BBDM2153

20WBR07945

NYIAU HAO WEN_RMK_G3_OM

Calculation formula

Types of quantitative methods

a. Naive approach

Ft-1= At

b. Moving average
Ft-1= Σ At / n

c. Weighted moving average

Ft-1 = Σ Wt At / Σ Wt

d. Exponential smoothing
Ft = Ft-1 + 𝛂 (At-1 - Ft-1 )

MAD = Σ (Actual - Forecast)/ n

Break-even analysis

BEP= F/(P-V) unit BEP = F/ selling price -(variable + variable price)

BEP=F/1-(V/P) RM

time to break even

Fixed price/ hours per months

Profit = TR-TC
 =PX=(F+VX)
=(P-V)X-F

TC= FC+VC
Chapter 2 layout decision

(consideration, issue) Layout design must consider how to achieve the following

- High utilization of space, equipment and people

- Improve flow of information, materials or people
- Improve employee morale and safeer working conditions
- Improve customer or client interaction
- Flexibility ( can change the layout easily in future)

5 idea -determining the overall arrangement of many stores

- Locate the high-draw items around the periphery of the store.

- Use prominent locations for high-impulse and high-margin items.
- Distribute what are known in the trade as “power items”- items that may dominate a
purchasing trip – to both sides of an aisle.
- Use end-aisle locations because they have a very high exposure rate.
- Convey the mission of the store by carefully selecting the position of the lead-off
department. For example, if prepared foods are part of supermarket’s mission, position
the bakery and deli up front to appeal to convenience-oriented customers.

Types of layout

1. Office layout
2. Supermarket layout
3. Servicescapes : the physical surroundings in which a service takes place and how they
affect customers and employees

- 3 element to provide good service layout

 - Ambient condition- background characteristics such as lighting, sound,
smell and temperature
- Spatial layout and functionality which involve customer circulation path
planning,asile characteristics and product grouping such as width,
direction, angle and shelf spacing)
- Sign, symbols and artifacts- characteristics of building design that carry
social significance eg. legoland have a lot of lego design, lego building.

4. Warehousing and storage layout

5. Fixed- position layout
6. Process oriented layout
7. Work cell layout (bank)
8. Product oriented layour

Chapter 6 Forecasting

Forecasting is the process of predicting a future event. It is an underlying basis of all business
decisions such as production, inventory, personnel and facilities.

Production - operate from what time to what time

Inventory- how many store to keep
Personnel- Need to hire how many worker
Facilities- how big the facilities need
3 types of forecast

1. Short-range forecast- time span of up to 1 year but generally less than 3 month and it is
used for planning purchasing, job scheduling, workforce levels, job assignments,
production levels.
2. Medium-range forecast- also called intermediate forecast generally spans from 3 months
to 3 years. It is useful in sales and production planning, budgeting, cash budgeting and
analysis of various operational plans.
3. Long-range forecast- generally is 3 years or more time span. It is used in new products
planning, capital expenditures, family location, research and development.
From inception to completion

Factor that influence of product life cycle

Introduction and growth require longer forecast than maturity and decline
As product passes through life cycle, forecasts are useful in projecting staffing levels, inventory
levels and factory capacity

Types of forecasts in planning future operations

a. Economic forecast- address business cycles such as inflation rate. Money supply, housing
start, money changing rate and others
b. Technological forecast- predict rate of technological progress and impacts development
of new products
c. Demand forecast - predict sales of existing products and service
7 steps in forecasting
1. Determine the use of the forecast
2. Select the item to be forecasted
3. Determine the time horizon of the forecast
4. Select the forecasting model
5. Gather the data
6. Make the forecast
7. Validate and implement result

Forecasting method

Qualitative method
Used when the situation is vague and little data exist such as new products and new technology
Qualitative method involves intuition, experience
for example forecasting sales on internet

i. Jury of executive opinion

· The opinions of a group of high level experts or managers, often in combination with
statistical models, are pooled to arrive at a group estimate of demand.

