Operational Management Midterm
Department: International Business
NAME: LE THI THU HUONG
ID: 202375147
1. Write down and explain the five elements of a business process characterizing the
transformation.
The five elements of a process to characterize the transformation:
 Inputs: Flow units (customers, data, material, cash, etc.): A flow unit is the basic unit of
analysis in any given scenario that initiates a business process. Inputs, such as customer
orders, raw materials, financial data, or customer feedback, can be tangible or intangible.
 Information structure: It helps organize, manage, and leverage data and information
effectively to support decision-making, streamline operations, and achieve desired outcomes.
It supports managers in making their strategic initiatives and long-term success.
 Resources: Labor and Capital: Labor resources refer to those directly and actively involved
in the business transformation process. They contribute their knowledge, skills, and effort to
execute tasks. Capital resources encompass the financial and physical assets necessary for a
business transformation. This includes investments, technology, equipment, facilities, and
other resources required to produce and deliver products.
 Process Management: Process management is a systematic approach to ensure effective and
efficient business processes are in place. It is a methodology used to align business processes
with strategic goals.
 Outputs: Outputs are the results or deliverables of a business process. These can be goods
and services or any other tangible or intangible outcomes. Outputs should align with the
process's objectives and be valuable to the organization or its stakeholders. The quality and
efficiency of the transformation directly affect the quality of the outputs.
2. What is Management? Explain management based on what you have learned in OM course and
like you are explaining these to your family.
At the heart of any successful organization, you will find good managers making critical daily
decisions. Managers ensure that projects are completed, that work is of the highest possible
quality, that employees are motivated and engaged, and that policies and procedures are
followed. Management uses critical skills and practices designed to help an organization reach
its highest potential.
For example, PepsiCo discovered that causing consumers not to buy their products is due to the
effect on people’s health that leads to obesity and diabetes. Due to the data analysis and the
manager’s decision and strategy, they created a new product named Pepsi Light, which contains
no sugar but is still tasty. This product line helped the company stay ahead of the Cola race, and
PepsiCo became the largest searched company on the internet.
3. We can view Operations Management (OM) as Business Process Management. Why is Business
Process Management perspective important in terms of management? Explain.
Business process management is important because effective business processes are crucial to
enterprise success because of the following reasons:
 Strategically maximize resources to minimize expenditures: Business Process Management
allows managers to reduce the cost of executing transactions by giving managers a closer look
at the workflows. This way, managers can find out what needs improvement and quickly make
adjustments to eliminate bottlenecks, allowing them to spend their billable hours on more
important tasks. It should also help managers better understand how the company is using
resources so they can allocate them properly and ensure that they are being maximized.
 Gives you better visibility and control of your business processes: Managers can map out
workflows from beginning to end. This way, managers can avoid confusion and make it
simpler for their employees to understand how to perform their tasks.
 Pinpoint operational deficiencies to improve productivity: Business Process Management lets
managers evaluate workflows to see key deficiencies. This way, they can develop more
targeted and efficient remedies to bottlenecks in the process.
 Make better business decisions to remain competitive: Business Process Management helps
managers make better decisions by providing data-driven insights, optimizing processes,
enhancing visibility, and fostering a culture of continuous improvement, enabling
organizations to remain competitive.
4. For a certain company, customers could be satisfied by various competitors. How should this
company act to get its sustained competitive advantage. Explain it based on what you have
learned in OM course.
 Firstly, the company has to understand its target customer: Conduct thorough market research
to understand the target audience, their preferences, pain points, and buying behavior.
Tailoring your offerings to meet their specific needs.
 Secondly, the company has to select the right combination of product attributes, which is
strategic positioning, that will result in a product that appeals to a particular market segment.
Occupying a differentiated position from competitors entails producing and delivering
different product attributes. For example, if the competitor provides a low-cost, standardized
product and a wide range of product portfolio, we should provide high-quality, customized
but expensive products. The strategy would focus on product quality, enhance design
specification and lead market trends. However, to keep abreast of the competition, there must
be continuous improvement in product variety and quality and a decrease in cost and deliveryresponse time.
 Thirdly, the company must remain differentiated from competitors to sustain competitive
advantage. In order to be better than them, the company should continuously innovate and
invest in research and development to create new products, services, or features that set it
apart from competitors and to stay at the forefront of market trends. Moreover, an organization
may differentiate itself by offering customers value through a product with a unique
combination of the four product attributes.
 Finally, to support the company’s strategic position, it should develop processes and operating
policies that fit the strategic decision, and its competition finds it difficult to imitate its chosen
position, which is operational effectiveness. For instance, if the company provides highquality products, it should focus on research and development, making the most innovative
product in the market. Suppose you want to expand the company’s product catalog. In that
case, the company should have strong supplier relationships, global supply chain operations,
and partners, which can provide great flexibility in response to demand surges.
5. Explain differences in Job Shop and Flow Shop.
Type of
Product
Specialized Product Machine Setup
Labor
Variable
Process
Volume
Equipment
Variety
Frequency
Skills
Cost
Job Shop
Small
Low
High
High
High
High
Flow Shop
High
High
Low
Low
Low
Low
 A job shop uses flexible resources to produce low volumes of customized, high-variety
products. a job shop typically has high process flexibility that permits product customization
but has high processing costs and long flow times.
Example: A fine dining restaurant with a changing menu every day. As a result, processes in
such kitchens are divided into workstations by functions (e.g. saucier, grill, pastry and other
workstations). This order helps to maintain the variety and flexibility of a restaurant.
 A flow shop uses specialized resources that perform limited tasks but do so with high
precision and speed. The result is a standardized product produced in large volumes. Although
the high processing capacity needed to produce large volumes entails high fixed costs for
plant and equipment, these costs are spread over larger volumes, often resulting in low
variable processing cost.
