Operations Management

Assignment#1
MobinKanjiani
Reg # 32581

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

A: E- Business has lot of applications in todays 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 orders
o

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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 worlds 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 Amways 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

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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) = $67,500
Productivity = $67,500/$38,375 = 1.76
The 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/class
Labor 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
Value of output

standard cost*units sold

$144*4000 = $576,000
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
b) Labor productivity during normal operation:
Input labor hours

100 * 40 = 4,000
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Output = 2500 units

Labor productivity = 2500/4000 = 0.625units/manhour
Labor productivity during busy operation:
Input labor hours
100 * 72 = 7,200
Output = 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/unit
Total profit = 80*2500 = $200,000
Profitability during busy operation:
Profit per unit = selling price per unit cost price per unit
200-144 = 56/unit
Total 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-theinternet/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)
185197

http://www.internetlivestats.com/

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