Take Home Exam of Operation Management
Question 1
Job Rotation as Operations Management Concept
A concept of job rotation was chosen for analysis. Job rotation is a job design technique when employees are moved between jobs according to an approved plan. The main objective of job rotation is to enable employees to try different jobs and to expose them to a variety of skills aiming at raising job satisfaction and to encourage team work.
Job rotation pursues several objectives, namely: reduction of job monotony, succession planning, exposing employees to vertical integration, opportunity to create the fit between an employee and a job, testing employees’ skills, development of wide range of work experience. However, job rotation may cause problems as well, such as refusal to learn new types of work, abuse of authority in the process of implementation of job rotation principle, additional training costs required, inability to find appropriate jobs for all job rotation participants, refusal to let other employees to work at one’s working place, and problems of getting from one job to another (Bennett, 2003).
Aspects of Operations Concept
There are two types of job rotation, namely: “within functional rotation” and cross-functional rotation. Rotation within one function means rotation in the same operational area with the same or nearly the same level of responsibility. Using the current skills in a situation which is different to ordinary circumstances is stipulated by job rotation within a function. The movement within one function is aimed to enrich a career (Bennett, 2003).
An example of within-functional rotation is when the members of a permanent working team are moving between the jobs covered by the team. This type of job rotation is aimed at increase motivation and to ensure an optimal staffing (Cunningham, Dawes and Bennett, 2004).
Cross-functional job rotation suggests the movement between different operational areas in a given period of time. Cross-functional rotation is directed on the development of the new employee skills when an employee is moved to another position or to another operational area (Holle 2005). Cross-functional rotation can be a part of a career development scheme. This type of job rotation is often used when there are new graduate entrants in the company. Typically, the new entrants spend 6-8 months in 3-4 positions within 2 years before they are appointed to substantive posts (Cunningham, Dawes and Bennett, 2004).
Application of Concept
The case of McDonalds Corporation immediately comes to mind when job rotation is mentioned. McDonalds is known for carrying out successful experiments in human resource area. The fast food restaurant in Hong Kong had encountered a problem: the majority of employees, approximately 80%, were young people aged between 20 and 30 years who are ambitious, active, and flexible. The characteristics of this age group went in line with the job rotation policy of the company. The staff appreciated flexible working hours, was easily bored, and was open to experience. On the other hand, keeping this age group is difficult and requires original human resource solutions. The problem was that employees failed to connect with each other and were unable to work in a team. An extra complexity was added by diversity of the staff conditioned by multicultural environment. At the same time an important component of any company success are team work, low rate of employee turnover, and employees’ satisfaction with the job. For employees it is important to work in a stable and comfortable working environment, to have friendly relationships in the team, and to proceed in career. Job rotation offered these opportunities and McDonalds succeeded in their implementation (Cafolla, 2011).
Management Tasks
The first task is that it is important to know the needs of a company and employees. The managers of McDonalds Company had analyzed the situation in human resource area and succeeded to identify the needs of both the company and employees. On getting to know the needs of employees, the human resource managers offered a solution which resulted in synergy between the company and the staff goals. It was important to find a win-win solution to achieve shared goal (Cafolla, 2011).
The second important task is that success of any company is in the ability to create comfortable working environment in the company. The paradox is in the fact that the revenue is created in the communication area. Profitability of the company does not depend directly on the net profit indicators. In contemporary business environment profitability starts in the sphere of human relationships. Job rotation is an important tool for creating comfortable working environment if applied correctly (Cafolla, 2011).
The third task is that it is important to remove monotony and boredom from the working place. Often young employees, who have to repeat the same monotonous motions every day, get dull. McDonald’s philosophy is that the work has to be fun, easy and pleasant. However, this approach may not result in noticeable progress in a different environment. Thus, particular circumstances of the company must be taken into account when implementing job rotation because incorrect application of this powerful tool may lead to unwanted consequences causing harm to both the company and employees (Cunningham, Dawes and Bennett, 2004).
Question 2A
Economic Order Quantity (EOQ) model is designed to identify an optimal number of orders and to minimize yearly ordering and holding costs of inventory. It helps to indicate whether or not the number of current orders is reasonable. The EOQ model is commonly used for the purposes of maximizing profit in small business. The main assumptions of the model are as follows: the demand rate is known or relatively uniform, the cost of an item is fixed, lead time is constant, ordering and holding costs are fixed (Schroeder, Goldstein, and Rungtusanatham, 2010).
