Operations Management

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Questions and Answers

What is the fifth step in the decision-making framework?

Defining the problem

Implementing and monitoring

Identifying the criteria

Evaluation of alternatives and selecting the best one (correct)

What type of solution is sought in Linear Programming Problems (LPP)?

Heuristic solution

Optimum solution (correct)

Feasible solution

Satisficing solution

Why are heuristics used in decision making?

To find an optimal solution

To make a quick decision

To avoid making a decision

To save time and resources when an optimum solution is not possible (correct)

Why is implementation and monitoring not strictly a part of decision making?

Because it's a managerial action Signup and view all the answers

What is the degree of certainty in a situation where we know for sure what would be the outcome of our decision?

Complete certainty Signup and view all the answers

What type of problem do we deal with when a decision has more than one possible outcome and we know the likelihood of each outcome?

Problem under conditions of risk Signup and view all the answers

What is the category of decision-making techniques based on the degree of certainty?

Certainty, risk, and uncertainty Signup and view all the answers

What is the situation where a decision has more than one possible outcome and we do not know the likelihood of each outcome?

Problem under conditions of uncertainty Signup and view all the answers

What is the name given to the three rates of population growth in the language of an analyst?

States of nature Signup and view all the answers

What is the expected value of alternative location 2?

R 0.77 million Signup and view all the answers

What is the best location if population growth turns out to be low?

Location 4 Signup and view all the answers

What is the name of the procedure used to calculate the expected value in decision-making under conditions of risk?

Calculating the expected value Signup and view all the answers

What is the term used to describe decision-making when the probabilities of outcomes are not known?

Decision-making under uncertainty Signup and view all the answers

What is the expected outcome if management always chooses alternative 2 in similar situations?

Average profit will be higher than for any other alternative Signup and view all the answers

What is the main difference between decision-making under conditions of risk and uncertainty?

The probabilities of outcomes are known in risk, but not in uncertainty Signup and view all the answers

What is the name of the approach used to structure problems under conditions of uncertainty?

Matrix form Signup and view all the answers

What is the primary goal of producing products at pre-established cost?

To reduce the variation between actual and standard cost Signup and view all the answers

What is the role of operations manager in planning?

To define the objectives and policies for the operations subsystem Signup and view all the answers

What is involved in the planning stage of operations management?

Product planning, facility designing, and using the conversion process Signup and view all the answers

What is the primary function of controlling in operations management?

To assure the actual performance in accordance with planned performance Signup and view all the answers

What is the role of operations managers in organizing?

To establish a structure of tasks and authority Signup and view all the answers

What is the significance of models in operations management?

To affect human behaviour through models Signup and view all the answers

What is the primary focus of operations in the organization's overall strategy?

To clarify the role and focus of operations Signup and view all the answers

What are the important functions of controlling in operations management?

Controlling costs, quality, and schedules Signup and view all the answers

What is the approach in which the analyst considers only the best outcome for each alternative regardless of probability?

Maximax Signup and view all the answers

What is the approach in which the analyst considers only the worst outcome for each alternative and chooses the 'best of the worst'?

Maximin Signup and view all the answers

What approach involves calculating the expected values and choosing the alternative with the highest expected value?

Principle of insufficient reason Signup and view all the answers

What is the classification of decision methodologies used by operations managers?

Classified under decision making techniques Signup and view all the answers

What is the approach in which the probabilities are treated as equal?

Principle of insufficient reason Signup and view all the answers

What is the approach that uses mathematical and statistical techniques to arrive at good decisions?

Quantitative methods Signup and view all the answers

Which of the following is a decision making technique used by operations managers?

All of the above Signup and view all the answers

What is the inclination among business firms in recent days?

To use quantitative methods Signup and view all the answers

What is the primary role of a manager in decision-making, despite the availability of computers and decision support systems?

To condition the outcome of analysis with judgment, experience, and skills Signup and view all the answers

What is the purpose of Break-Even Analysis (BEA) in Operations Management?

To identify the volume of business operation at which the total costs become equal to the total revenue Signup and view all the answers

What is an advantage of Break-Even Analysis (BEA) in Operations Management?

It addresses profitability of an investment Signup and view all the answers

What is a limitation of Break-Even Analysis (BEA) in Operations Management?

