Parami International University

Master’s in Business Administration

Course Name:OPM 401–Operation Management Assignment

Submitted to; Submitted by;

Sir Ye Zinyaw Myint Wint Yee Khaing

Batch – 5
Date of Submitted

26 / 06 / 2023

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Table of Content
Pages
1. Answer for question 1.1 a) …………………………………………..3
2.Answer for question 1.1 b)…….……………………………………...3
3.Answer for question 1.1 c)…………………………………………….5
4Answer for question 1.1 d)……………………………………………..6
5.Answer for question 1.2 a)……………………………………………..7
6.Answer for question 1.2 b)……..……………………………………...9
7.Answer for question 1.2 c)…………………………………………….10

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Operation Management
1.1 a)
Operations Management:
The discipline of managing and supervising the production of goods and services within an
organization is referred to as operations management. To ensure the efficient and effective use of
resources, it involves the design, planning, coordination, and control of various processes and
activities. Optimizing productivity, quality, and customer satisfaction while reducing costs and
waste is the main objective of operations management. Capacity planning, inventory
management, scheduling, quality assurance, process improvement, and human resource
management are just a few of the many tasks it covers.

Supply Chain Management:

The flow of goods, services, information, and money from the procurement of raw materials to
the final delivery of goods or services to customers is all included in the supply chain. To
efficiently create value and deliver goods or services, it entails the coordination and integration
of numerous entities, including suppliers, manufacturers, distributors, retailers, and customers.
The supply chain includes activities like demand forecasting, inventory management, production,
transportation, and warehousing. In order to reduce costs, improve customer satisfaction, and
enable timely and accurate decision-making throughout the entire supply chain network,
effective supply chain management aims to optimize the flow of goods and information.

1.1 b)
Poor forecasts can have several consequences for businesses and organizations. Here are some of
the key consequences:

1. Excess Inventory or Stockouts: Inaccurate forecasts can cause customers' demands to be

over- or under-estimated. Excess inventory is the result of overestimating demand, which
uses up valuable resources and storage space. On the other hand, underestimating demand
can result in stockouts, which could harm the company's reputation as well as result in
lost sales and customer dissatisfaction.

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 2. Ineffective Production and Operations: Planning and scheduling for production can be
affected by poor forecasts. It becomes difficult to match production capabilities, labor
needs, and raw material procurement with the actual demand if forecasts are inaccurate.
Inefficiencies, production bottlenecks, elevated costs, and decreased productivity can
result from this.
3. Higher Costs: Inaccurate forecasts may lead to higher costs throughout the supply chain.
Working capital is restricted by excess inventory, which also results in increased carrying
costs for things like storage, handling, and obsolescence. Conversely, stockouts may
necessitate expedited shipping or emergency procurement, both of which are frequently
more expensive. Additionally, unplanned overtime and downtime brought on by
production imbalances can raise labor costs.
4. Subpar Customer Service and Dissatisfaction: Improper forecasts may make it
challenging to satisfy customer demands. Customers may become dissatisfied and lose
faith in the company if they encounter stockouts or delayed deliveries. Negative client
interactions can harm a company's reputation, affect client loyalty, and lead to missed
business opportunities.
5. Inefficient capacity planning: Resource allocation and capacity planning both heavily rely
on forecasts. Inaccurate forecasts can cause resources to be used inefficiently or
excessively. Reduced profitability and resource waste result from underutilizing capacity.
On the other hand, overutilization can result in bottlenecks, longer lead times, lower-
quality products, and employee burnout.Forecasts are the foundation for supply chain
coordination, which includes planning for procurement, production, and distribution.
These processes can be disturbed by inaccurate forecasts, which makes it challenging to
coordinate activities throughout the supply chain. This may result in less effective
transportation, procurement, and supply chain operations overall, as well as delays and
higher costs.
To mitigate the consequences of poor forecasts, organizations can invest in improved demand
forecasting techniques, leverage advanced analytics and data-driven approaches, collaborate
closely with suppliers and customers, and continuously monitor and adapt to changes in the
market and customer preferences.