However, the assumptions are not realistic because of changing business environment. The situations when all the assumptions hold are rare, but the cases when one of the assumptions hold occur more often. For example, the demand for coats is seasonable and varies significantly during a year. However, a seasonable demand can be forecasted on the basement of the demand of previous years. The assumption of uniform demand is not realistic as relevant to contemporary markets. The cost of an item can be fixed. Actually, this is the most realistic assumption. Lead time and the cost of ordering and holding depend on the quantity of inventory which in its turn depends on demand. These assumptions correlate with the demand volume which cannot be easily predicted. Thus, they are not realistic. They could be realistic under particular circumstances which are to be considered in each particular case (Schroeder, Goldstein, and Rungtusanatham, 2010).
The model has certain advantages, namely: it helps to identify the number of units per order needed to satisfy the demand and to maintain sufficient inventory level to meet the demand. It may suggest either buying a larger quantity of items in fewer orders to receive bulk discount or to make more orders with fewer items in order to minimize holding costs depending on a particular situation. It also has disadvantages associated with several complications. For example, good knowledge of algebra is needed to calculate the amount of inventory; the model is designed for one item of inventory; there are limitations connected with several unrealistic assumptions of the model (Harbour, 2012).
The reorder point is a point when a firm needs to replenish its stock. At this point inventory is equal zero. A zero lead time almost never occurs in real life situations. Therefore, there is a time lag between placing the order and receiving items. Therefore, the reorder point is usually higher than zero. Thus, the firm places new order when the inventory reaches the point of reorder and the new items arrive when the firm still has items for selling. The decision about an optimal quantity of stock ordered is referred to the optimal minimum quantity of inventory. An appropriate order point is influenced by two factors, namely: the time of stock delivery and the safety stock – the minimum level of inventory needed to support the required level of supply (Harbour, 2012).
The reorder time can be determined by using the following formula:
RP = (D x S) + SS,
where D - demand, S - supplier lead time expressed in days, SS – the amount of safety stock (Schroeder, Goldstein, and Rungtusanatham, 2010).
The determination of the level of safety stock addresses two problems: the first problem is to eliminate the risk connected with the shortage of stock and the second one is to reduce the costs associated with carrying excessive inventory. The EOQ model which uses safety stock is more realistic in comparison to other models. Safety stock must be taken into account when developing inventory policy. Usually, the amount of safety stock is determined by the management of a firm with regard to fluctuations in historical demand and holding costs.
The most recent research conducted by Erjavec, Tomat and Gradišar (n.d.) showed that the EOQ model is widely used for cost optimization. According to the research, EOQ is often used as the basic model for the computation of the quantity of inventory needed to conduct a business. However, the basic EOQ model is rarely used. Therefore, the authors proposed several expansions to the basic model by inclusion of costs of trim-loss. The use of the versions of the EOQ model depends on the size and specificity of a particular business. The expansion of the model relies on the optimal ratio between order and stock size. Usually, EOQ model is not used in its pure form because of different circumstances businesses are operating. The best decision is to use EOQ model as a basement for calculations making corrections with respect to a type and the nature of a particular business (Erjavec, Tomat and Gradišar, n.d.)
Question 3D
The product design is one of the main components of quality assurance. The process of the product design is a result of integrated efforts which includes generation of ideas, concepts development, details of modification, and evaluation of solutions. Design of a product is a complex engineering and managerial process. The concept of modularization is designed to help deal with complexities in the process of product development. Modularization concept divides the process into two parts – constituent design activities and identification of inter-dependency among these activities – to manage the development process effectively. After process modeling is completed, the process design should be structured. Modularization offers a new approach to structuring the process of product design. A module is often defined as the group of activities. Some activities are to be merged and the rest are to be split in the process. Modularization can be also applied in supply chain management since it has a lot of advantages. For example, this approach helps managers manage process more effectively because of ability to analyze all procedures in details (Hyeonju, Chulhyun, Changyong, and Yongtae, 2007).
Ping, Yin, Jaselskis, Hung and Lin (2011) represented a study where algorithms of efficient design of buildings construction systems were described. The principle described in the article can be also applied in the development of television programmes and in supply chain management. A rational universal planning algorithm was offered in the study. The process is split into the basic and supplementary activities aiming at process simplification. Complex systems are packaged into smaller components. The approach allows increasing the efficiency of the installation process, reducing time for construction, creating safe working environment, improving construction quality, and minimizing costs. The same principle can be applied in other industries for many similar operations and managerial processes (Ping, Yin, Jaselskis, Hung and Lin, 2011).