· Group estimates demand by working together

· Combines managerial experience with statistical models

· Relatively quick

· ‘Group-think’ disadvantage

ii. Delphi method

· Iterative group process, continues until consensus is reached.

· A forecasting method in which the objective is to reach a consensus among a group of
experts while maintaining their anonymity.

· These experts do not have to be in the same facility, they do not know who the other
panelists are.

iii. Sales Force Composite

· Each salesperson projects his or her sales

· Combined at district and national levels

· Sales reps know customers’ wants

· Tends to be overly optimist

iv. Consumer Market Survey

· Solicit/ask customers or potential customers about future purchasing plans.

· It can help not only in preparing forecast but also in improving product design and
planning for new products.

· What consumers say, and what they actually do are often different (disadv)

· Sometimes difficult to answer (disadv)

Quantitative method
Used when situation os stable and historical data exist such as existing products and existing technology
Quantitative involves mathematical techniques
Eg
Forecasting sales of colour television

Type of quantitative methods ??xx

i. Naive (simple) Approach (Ft-1 = At)

· Assumes demand in next period is the same as demand in most recent period

· e.g., If January sales were 68, then February sales will be 68

· Sometimes cost effective and efficient

· Can be good starting point

ii. Moving Average Method

· MA is a series of arithmetic means (average value)

· Used if little or no trend

· Used often for smoothing

· Provides overall impression of data over time

iii. Weighted Moving Average

· Used when some trend might be present. Older data usually less important

· Weights based on experience and intuition

iv. Exponential Smoothing

· Form of weighted moving average

· Weights decline exponentially

· Most recent data weighted most

· Requires smoothing constant (α)

· Ranges from 0 to 1

· Subjectively chosen

· Involves little record keeping of past data

factors/ reason for ineffective forecasting

- Failure of the organisation to involve a broad cross section of people in

forecasting. Individual effort is important, but the need to involve everyone who
has pertinent information and who will need to implement the forecast is also
important.

- Failure to recognize that forecasting is an integral to business planning. When

managers plan, they determine in the present what courses of action they will take
in future. Failure to input sales forecasts to both business strategy and production
resource forecasts may cause ineffective future action plans.

- Not recognizing that forecasts will always be wrong. Estimates of future demand
are bound to be subject to error and the magnitude of error tends to be greater for
forecasts that cover very long or extremely short spans of time.

- Failure to forecast the right things. Organisations may forecast the demand for
raw materials need not be forecast because these demands can be computed from
the forecast for finished products.

- Used the wrong method. There are many forecasting models with their own
strengths and weaknesses. So choosing the wrong model will cause the inaccurate
forecasting.

• Failure of the organisation to involve a broad cross section (representation) of people in

forecasting.
- Individual effort is important, but the need to involve everyone who has pertinent
(important) information and who will need to implement the forecast is also important.
• Failure to recognize that forecasting is an integral (essential) to business planning
- When managers plan, they determine in the present what courses of action they will take
in future. Failure to input sales forecasts to both business strategy and production resource
forecasts may cause ineffective future action plan.
• Not recognizing that forecasts will always be wrong
- Estimates of future demand are bound to be subject to error and the magnitude of error
tends to be greater for forecasts that cover very long or extremely short spans of time.
• Failure to forecast the right things
- Organisations may forecast the demand for raw materials that go into finished products.
The demand for raw materials need not be forecast because these demands can be computed
from the forecasts for the finished products.
• Failure to select an appropriate forecasting method
- There are many forecasting models with their own strengths and weaknesses. Choosing
the wrong model cause inaccurate forecasting.
• Failure to track the performance of the forecasting models so that the forecast accuracy
can be improved.
- The forecasting models can be modified as need to control the performance of the
forecasts.

key/ criteria for selecting a forecasting method

Explain the factors needed in consideration during the process of selecting a forecasting
model.

i. Cost and Accuracy

· There is a trade-off between cost and accuracy. More forecast accuracy can be obtained
at a cost.

· High accuracy approaches use more data, the data are more difficult to obtain and the
models are more costly to design, implement and operate.