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1.1 c)
Improving quality can lead to reduced costs through various mechanisms and benefits. Here are
some ways in which improving quality can result in cost reduction:
1. Reduced Rework and Scrap: Lessened Rework and Scrap: By enhancing the quality of
goods or services, businesses can reduce the frequency of flaws, mistakes, or rejections.
As a result, there will be less need for rework, repair, or scrap, all of which can be
expensive in terms of materials, labor, and time. Organizations can avoid the costs of
fixing errors and defects by putting more emphasis on prevention than on correction.
2. Decreased Warranty and Customer Support Costs: Products of higher quality are less
likely to fail or have problems that call for warranty claims or customer service.
Organizations can cut down on warranty claims, repair or replacement expenses, and
customer complaints by raising quality. Lower customer support costs and higher
customer satisfaction are the results of this.
3. Enhanced Efficiency and Productivity: Enhanced productivity and efficiency frequently
go hand in hand with enhanced quality. Rework, inspections, and error correction take
less time and effort when products or processes are designed to be more dependable,
consistent, and error-free. Throughput is improved, lead times are shortened, and labor
costs are decreased as a result of this increased efficiency.
4. Decreased Costs of Inspection and Testing: Products of higher quality necessitate less
frequent and exacting testing and inspection. Organizations can cut down on the need for
extensive inspections, quality checks, and testing, which can be time-consuming and
expensive, by enhancing the quality of processes and putting in place strong quality
control measures. Savings are made in terms of labor, machinery, and resources used for
quality control as a result.
5. Minimized Cost of Non-Quality: Poorly made goods or services may incur a number of
costs related to unhappy customers, returns, and possible liability. Organizations can
avoid the costs associated with product recalls, legal disputes, product liability claims,
and damaged brand reputation by concentrating on improving quality. These risks and
related costs can be reduced by investing in quality assurance measures and meeting or
exceeding customer expectations.

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 6. Improved Supplier Relationships and Costs: Customer dissatisfaction, returns, and
potential liability costs can all be incurred as a result of poor quality goods or services.
Organizations can save money by concentrating on improving quality by avoiding the
costs associated with product recalls, legal disputes, product liability claims, and
damaged brand reputation. These dangers and associated costs can be reduced by
investing in quality assurance procedures and meeting or exceeding customer
expectations.
Overall, improving quality reduces costs by minimizing rework and scrap, decreasing warranty
and customer support expenses, enhancing efficiency and productivity, reducing inspection and
testing costs, mitigating non-quality costs, and fostering better supplier relationships. By
adopting a quality-focused approach, organizations can achieve cost savings while
simultaneously delivering higher value to customers.

1.1 d)
To implement just-in-time (JIT) deliveries, the purchasing function plays a crucial role in
coordinating and managing the supply chain. Here are some actions the purchasing department
can take to implement JIT deliveries:

2 Supplier Evaluation and Selection: Purchasing should identify and evaluate suppliers based
on their ability to provide reliable and on-time deliveries. Supplier performance metrics
should include delivery time, lead time, and flexibility. Selecting suppliers who have a track
record of meeting delivery commitments is essential for JIT implementation.
3 Collaborative Supplier Relationships: Purchasing should establish collaborative relationships
with key suppliers to foster open communication and align goals. Building strong
partnerships can lead to better coordination and trust, enabling suppliers to respond quickly
to JIT delivery requirements. Regular meetings and joint planning sessions can enhance
collaboration and address potential supply chain challenges.
4 Clear Demand Communication: Purchasing needs to ensure accurate and timely
communication of demand forecasts and changes to suppliers. This includes sharing
production schedules, customer orders, and any fluctuations in demand. Transparent and

