Operations Management

Assignment#1MobinKanjianiReg # 32581

Mobin Kanjiani-32581

Q1 What is the impact of E-business on operational management?

A: E- Business has lot of applications in today’s world. It has transformed the way business is being done nowadays. The impact of E-Business on operations management is as follows:

Internet is the medium of E- Business, and through the internet, firms can now take advantage of faster transaction and processing of the operations. This can help firms reduce their operational costs and hence increase their revenue, and since transaction and processing is done quicker, firms can deliver products or provide services at a much quicker rate.

E-business helps the firm in global marketing of their product or service. It allows the firm to globalize its operations. Moreover, almost 40% of the world population uses internet (source: www.internetlivestats.com), so the potential market for firms doing E-business is tremendous.

E-business has actually made operations management more efficient and dynamic because of:

o The reduced cost of sending data electronically rather than through post.

o Lowering of distribution and transaction costs

o Speeding product development

o Providing more information to buyers and sellers, hence facilitation with

better decision making, and improving the quality of goods produced. o Enlarging customer choice and supplier reach

o significantly increase the speed of communication, especially international

communication o E business communication methods such as EDI save on postage costs

and automate the process of inventory calculation and purchase orderso

1 | P a g e

Mobin Kanjiani-32581

Q2Write down at least 5 benefits of E-business and its impact on any one industrial organization of your choice

The organization that I did a study on was Amway. Amway is one of the world’s largest direct sales companies that services and supplies over 3.3 million IBOs (independent business owner) in more than 80 countries. Amway manufacturers and distributes all its products. E-Business plays a key role in communicating with the IBO for selling the products and services to the customers. The IBOs have the flexibility to work from where and when they want, as long as they are connected through internet.

Increasing use of the Internet has created real potential for businesses to develop different types of business models and to try out new approaches to reach users directly and quickly in their homes. Amway was well placed to make such a move. Amway has developed ecommerce opportunities that would offer the 24 hour/7 day service its customers were wanting.

Amway has also taken a strategic decision to use internet to group or link the manufacturing and distribution divisions within European countries, this would enable it to gain economies of scale, e.g. a reduction in distribution costs.

The E-business platform has given Amway’s IBO lot of benefits such as:

Providing up-to-date feedback and information with fewer clerical errors Receiving access to valuable business information and advice 24 hours a day, 7

days a week both from Amway and elsewhere Offering a range of evolving functions such as live online ordering enabling IBOs to check the bonuses they receive on their purchases Providing a modern and exciting way in which to run and promote a retail

business opportunity to like-minded entrepreneurs. Giving them the flexibility to work from any place and at anytime

2 | P a g e

Mobin Kanjiani-32581

Numerical problems

Solutions to Problem#1 (pg. 27)

a) Multifactor productivity ratio= value of output(s)/value of input(s)Value of inputs Labor Costs + Material Costs + Overhead Costs

$6,500 + $(25*75) + $30,000 = $38,375

Value of outputs $(300*3*75) = $67,500Productivity = $67,500/$38,375 = 1.76The productivity increased by 40.8% (1.76-1.25/1.25)*100

b) Labor hours of input = (20 hours /week) * (16 weeks/class) = 320 hours/classLabor productivity = $67,500/320 = $210.94/manhour.

Solution to Advanced Problem#6 (pg. 28)

a) Multi factor productivity during normal operation : Value of input standard cost*units sold

$120*2500 = $300,000

Value of output contract price (selling price)*units sold $(200*2,500) = 500,000

Multi factor Productivity = 500,000/300,000 = 1.67

Multi factor productivity during busy operation:

Value of input standard cost*units sold $144*4000 = $576,000Value of output contract price (selling price)*units sold $(200*4,000) = 800,000

Multi factor Productivity = 800,000/576,000 = 1.39

The productivity did change indeed. It decreased by 16.77% (1.67-1.39/1.67)*100

3 | P a g e

Mobin Kanjiani-32581

b) Labor productivity during normal operation:

Input labor hours 100 * 40 = 4,000Output = 2500 units Labor productivity = 2500/4000 = 0.625units/manhourLabor productivity during busy operation:

Input labor hours 100 * 72 = 7,200Output = 4,000 units Labor productivity = 4000/7200 = 0.555units/manhour

The labor productivity has dropped by 11.2% from working in normal operation to working in busy operation. (0.625-0.555/0.625)*100

c) Profitability during normal operation: Profit per unit = selling price per unit – cost price per unit 200-120 = 80/unitTotal profit = 80*2500 = $200,000

Profitability during busy operation:Profit per unit = selling price per unit – cost price per unit 200-144 = 56/unitTotal profit = 56*4000 = $224,000

Hence there was an 12% increase in profits from working in normal operation to working in busy operation.

References

http://businesscasestudies.co.uk/amway/meeting-customers-needs-through-the-internet/developing-an-internet-strategy.html#axzz3nXVRvTw1

A.Gunasekaran, H.B. Marri, R.E McGaughey, M.D. Nebhwani: E-commerce and its impact on operations management, Int. J. Production Economics 75 (2002) 185–197

http://www.internetlivestats.com/

4 | P a g e