· Each organization must make the cost and accuracy trade-off that is appropriate to its
own situation.

ii. Data Available

· If the attitudes and intentions of customers are a relevant factor in forecast and if the data
can be economically obtained from customers, then a survey of customers may be
appropriate method for developing demand estimates.
· On the other hand, if the requirement is to forecast sales of a new product, then a
customer survey may not be practical.

· Instead, historical analogy or market research may be more appropriate.

iii. Time Span

· The choice of an appropriate forecasting method is affected by the nature of the

production resource that is to be forecasted.

· Workers, cash, inventories and machine schedules are short-range in nature and can be
forecasted using moving average or exponential smoothing models.

· Factory capabilities and capital funds are long-range production resource needs and can
be estimated by regression and executive committee consensus.

iv. Nature of Products and Services

· Managers are advised to use different forecasting methods for different products. Factors
such as whether a product is high volume and high cost should be taken into consideration.

· Is the product/service whether the product is a manufactured good or a service and where
the product is in its life cycle all affect the choice of forecasting model.

v. Impulse Response and Noise Dampening

· Each forecasting model differs in its impulse response and noise dampening abilities. The
model selected must fit the forecasting situation.

· For example, in the case where we would like to keep our work force reasonably stable, a
forecasting model that has high noise dampening ability with low impulse response is more
appropriate to have less erratic forecasts for a planned stable work force.
Chapter 7b

Capacity: the throughput, or the number of units a facility can hold, receive, store, or produce in
a period of time.

Capacity planning decision included determining the following activities

- Forecasting the long-range future capacity need for all products and services. For
example, proton volume projection 200,000 in 2020
- Estimating the capacities of the present facilities
- Identify and analysing sources of capacity to meet future capacity needs
- Selecting from alternative source of capacity
- Deciding when additional capacity is needed, where the production facilities should be
located and the layout and characteristics of the facilities

3 time horizon capacity planning

1. Long-range capacity/ planning (greater than 3 years)

Is a function of adding facilities and equipment that has a long lead time
Eg design new production processes, add or sell existing long-lead time equipment,
acquire of sell facilities and acquire competitors
2. Medium-range capacity (3 months to 3 years)
Adding equipment, personnel, add or reduce shifts; subcontract or build or use inventory.
This is the aggregate planning task.
3. Short-range capacity (usually up to 3 months)
Concerned with scheduling jobs and people and allocating machinery.
It is difficult to modify capacity in the short run, capacity used are those that already
exist.
Three time horizons of capacity planning: Long range capacity/planning - Is generally greater
than 3 years and is a function of adding facilities and equipment that have a long lead time.
Intermediate range capacity/planning - Is usually 3 to 36 months and includes adding of
equipment, personnel, shifts, subcontract or build inventory. Short range planning - Is usually up
to 3 months and is concerned with scheduling jobs and allocating machinery The construction of
the new Sabah campus is expected to take 2 years to complete from the year 2017 to 2019. 8
Although in terms of time, it is considered as an intermediate range, the capacity options of
adding a facility (a new campus) is a long range capacity planning.

4 special considerations for a good capacity decision:

1. Forecast demand accurately

- the management must know which new and existing product are being added or dropped,
their prospect and expected volume
2. Understand the technology and capacity increments
- The technology initial investment is large. Technology decision must be aided by
analysis of cost, human resource required, quality and reliability
- Match capacity to sale
3. Find the optimum operating level (volume)
- Technology and capacity increments often dictate an optimal size for a facility
4. Build for change ( can change it in the future)
- Operation managers designed facilities and equipment with modifications in the mind to
accommodate future changes in product, products mix and processes.
- Nissan, Honda, Motor.co and Toyota Motor.corp

Managing demand

I. demand exceed capacity

solution= reduce demand by raising prices, scheduling longer lead time and discouraging
marginally profitable business.
Long term solution is to increase capacity
Eg
Add additional flights to meet the demand on the long-term basis
Reduce demand by raising the prices on the air tickets
Use bigger plane on the peak demand period
Relook into the flight scheduling and revamp with minimum number of flights for those having
discouraging marginally profitable business. Use that schedule to implement more flight which
demand are more encouraging
Promote and encourage those demand towards low demand period in order to reduce capacity
problem
Last resort. Implement coach sharing with another airline
2. Capacity exceed demand
Solution = stimulate demand through price reductions or aggressive marketing
Accommodate the market through product change

3. Adjustment to seasonal demand

solution= offer products with complementary demand patterns- products for which the demand is
high for one when low for the other.