Modularization is an important concept of operations management which allows saving cost and time. There is a need to develop strong competitive advantage in the global market since many companies tend to expand globally in recent years. Modularization concepts may provide such an advantage through offering the opportunity of additional investment and saving time for the development of products. Additional investment may arise from saving cost by organizing effective management of operations. Time saved on the stage of the product development can also be used as significant competitive advantage because it gives an opportunity to pass ahead of the rivals (Schroeder, Goldstein, and Rungtusanatham, 2010).
Television programme makers use the same approach utilized by motor vehicle manufacturers in assembling process. The concept of modularization is often applied in supply chain management as well. Modular supply chain allows suppliers to create the components of automobiles quickly giving manufacturers a significant competitive advantage in contemporary highly competitive markets. A supplier sends a complete seat to a manufacturer instead of sending basic parts of automobile components for assembling like it was before. Further, a manufacturer installs a complete seat. This approach gives manufacturers an opportunity to deliver their products in a short period of time. It is a significant advantage in modern competitive environment (Schroeder, Goldstein, and Rungtusanatham, 2010).
Programme makers adapted “Art Attack!” television programme for their foreign audience using basic and supplementary components like automotive industry manufacturers. Automobile manufacturers often produce basic models which are further adjusted to the customer needs. For example, a basic model of an automobile contains standard parts. Further, an automobile can be complemented with the parts which are not included into basic model. Programme makers used 60% of British programme as the basement for the programmes they broadcasted in other countries allowing for saving one third of the costs which they would have been needed when producing separated programmes for each of the six markets. There are two advantages arising from modularization in both cases: the speed of delivering products and the opportunity to order completed parts from supplier for further installation of the parts. Modular supply chain offers considerable leeway in innovation and design. Suppliers are working with manufacturers creating value by providing cost saving opportunities and design of a product. This approach help both to achieve aggressive goals aimed at saving time and costs. The main advantage of this approach is that the components of a product can be reused in a similar product, but also they have certain degree of freedom in design. In this case basic components made up 60% and 40% of the programme were adapted to the needs of the customers in other countries. Splitting operations into basic and supplementary parts is seen as the most effective way to organize various processes. This approach has widespread applicability in maintenance of effective supply chain (Murdock, n.d). Automotive companies were pioneers in adapting modularization in the management of their supply chains. The principle of modularization is widely used in electronics, airline, software, and toy industries. In general, it can be applied in any industry using separated components to assemble their products. Modular supply chains are very popular in the global marketplace in many other industries and in organizations offering various services. Modular supply chains are considered the most effective way of organizing operations management processes. (Murdock, n.d).
References
Bennett, B., 2003. Job rotation. Training Strategies for Tomorrow, 17(4). p. 7.
Cafolla, L., 2011. McDonald's top recipe for loyalty. [online] Classifiedpost. Available at:
Cunningham, I., Dawes, G. and Bennett, B. 2004. The handbook of work based learning. Aldershot: Gower Publishing Limited.
Erjavec, J., Tomat, L. and Gradišar, M., n.d. Expansion of the basic EOQ model with inclusion of trim-loss costs [pdf] Available at:
Harbour, S., 2012. The Advantages & Disadvantages of Economic Order Quantity (EOQ) [online] Hearst Communications, Inc. Available at:
Holle, C., 2005. What about job rotation? Belton Emergency Service, 15(2), p. 1.
Hyeonju, S., Chulhyun, K., Changyong, L. and Yongtae, P., 2007. Design process modularization: concept and algorithm. Sage Journals, [e-journal] 15(2), Abstract only. Available through: Sage Journals
Murdock, R., n.d. What is modularization in supply chain management? [online] eHow. Available at:
Ping, T.H., Yin, Y.L., Jaselskis, E. J., Hung, Wu-Ch., and Lin, Yi-Ch., 2011. Modularization and assembly algorithm for efficient MEP construction. Elsevier, [e-journal] 20(7), Abstract only. Available through: Automation in Construction
Schroeder, R., Goldstein, S., and Rungtusanatham, M.J., 5th ed., 2010. Operations management: contemporary concepts and cases. New York: Mcgraw-Hill/Irwin.