It assumes that all data is known and certain Signup and view all the answers

What does the slope of the total cost line represent in Break-Even Analysis (BEA)?

The variable cost per unit Signup and view all the answers

What type of systems may be involved in Decision Support Systems (DSS)?

Expert systems Signup and view all the answers

What is the importance of knowing the Break-Even Point (BEP) in business operations?

To know the safety margin of operation Signup and view all the answers

What is the primary focus of economic models in Operations Management?

To analyze the profitability of an investment Signup and view all the answers

Study Notes

Framework of Managing Operations

Managing Operations can be enclosed in a frame of general management function.
Operations managers are concerned with planning, organizing, and controlling the activities that affect human behaviour through models.

Planning

Planning is the activity that establishes a course of action and guides future decision-making.
The operations manager defines the objectives for the operations subsystem of the organization and the policies and procedures for achieving the objectives.
This stage includes clarifying the role and focus of operations in the organization's overall strategy, product planning, facility designing, and using the conversion process.

Organizing

Organizing is the activity that establishes a structure of tasks and authority.
Operations managers establish a structure of roles and the flow of information within the operations subsystem.
They determine the activities required to achieve the goals and assign authority and responsibility for carrying them out.

Controlling

Controlling is the activity that assures the actual performance in accordance with planned performance.
To ensure that the plans for the operations subsystems are accomplished, the operations manager must exercise control by measuring actual outputs and comparing them to planned operations management.
Controlling costs, quality, and schedules are the important functions here.

Framework for Decision Making

Evaluation of alternatives and selecting the best one: Alternative solutions are evaluated against the already established criteria.
Best alternative or decision is one which most closely satisfies the criteria.

Implementation and Monitoring

Implementation and monitoring are not strictly a part of decision making, but the managerial action would be complete only when the decision is implemented and monitored.
Fellow managers have to be convinced of the merit of the decision made and its implementation has to be followed through.

Decision Methodology

Techniques/methodologies that are useful for decision making can be categorized based on the degree of certainty that exists with respect to the decision variables and possible outcomes.
The degree of certainty is classified as:
Complete certainty
Somewhat uncertain and risky
Complete uncertainty

Decision under Conditions of Certainty

When we know for sure what would be the outcome of our decision then we are dealing with a problem under conditions of certainty.

Decision under Conditions of Risk

When a decision has more than one possible outcome and we know the likelihood of each outcome we are dealing with a problem under conditions of risk.
The profit for low, medium, and high population growth is listed separately for each location.

Decision under Conditions of Uncertainty

When a decision has more than one possible outcome and we do not know the likelihood of each outcome, we are dealing with a problem under conditions of uncertainty.
Even further analysis has cast doubt on the probability of the rates of population growth.
Problems under conditions of uncertainty can also be structured in matrix form.

Approaches to Decision Making under Uncertainty

Maximax: an optimistic approach; the analyst considers only the best outcome for each alternative regardless of probability.
Minimax: a pessimistic approach; the analyst considers only the worst outcome for each alternative and chooses the "best of the worst".
Principle of Insufficient Reason: assumes that since we know absolutely nothing about the probabilities of any state of nature, we should treat each with equal probability.

Classification of Decision Methodologies

Decision methodologies can be classified based on the degree of certainty that exists with respect to the decision variables and possible outcomes.

Decision Support System (DSS)

In recent days, there has been a great inclination among business firms to use quantitative methods to arrive at good decisions, especially, mathematical and statistical techniques.
Computers are of a big help especially in generating and evaluating alternatives.
However, it is the manager who has to take decisions and not computers.

Economic Models

Break-Even Analysis (BEA): This technique helps us to determine the volume of business operation at which the total costs become equal to the total revenue, i.e., no profit or no loss situation.
The advantages of BEA are that it is very simple to understand, it addresses profitability of an investment which is very important, and it allows quicker manipulation of the model and easier sensitivity analysis.
However, it assumes that all data (costs, price, and volume) are known and certain. It further assumes linear relationships between variables and that all output can be sold. It is useful for only one product business and assumes that variable and fixed cost elements can be separated.

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Description

This quiz covers the framework of managing operations, including planning, organizing, and controlling activities that affect human behavior.

Operations Management - Chapter 2