Tactics for matching capacity to demand

- Making stuffing changes- increasing or decreasing the number of employees

- Adjustment equipment- purchasing additional machinery, selling or leasing out existing
equipment
- Improving processes to increase throughput
- Adding process flexibility to meet changing product preferences
- Close facilities

Demand and capacity management in the service sector

a. Demand management ( scheduling management)- appointment, reservation, FCFS rule

b. Capacity management ( scheduling workforce) - full time, temporary, part-time staff
c.
Break-even analysis

BEP= F/(P-V) unit BEP = F/ selling price -(variable + variable price)

BEP=F/1-(V/P) RM

Profit = TR-TC
=PX=(F+VX)
=(P-V)X-F

TC= FC+VC
Chapter 8- product and service design

Product decision

Product decision is the selection, definition and design of products.

Product selection is choosing the goods and services to provide to customers or clients. Top
organisations typically focus on the main product. Customers buy satisfaction, not just a physical
good or partially service.

Product decision organisation strategies

1. Differentiate
2. Cost leadership
3. Response

Explain product life cycle

Introduction phase Growth Maturity Decline

 Fine tuning may Product design begin Competitors now Unless product makes
warrant unusual to stabilise established a special contribution
expense for to the organisation,
- Research Effective forecasting High volume, must plan to
- Product of capacity become innovative production terminate offering
development necessary may be needed
- Process
modification Adding or enhancing Improved cost
and capacity may be control, reduction in
enhancement necessary options, paring down
- Supplier of product line
development

Use competitive strategy of getting products to market rapidly and may include rapid design,
efficient delivery system and JIT manufacturing
Factors affecting new product opportunities

1. Understanding customer
- Many commercially important products are initially through of and even prototyped by
used rather than producers
- These users ( companies, organisation, individual) tend to be well ahead of market trends
and have needs that go far beyond average users
2. Economic change
- Economic change bring increasing levels of affluence in the long run but economic
cycles and price changes in the short run. For example, people can afford automobile in
the long run but in the short run, recession can weaken the demand for automobiles
3. Sociological and demographic change
- Factors such as decreasing the family size. This trend change the size preference for
homes, apartments and automobile
4. Technological change
- Technological change makes everything possible from smartphones to artificial hearts.
5. Political change/legal change
- political/ legal changes bring about new trade agreement, tariffs and government contract
requirements.
6. Other change
- Market practice, competitors, professionals standard, suppliers, distributors.

Describe issue for product design

1. Techniques importance to design of a product

- Robust design
- Modular design computer-aimed design (CAD)
- Computer-aided manufacturing
- Virtual reality technology
- Value analysis
- Environmentally friendly design
Challenges in designing services
Customer may be directly involved, customization is more likely to be possible but at the cost of reduced
productivity.
Customization can be maintained but at a lower cist by
a. Delaying customization
b. Modularizing using standard modulus that are combined according to customer wishes
c. Dividing the service into small parts and automating or reduced customer interaction

3 dimension of service design

a. The degree of standardisation of a service
- Is the nature of the service custom-fashioned for a particular customer or classes of the
customers, or the nature of the service the same for all customers?
- Services that are standardised with low degree of customer contact are usually less
expensive and quicker to deliver

b. Degree of customer contact in delivering the service

- Is there a high level of customer contact as in a dress boutique or a low level of customer
contact is in a fast=food restaurant
c. Mix of physical goods and intangible service
- Is the mix dominated by physical goods as in a tailor’s shop or by intangible service as in
a university
 Chapter 10

1. Reasons why a domestic business operation will decide to change some form its
international operation. (Why is local business globalised?)

i. Reduce costs

· Many international operations seek to take advantage of the tangible

(actual/real) opportunities to reduce their costs.

