread $ 7.00 27,882 $ 195,174. 00
Nazareth Bread $ 8.00 9,584 $ 76,672. 00
Coffee Cake $ 28.00 3,796 $ 106,288. 00
Chocolate Cake $ 35.00 5,537 $ 193,795. 00
Banana Cake $ 26.00 5,166 $ 134,316. 00
Muffins $ 4.00 5,579 $ 22,316. 00
Cupcakes $ 6.00 5,455 $ 32,730. 00
Scones $ 3.50 5,087 $ 17,804. 50
TOTAL 1,242,920 $ 6,789,899. 00
14
CENTRE FOR BUSINESS,
INFORMATION TECHNOLOGY
AND ENTERPRISE
BIBM
BIBM 672: OPERATIONS MANAGEMENT SEMESTER 1: 2018
ASSESSMENT 3: ASSIGNMENT (Individual) 40%
Student Name: ________________________________ ID: _________________
Question Mark Allocation Mark Awarded
One Operations Management
5
Two Productivity
7
Three Forecasting Demand
20
Four Capacity Management
11
Five Inventory Management
27
Six Material Resource Planning
9
Seven Integrated Supply Chain
9
Presentation:
 Formatting – correct use of appropriate formatting
 Editing and Proofreading – Uses correct New Zealand
grammar, punctuation and spelling;
 APA referencing: Acknowledgement of sources; the
reference list is complete and correct
 Presentation: is clear, legible and professional
12
TOTAL MARKS
COMMENTS:
15

 

         $10 per 275 words - Purchase Now