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 frequent communication helps suppliers plan their production and adjust their deliveries
accordingly.
5 Inventory Management: Purchasing plays a crucial role in managing inventory levels to
support JIT deliveries. By closely monitoring inventory levels and demand patterns,
purchasing can avoid excessive stock and minimize the need for buffer inventory.
Collaborating with suppliers on inventory management strategies, such as vendor-managed
inventory (VMI) or consignment arrangements, can further optimize inventory levels
6 Streamlined Order Processing: Purchasing should streamline the order processing and
approval procedures to minimize lead times. Implementing electronic data interchange (EDI)
or online ordering systems can speed up order placement, reduce paperwork, and enhance the
efficiency of order processing.
7 Continuous Improvement and Performance Monitoring: Purchasing should continuously
monitor supplier performance to ensure adherence to JIT principles. Key performance
indicators (KPIs), such as on-time delivery rates, lead time reduction, and quality metrics,
should be tracked and reviewed regularly. Any deviations or performance issues should be
addressed promptly to maintain the JIT delivery process.
8 Risk Mitigation Strategies: Purchasing should proactively identify and mitigate risks that
could disrupt JIT deliveries. This includes having contingency plans in place for potential
supply chain disruptions, such as alternative suppliers, safety stock, or redundancy plans.
Conducting risk assessments and developing risk mitigation strategies help maintain a
resilient supply chain.
9 Continuous Supplier Development: Purchasing should engage in ongoing supplier
development initiatives to improve supplier capabilities and performance. This can include
providing training, sharing best practices, and collaborating on process improvement
initiatives. By investing in supplier development, purchasing can contribute to the overall
effectiveness of the JIT delivery system.

By implementing these strategies, the purchasing function can effectively support the
implementation of JIT deliveries, ensuring timely and efficient supply chain operations.

1.2 a)

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Setting up production in Ethiopia offers several pros and cons for companies, as highlighted in
the case study. Here are the major advantages and disadvantages:
Pros:
1. Cost Advantage: Ethiopia provides access to a cheap and abundant labor force, resulting
in significantly lower labor costs compared to developed countries or even China. This
cost advantage can contribute to increased profitability for companies operating in
Ethiopia.
2. Government Incentives: The Ethiopian government offers various incentives to attract
foreign investment, such as tax exemptions for a certain period of time. These incentives
can help reduce operational costs and improve the overall business environment for
companies.
3. Emerging Market Potential: Ethiopia is transitioning from an agrarian economy to a
manufacturing hub, creating opportunities for companies to tap into a growing consumer
market. As the country develops, there is potential for increased local demand for
products, providing a market for companies operating in Ethiopia.
4. Strategic Location: Ethiopia's geographical location in East Africa offers proximity to
key markets in Europe, the Middle East, and Africa. This can facilitate efficient
distribution and access to a broader customer base.

Cons:
1. Political Instability: Ethiopia has experienced periods of political instability, which can
pose risks for businesses. Political unrest, protests, or changes in government policies can
disrupt operations and create uncertainties for companies.
2. Infrastructure Challenges: Ethiopia's infrastructure, including transportation and logistics,
is still developing and may not meet the standards or efficiency levels that companies are
accustomed to. This can result in longer lead times, logistical difficulties, and increased
costs for companies operating in the country.
3. Skill Gap and Training Needs: While Ethiopia offers a large labor force, there may be a
gap in skills and expertise, particularly in specialized industries. Companies may need to
invest in training programs to develop the required workforce capabilities, which can add
to operational costs.

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 4. Limited Supplier Network: The local supplier network in Ethiopia may not be as
developed or extensive as in more established manufacturing hubs. Companies may need
to rely on importing raw materials or components, which can lead to additional costs and
potential supply chain challenges.
5. Regulatory and Legal Environment: Navigating the regulatory and legal framework in
Ethiopia may present challenges for companies, especially those unfamiliar with the local
business environment. Compliance with regulations, obtaining permits, and protecting
intellectual property rights may require additional effort and resources.
It is important for companies considering setting up production in Ethiopia to carefully evaluate
these pros and cons, assess their specific business needs, and conduct thorough market research
to make informed decisions.