Example: McDonald’s has a standardized and efficient process for preparing and serving fast
food. When customers order a BigMac, employees just need to follow the available procedure.
It is a fast process but requires specialized equipment such as toaster, deep fryer machine, etc.
6. How do the strategies of your neighborhood supermarket (like GS 25) differ from those of Emart? How do their business processes support those strategies?
GS25 and E-mart
High
High
Medium
Medium
Low
Low
Product
cost
Response
time
Variety
GS25
Quality
Processing Flow
cost
time
E-mart
The chart depicts the strategic positioning of two firms GS25 and E-mart.
Resource Process
flexibility quality
 GS25 provides an expensive with a lower variety of products, whereas E-mart offers a lower
cost but wide range of product portfolio. The delivery-response time and quality of both
company is the same.
 GS25 stores are open 24 hours a day, seven days a week, making them highly convenient for
customers who need to shop at any time of the day or night. Customers are often willing to
pay a premium for the convenience of purchasing items quickly and easily, especially when
they are in a hurry or need things outside of regular store hours. In contrast, E-Mart and
similar retailers often run sales, promotions, and bulk discounts that can lower the cost of
products for consumers.
 Convenience stores have limited shelf space so they may carry a smaller selection of products
than a larger supermarket like E-Mart. E-Mart typically offers a broader range of products
and brands, including their own private labels. The wider selection allows customers to
choose from various price points and quality levels, while convenience stores may have a
more limited selection.
 In order to support their strategies, GS25 focused on process quality and flow time rather than
flexibility, while the E-mart business process emphasized a variety of resource flexibility but
lower processing costs. GS25 also has processing costs higher than E-mart.
 Operating a 24/7 convenience store in various locations can result in higher operating costs,
such as staffing, utilities, and logistics. Convenience stores are smaller than large retail stores
like E-Mart, leading to lower costs for rent and maintenance than E-Mart. Besides, GS25
stores might need to restock inventory more frequently due to their smaller store space and
high customer turnover, leading to higher logistics and supply chain costs than E-mart.
 Regarding the flexibility of resources, larger retailers like E-Mart may have more significant
bargaining power with suppliers, allowing them to negotiate better product prices.
Additionally, E-Mart can manage its supply chain and inventory more flexibly due to the
scale of its operations. They can store larger quantities of goods, better meet fluctuations in
demand, and have more diverse distribution channels.
7. A bank finds that the average number of people waiting in line during lunch hour is 20. On
average, during this period, 5 people per minute leave the bank after receiving service. On
average, how long do bank customers wait in line?
The process is the bank.
The flow unit is a customer.
Average inventory I = 20 customers and Throughput R = 5 customers/minute.
Thus, Little’s Law yields the following information:
Average flow time T = I/R = 20/5 = 4 minutes
In other words, the average time that customers wait in line is 4 minutes.
8. At the drive-through counter of a fast-food outlet, an average of 20 cars waits in line. The
manager wants to determine if the length of the line is having any impact on potential sales. A
study reveals that, on average, 5 cars per minutes try to enter the drive-through area, but 30
percent of the drivers of these cars are dismayed by the long line and simply move on without
placing orders. Assume that no car that enters the line leaves without service. On average, how
long does a car spend in the drive-through line?
The process is a fast-food outlet.
The flow unit is a car.
Average inventory I = 20 cars.
Because there are 30% of these cars are dismayed, the number of cars that flow through in the
process per minute is Throughput R = 5 – (5x0.3) = 3.5 cars/minute.
Thus, Little’s Law yields the following information:
Average flow time T = I/R = 20/3.5 = 40/7 = 5.71 minutes
In other words, the average car spends 5.71 minutes in the drive-through line.
9. ABC Inc. manufactures prefabricated garages. The manufacturing facility purchases sheet metal
that is formed and assembled into finished products-garages. Each garage needs a roof and a
base, and both components are punched out of separate metal sheets prior to assembly.
Production and demand data for the past four weeks are shown in Table 1. Observe that both
production and demand vary from week to week. We regard the finished foods inventory
warehouse of ABC Inc. as a process and each garage as a flow unit. The production rate is then
the inflow rate, while demand (sales) is the outflow rate. Clearly, both have fluctuated from
week to week. ABC Inc. tracks inventory at the end of each week, measured in number of
finished garages. Let I(t) denote the inventory at the end of week t. Now suppose that starting
inventory at the beginning of week 1 (or the end of week 0) is 2000 units, so that I(0) = 2000
Evaluate buildup rates and inventory for each week. Write down values for (a), (b), (c), and (d).
The process is ABC Inc. manufactures.
The flow unit is a garage.
Starting inventory I(0) = 2000.
Thus, the instantaneous inventory accumulation rate: ΔR(t) = Ri(t) – Ro(t)
I(t2) – I(t1) = ΔR(t) x (t2 – t1)
Week
1
2
3
4
Total
Production
800
1,100
1,000
900
3,800
Demand
1,200
800
900
1,100
4,000
Buildup rate
-400
300
100
-200
Ending inventory
1,600
1,900
2,000
1,800
10. A car repair shop has two hoists where cars can be lifted for repair work. Currently, customers
come in at the rate of 4 per hour and are processed at a similar rate. On average 8 cars are waiting
to be processed, 4 needing routine repairs and 4 needing major repairs. People are served on a
first come first serve basis. How long do customers wait on average before being processed?
The process is a car repair shop.
The flow unit is a car.
Throughput R = 4 cars/hour
For the current process, we have Average inventory I = 8 cars.
Thus, Little’s Law yields the following information:
Average flow time T = I/R = 8/4 = 2 hours
In other words, the cars wait an average of 2 hours before being served.