· Foreign locations with lower wage rates can lower direct (labour cost) and
indirect costs (insurance).

· Opportunities to cut the costs of taxes, tariffs, trade agreements & trading
group. (less government rules)

ii. Improve the Supply Chain (deliver faster, transportation cost lower)

· The supply chain can often be improved by locating facilities in countries

where unique resources are available.

· These resources may be expertise, labour and raw material.

iii. Provide Better Goods and Services

· The result of local presence permits firms to customize goods and services to
meet unique cultural needs in foreign markets improve understanding of
differences in culture and the way business is handled in different countries.

· International operations reduce response time to meet customers’ changing

product and service requirements

iv. Attract/Understand new Markets

 · Interaction with foreign customers, suppliers and other businesses from
international operations permits organizations to diversify their customer base
and smooth the business cycle.

· Global operations may add production flexibility so goods and services can
be switched between booming economies and those are not.

v. Learn to Improve Operations

· Firms serve themselves and their customers well when they remain open to
the free flow of ideas.

· E.g. General Motors partnered with a Japanese auto manufacturer Toyota to

learn new approaches to production and inventory control.

vi. Attract and Retain Global Talent

· Global organizations can attract and retain better employees by offering

more employment opportunities.

· Global firms can recruit and retain good employees as they offer better
growth opportunities and insulation (protection) against unemployment during
times of economic downturn.

· During economic downturns in one country or continent, a global firm has

the means to relocate unneeded personnel to more prosperous locations.

2. Factors affecting global business conditions PG 17

i. Reality of global competition –World is getting smaller. For every industry, firms need
to compete globally.

- The changing nature of world business

Companies all over the globe are aggressively exporting their products and service to
other countries to share up profits partly because of increased competition at home
 - International companies = those whose scope of operations spans the globe as they buy,
produce and sell in the world markets. Companies are shifting the headquarters of whole
business units to forieng countries relatively unencumbered by national boundaries to
increase profits
- Strategic alliance and production sharing = companies formed strategic alliance and
production sharing to achieve high quality and least-cost produce
- Fluctuation of international financial conditions = inflation, fluctuating currency
exchange rate, turbulent interest rates and enormous trade balances have created complex
financial conditions for global businesses

ii. Quality, customer service, and cost challenges –Availability of information particularly
on what other firms are offering has enabled the customer to demand for better quality, price and
customer service.

- Many companies adopt Total Quality Management (TQM) to focus in customer’s needs
and structure the organisation to deliver on those needs
- Many firms implement the JIT manufacturing to reduce inventory costs. To reduce cost,
most firms focused on labour rates …..

iii. Rapid expansion of advanced production technology -The use of automation in

manufacturing and services has reduced company costs.

iv. Continued growth of the U.S. service sector -The growth of need for the service sector
in the US provides employment opportunities for other countries. Setting up a service call center
in India.

v. Scarcity of production resources -Scarcity of coal and crude oil will further increase
price and this will affect business cost of operations.

vi. Social responsibility issues –produce to reduce pollution.

- Doing what is right

3. Three strategy approaches for an organization to gain competitiveness(competitive
advantage) 10marks

i. Differentiation- better, or at least different

· Uniqueness can go beyond both the physical characteristics and service

attributes to encompass everything that impacts customer’s perception of
value.

ii. Cost leadership- cheaper

· Low cost leadership: achieving the maximum value as perceived by the

customer. Does not imply low quality.

iii. Response- rapid response

· Flexibility is matching market changes in design innovation and

volumes

· Reliability is meeting schedules

· Timeliness is quickness in design, production, and delivery

 4. How does an OM Strategy change during a product’s life-cycle? 12marks

i. Introduction stage

· issues such as product design and development are critical

· In this stage, sales begin, production and marketing are developing and
profits are negative

ii. Growth stage

· Successful products move on to the growth stage when sales grow

dramatically, marketing efforts intensify, production concentrates on
expanding capacity fast enough to keep up with demand and profits begin.