1.2 b)
Inferior working conditions can significantly impact the efficiency of production for companies
in several ways:
1. Lower Employee Morale: Poor working conditions, such as unsafe or uncomfortable
working environments, inadequate facilities, or lack of proper equipment, can lead to
decreased employee morale. When employees are dissatisfied or demotivated, their
productivity and engagement levels tend to decline. This can result in reduced efficiency
and lower output in production processes.
2. Increased Absenteeism and Turnover: Inferior working conditions can contribute to
higher rates of absenteeism and employee turnover. If the work environment is physically
demanding or hazardous, employees may be more prone to illness or injuries, leading to
increased absences. Additionally, if employees feel their health and well-being are
compromised due to poor conditions, they may seek alternative employment
opportunities, resulting in higher turnover rates. The constant need to recruit and train
new employees can disrupt workflow and productivity.
3. Quality and Error Issues: Poor working conditions can lead to errors, mistakes, and
accidents on the production floor. Fatigue, discomfort, or distractions caused by subpar
working conditions can impair concentration and attention to detail, resulting in quality

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 issues or rework requirements. This can lead to increased waste, higher costs, and delays
in meeting production targets.
4. Lower Efficiency and Productivity: Inferior working conditions can hinder overall
efficiency and productivity. Physical discomfort, inadequate lighting or ventilation, and
inefficient layout or equipment can slow down production processes. Employees may
struggle to perform tasks efficiently, leading to longer cycle times, reduced throughput,
and increased bottlenecks in the production line.
5. Negative Impact on Health and Well-being: Poor working conditions can have
detrimental effects on employee health and well-being. This can lead to increased
instances of physical or mental health problems, absenteeism, and reduced overall
resilience. Employees who are physically or mentally unwell may experience reduced
energy levels and motivation, further impacting their productivity and efficiency at work.
To mitigate the negative impact of inferior working conditions on production efficiency,
companies should prioritize creating a safe, comfortable, and supportive work environment. This
includes addressing issues related to physical safety, providing necessary equipment and
resources, promoting employee well-being, and fostering a positive work culture. Investing in
training and development programs, regular maintenance of facilities and equipment, and
listening to employee feedback can contribute to improved working conditions and enhance
production efficiency.

1.2 c)
Several factors can influence the productivity of companies that decide to set up operations in
Ethiopia, as mentioned in the case study. Here are the key factors:
1. Labor Force: The availability and quality of the labor force play a crucial role in
determining productivity. Ethiopia offers a large labor force, which can be advantageous
for companies seeking to scale up production. However, the productivity of the labor
force may vary based on factors such as education, skills, training, and experience.
Companies that invest in training programs and skill development initiatives can enhance
the productivity of their workforce.
2. Infrastructure: The state of infrastructure, including transportation, logistics, and utilities,
can impact productivity. Well-developed infrastructure enables efficient movement of

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 goods and materials, reduces delivery times, and improves overall operational efficiency.
However, in the case of Ethiopia, the underdeveloped infrastructure mentioned in the
case study may pose challenges and affect productivity if there are delays or disruptions
in the supply chain due to infrastructure limitations.
3. Technology and Automation: The level of technological advancement and automation
within the production processes can greatly impact productivity. Companies that adopt
modern technologies, machinery, and automation systems can achieve higher
productivity levels and reduce human errors. However, the extent of technological
infrastructure and automation in Ethiopia may be a factor to consider, as mentioned in the
case study.
4. Supply Chain Management: Effective supply chain management is essential for
optimizing productivity. Companies need reliable and efficient supply chains to ensure
the timely availability of raw materials, components, and other inputs. Challenges in the
supply chain, such as long delivery times due to underdeveloped infrastructure or limited
local supplier networks, can impact productivity.
5. Regulatory Environment: The regulatory environment, including labor laws, customs
procedures, and compliance requirements, can influence productivity. Companies that
navigate regulatory frameworks smoothly and efficiently can maintain productivity
levels. However, complexities or bureaucratic hurdles in the regulatory environment can
hamper operations and productivity.
6. Business Culture and Work Ethic: The prevailing business culture and work ethic in
Ethiopia can influence productivity. Companies that align with the local work culture,
build positive relationships with employees, and foster a strong work ethic can enhance
productivity levels. Cultural differences and the need to establish effective
communication and management practices may require attention and adaptation.
To maximize productivity, companies setting up operations in Ethiopia should assess and
address these factors through strategic planning, investment in technology and infrastructure,
talent development programs, supply chain optimization, and compliance management.
Additionally, collaborating with local stakeholders, understanding the local business context,
and adapting to the cultural nuances can contribute to improved productivity.

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