· In this stage, the emphasis changes to product and process reliability;

iii. Maturity stage

· concern for increasing the stability of the manufacturing process and cost
cut-ting;

· The production concentrates on high volume production, efficiency and low

cost.

· Marketing shifts to competitive sales promotion aimed at increasing or

maintaining market share.

· Profits are at their peak.

iv. Decline stage

· Profit and sales decline

· The issue involve pruning the line to eliminate items not returning good
margin becomes important.
 · The product may be dropped by the firm or replaced by improved
products.

Om strategy change during a product’s life cycle

During the induction stage, issues such as product design and development are critical. In this
stage, sales begin, production and marketing are developing and profits are negatives

Growth stage
Successful products move on to the growth stage when sales grow dramatically, marketing
efforts intensify, production concentrates on expanding capacity fast enough to keep up with
demand and profit begins. In this stage, the focus on change to product and process reliability.

Maturity stage
From there we move to the maturity stage where concern is for increasing the stability of the
manufacturing process and cost cutting. The production concentrated in high volume production,
efficiency and low cost. Marketing shifts to competitive sales promotion aimed at increasing or
maintaining market share. Profits are at their peak.

Decline stage
Finally in the decline stage, profit and sales decline. The issue involve pruning the line to
eliminate items not returning good margin becomes important. Eventually the product may be
dropped by the form or replaced by improved products.

Advantages of globalisation PG 23

Disadvantages of globalisation
Managing global service operations
1. Capacity planning- form must do a good job of locating existing support facilities, transportation,
personnel, communication system and housing
2. Location planning- good location strategies provide barries to entry and competitive positioning
for service as well as generate additional demand
3. Facilities design and layout scheduling-
4. Scheduling

Competitive service organisation

- Low cost
- Delivery performance
- High quality products and service
- Customer service and flexibility
-
Chapter 11 shorten planning

1. Aggregate planning strategies:-

Capacity Options (meet demand change capacity)

i. Use inventories to absorb changes in demand - Vary inventory levels

• Increase inventory in low demand periods to meet high demand in the future
• Shortages may mean lost sales and poor customer service
ii. Accommodate changes by varying workforce size- By hiring or layoffs
• Match production rate workers to demand /production rates
• Hire New workers and Laying off workers may have lower productivity (disadv)
iii. Varying production rate through overtime or idle time (do nothing)
• Allows constant workforce (cut back hours when dd low, increase when dd increase)
• May be difficult to meet large increases in demand
• Overtime can be costly and may drive down productivity
• Absorbing idle (do nothing) time may be difficult
iv. Using part-time workers
• Useful for filling unskilled or low skilled positions, especially in services
v. Subcontracting
• Temporary measure during periods of peak demand
• Assuring quality and timely delivery may be difficult
• Exposes your customers to a possible competitor

Demand option

i. Influencing demand
• Use advertising or promotion to increase demand in low periods
• Attempt to shift demand to slow periods
• Change prices to balance demand and capacity
• Change other factors to influence demand
ii. Back ordering (accepting orders for goods but unable to fill at the moment) during
high- demand periods
• Requires customers to wait for an order without loss of goodwill or the order
iii. Counter-seasonal product and service mixing
• Develop a product mix of counter-seasonal items

2. Describe the 2 traditional plans for providing production capacity

i. Chase strategy (matching-demand plan)

production capacity in each time period is varied to exactly match the forecasted aggregate demand in
that time period. Such an approach varies the level of the workforce in each time period by hiring new
workers or laying off workers

• Match output rates to demand forecast for each period

• Vary workforce levels or vary production rate
• Favored by many service organizations

ii. Level-capacity plan

• used in conjunction with inventory, backlog, overtime, part time labor, or subcontracting
• Daily production is uniform
• Use inventory or idle time as buffer
• Stable production leads to better quality and productivity

Forward scheduling

Forward scheduling start as soon as the requirement are know (hospital, restaurant, clinics)
Produces a feasible schedule through it may not meet due dates (delivery schedule at earliest possible
date)
Frequently results in buildup of work-in-process inventory

Use in the lack of facility such as restaurant lack of sit

Use forward scheduling to block the date so it will be easy to scheduling
For example, restaurant can collect some deposit in case the person break his or her promise
Another example, restaurant can prepare the raw material or ingredient early when they know
that there will have a party on 24 DEC DATE

The hospital also using the forward scheduling to broke the date so the staff of hospital will have
a easy of scheduling on the surgery/ operation

Backward scheduling

Backward scheduling begins with the due date and schedules the final operation first
Schedule is produced by working backward through the process
Resources may not be available to accomplish the schedule
In this backward scheduling all things is very busy up-front, everything is emergence look for the due
date work
Eg
Student know that the assignment due date is 2 weeks before and it may take 1 weeks to complete the
assignment so students can plan to start to do the assignment one week before the due date
Difference between scheduling manufacturing system and from
scheduling service system

Manufacturing Service

Schedules machines and materials Schedule staff

Inventories used to smooth demand Seldom maintain inventories
Machine-intensive and demand may be Labour-intensive and demand may be variable
smooth Legal issue may constrain flexile scheduling
Scheduling may be union contract Social and behavioral issue may be quite
Few social or behavioral issue important

Common approach of service systems matching fluctuating customer

demand with capacity
- Appointment or reservation
- FCFS ( first come first serve) sequencing rules
- Discount or other promotional schemes
- When the demand management is not flexible, managing capacity through staffing
flexibility may be used

Eg

- adjust staffing
-
-
Chapter 13 managing quality

https://notesmatic.com/2020/03/garvins-eight-dimensions-of-quality-with-examples/
Product quality
- Performance = the ability to perform the task expected from it
- Features = attributes that supplement the product’s basic performance
- Reliability = product’s propensity to perform consistently over the product’s useful life
- Conformance = adherence to quantifiable specifications
- Durability = ability to tolerate stress or trauma without failing
- Serviceability = the ease and low cost of repair for a product
- Aesthetics= degree to which product attributes are match to customer preference
- Perceived quality= quality as the customer perceive ot created through image,
recognition or world-of-mouth
- Value = the value of money for the customer

Service quality
- Reliability = consistency of performance and dependability
- Responsiveness = willingness or readiness of employee
- Competence = required skills and knowledge. Which means possession of the required
skill and knowledge to perform the service. For example, able to explain to customer with
appropriate answer
- Access = approachability and ease of contact
- Courtesy = politeness, respect, consideration, friendliness
- Communication= keeping customer informed
- Credibility = trustworthiness, believability, honesty
- Security= freedom from danger, risk or doubt
- Understanding / knowing customer needs = understand the customer’s need
- Tangible = physical evidence of the service
service
Past Year Case Study (sample) (Jan 2018)

Berjaya Hotels breaks new ground to unlock fatter margins

Berjaya Hotels & Resorts Sdn. Bhd. (BHR), the hospitality arm of the Berjaya Group, is
preparing to launch a new chain of niche hotels that is expected to yield larger profit margins.
The first of these hotels, known as The Living Room (TLR), is slated to open by the end of next
year. TLR’s concept is different from conventional hotels that place an emphasis on in-house
restaurants, tiered room types and wide open spaces to project luxury.
That conventional approach is inefficient and wastes much space, says BHR CEO Hanley Chew,
a hospitality veteran with over 25 years of experience. BHR is a unit of Berjaya Land Bhd.
(Bland). “Conventional hotels with huge chandeliers, thick cupboards and high ceilings are
probably not going to be there for too long, because the needs of guests today are very, very
different,” Chew tells The Edge. In contrast, TLR will focus on maximising the utilisation of
space and offering guests more flexibility. Specifically, it will target a growing group of
corporate travellers, especially millennials, who travel with their families.“The (millennials) are
not looking for very luxurious offerings but something very practical, convenient and flexible,”
says Chew. “They do not want to be told that breakfast ends at 10 o’clock or that 12 o’clock is
the check-out time”. TLR will offer about 200 rooms of 25 sq m each, with identical layouts.
Each room will come with a full-sized bed that becomes a table when folded, providing guests
with more space. More importantly, each room will be able to accommodate four guests, thanks
to a sofa that can be transformed into a double-decker bed. Guests would also have the flexibility
of checking in and out any time of the day or night, says Chew.

3
Other differentiating factors are TLR will not have the usual front desk, in-house food and
beverage (F&B) operations and spacious lobby. Instead, BHR plans to have a Starbucks
outlet at each hotel to function as a check-in spot, and guests will be given Starbucks credit to
spend at the coffee house. Starbucks will also meet the catering needs of corporate events and
meetings held in the hotels. BHR will not be aiming for specific star ratings, the accommodation
will be benchmarked against four-star hotels in terms of furnishings and other materials. The
margins are expected to be fatter, Chew says BHR is targeting an operating profit margin of 55%
for TLR compared with 28% to 35% for a typical hotel. In term of workforce, Chew plans to hire
part-time workers, particularly non-working mothers who have idle hours between family
commitments and institute four-hour shifts, half the normal shift cycle in many hotels. TLR’s
ideal mix of staff would be 60% core full-time staff and 40% part-timers. This 60% will be able
to make all the beds. They will be trained to handle work in all areas of the
hotel.

Question 1 (Continued)
Source: Adapted from The Edge Malaysia , Business & Investment Weekly July 31- August
6, 2017, Berjaya Hotels breaks new ground to unlock fatter margins. Required:
(a) Based on the case above, what is the competitive strategy used by BHR to compete with its
conventional hotels and explain its implementation? (12 marks)

(b) Explain benchmarking principles and how it is apply in BHR’s case study? (8 marks)
(c) Compute labour productivity for the given scenarios, if one junior full-time staff make up 21
beds and begin paid daily wages of RM60 as compared to one senior full-time staff make up 26
beds and begin paid daily wages of RM84.
Compute both the productivity and explain which staff is more productive. (Round your
answer to nearest two decimals) (6 marks)

(d) Given that the operating profit margin targeted at 55% for the first year, based on Naïve
approach in forecasting, what will be the operating profit margin for the next following year?
(2 marks)quality

(e) Discuss what are the determinants of service quality should BHR provides in this new TLR
concepts based on Total Quality Management (TQM) view points. (12 marks)
[Total: 40 marks]
1. Factors That Affect Location Decisions (five-10m) PG 110

i. Labor productivity

· Management may be tempted Low wage rates - productivity

· Employees with poor training/education/work habits may not good choice even low
wages.

· Low productivity negates (cancel out) low cost.

ii. Exchange rates and currency risks

· Unfavorable exchange rates may negate cost savings.

· Firms can take advantage of favorable exchange rate by relocating/exporting

· The value of foreign currencies continually rise and fall in most countries could well
make a good location decisions in 2003- disastrous one in 2008

iii. Costs

· Tangible costs - easily measured costs such as utilities, labor, materials, taxes

· Intangible costs - less easy to quantify and include education, public transportation,
community, quality-of-life

iv. Political risk, values, and culture

· National, state, local governments attitudes toward private and intellectual property,
zoning, pollution, employment stability may be in flux (many incoming)

· Worker attitudes towards turnover, unions, absenteeism can affect a company’s decision

· Other country’s culture - punctuality (Japan), production, and delivery schedules.

 v. Proximity to markets (near to customer)

· Very important to services such as restaurants, pharmacies

· High transportation costs may make it important to manufacturers (reasons why

move near to customers).

· JIT system may be more easily accomplished when suppliers are clustered near the
customer

vi. Proximity to suppliers

· Firm locate near their raw material and suppliers because of Perishable goods (Bakeries,
frozen seafood processors), high transportation costs (steel producers close to coal & ore
suppliers), bulky products (lumber mills close to timber resources)

vii. Proximity to competitors

Often driven by resources such as natural, information, capital and talent