Assignment No: #2

Course: Production & Operations Management (8418)

Semester: Autumn, 2021
Level: BBA
Name: Noroz Khalid Qureshi
Roll No: By-481373

Question No: 1. Explain the concept of effective capacity system. How could a manager
make the capacity system effective in the organization?
Answer:

Capacity Planning
The production system design planning considers input requirements, conversion process and
output. After considering the forecast and long-term planning organization should undertake
capacity planning.

Capacity is defined as the ability to achieve, store or produce. For an organization, capacity
would be the ability of a given system to produce output within the specific time period. In
operations, management capacity is referred as an amount of the input resources available to
produce relative output over period of time.

In general, terms capacity is referred as maximum production capacity, which can be attained
within a normal working schedule.

Capacity planning is essential to be determining optimum utilization of resource and plays an

important role decision-making process, for example, extension of existing operations,
modification to product lines, starting new products, etc.

Strategic Capacity Planning

A technique used to identify and measure overall capacity of production is referred to as strategic
capacity planning. Strategic capacity planning is utilized for capital intensive resource like plant,
machinery, labor, etc.

Strategic capacity planning is essential as it helps the organization in meeting the future
requirements of the organization. Planning ensures that operating cost are maintained at a
minimum possible level without affecting the quality. It ensures the organization remain
competitive and can achieve the long-term growth plan.

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Capacity Planning Classification

Capacity planning based on the timeline is classified into three main categories long range,
medium range and short range.

Long Term Capacity: Long range capacity of an organization is dependent on various other
capacities like design capacity, production capacity, sustainable capacity and effective capacity.
Design capacity is the maximum output possible as indicated by equipment manufacturer under
ideal working condition.

Production capacity is the maximum output possible from equipment under normal working
condition or day.

Sustainable capacity is the maximum production level achievable in realistic work condition and
considering normal machine breakdown, maintenance, etc.

Effective capacity is the optimum production level under pre-defined job and work-schedules,
normal machine breakdown, maintenance, etc.

Medium Term Capacity: The strategic capacity planning undertaken by organization for 2 to 3
years of a time frame is referred to as medium term capacity planning.

Short Term Capacity: The strategic planning undertaken by organization for a daily weekly or
quarterly time frame is referred to as short term capacity planning.

Goal of Capacity Planning

The ultimate goal of capacity planning is to meet the current and future level of the requirement at
a minimal wastage. The three types of capacity planning based on goal are lead capacity planning,
lag strategy planning and match strategy planning.

Factors Affecting Capacity Planning

Effective capacity planning is dependent upon factors like production facility (layout, design, and
location), product line or matrix, production technology, human capital (job design,
compensation), operational structure (scheduling, quality assurance) and external structure (
policy, safety regulations)

Forecasting v/s Capacity Planning

There would be a scenario where capacity planning done on a basis of forecasting may not exactly
match. For example, there could be a scenario where demand is more than production capacity; in
this situation, a company needs to fulfill its requirement by buying from outside. If demand is
equal to production capacity; company is in a position to use its production capacity to the fullest.
If the demand is less than the production capacity, company can choose to reduce the production
or share it output with other manufacturers.

Capacity Management Definition

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Capacity management refers to the wide variety of planning actions used to ensure that a business
infrastructure has adequate resources to maximize its potential activities and production output
under any condition.

Capacity Management diagram shows the various activities involved in maximizing production
output.

Managers Role:

 Investigate the effect of capacity building on the employees’ performance, •

 explore the effect of managers’ support on the employees’ performance, •
 examine the moderating effect of employee retention between capacity building
 employee performance, and
 Examine the moderating effect of employee retention between managers’ support and
employees’ performance.

What is Capacity Management?

Capacity management theory consists of the planning, IT monitoring, and administration actions
undertaken to ensure that information technology resources have the capacity to handle data
processing requirements across the entire service lifecycle.

The goal of capacity planning management is to ultimately balance costs incurred against resources
required, and balance supply against demand. The capacity management procedure concerns
performance, memory, and physical space, and should cover both the operational and development
environment, including hardware, human resources, networking equipment, peripherals, and
software.

The main objectives of project management capacity planning include:

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Identify IT capacity requirements to meet current and future projected workloads

Develop and maintain a capacity management plan

Ensure performance goals are met on time and within budget

Monitor capacity continuously to support the service level management

Assist in diagnosing and resolving incidents

Analyze the impact of variances on capacity and take proactive measures to improve performance
where it is most cost-effective

Types of Capacity Planning in Operations Management

There are three main types of capacity planning and control in operations management that ensure
there are adequate resources for both the short- and long-term.

Product capacity planning -- ensures that there are adequate products or ingredients for
deliverables

Workforce capacity planning -- helps estimate the most efficient number of team members and
hours required to complete jobs, and the most ideal time frame in which to start recruiting new
employees, including consideration of the onboarding process

Tool capacity planning -- ensures that there is always adequate equipment to complete jobs, e.g.
assembly line components, manufacturing machinery, and transport vehicles for delivery of
products

Strategies for Managing Capacity

Capacity management tools and methodologies vary, ranging from manually compiled
performance spreadsheets to specially compiled hardware or software that is designed to produce
detailed insights on the functioning of computing components. These tools examine the operation
of hardware and software, and monitor and measure the volume and speeds at which an
organization’s applications move data through the IT infrastructure.

The software and hardware elements that should be monitored include: cloud services, end-user
devices, networks and related communications devices, servers, and storage systems and storage
network devices. Information on internal processes of individual components and data movement
metrics are extracted from these IT elements. Using this information, an administrator can run a
software utility program to measure the transfer rate of data during processing.

Some proactive capacity management and planning activities include: utilize network capacity
management, production capacity management and storage capacity management tools to predict
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network, production, and storage needs; implement pre-emptive, corrective actions; identify trends
to estimate future utilization requirements; build models based on estimated changes; ensure
upgrades are budgeted in a timely fashion; and develop and maintain a capacity plan to optimize
the performance of services and increase efficiency.

What is the Primary Focus of Business Capacity Management?

Capacity planning decisions in operations management for businesses focus on measuring how
much a company can achieve, produce, or sell within a given period of time. This includes:

Management and prediction of the performance and capacity of individual elements of IT

technology

Management and prediction of the performance and capacity of live, operational IT services

Analysis of capacity supplier agreements and supplier management contracts by a capacity

management analyst

The timely quantification, design, and implementation of future business requirements for IT
services

Capacity and Performance Management Best Practices

The following best practices should be adopted to help monitor the intelligence and adaptability
of existing IT systems:

Develop a comprehensive view of available resources in order to ensure that resources are
distributed to the appropriate people and projects

Run a variety of test scenarios with different variables and analyze the impact of the changes in
order to identify project risks proactively.

Derive insights from historical data with the predictive capacity management process in order to
predict the likelihood of success.

Prioritize tasks and assign resources effectively with continuous planning and monitoring.

Avoid overestimating or underestimating resource utilization needs by generating accurate

capacity versus demand capacity management ratios.

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Advantages of Capacity Planning in Operations Management

Strategizing capacity in operations management ensures that systems are operating at adequate
levels to achieve company goals without over-provisioning resources. By identifying and
eliminating extraneous activities, companies can reduce costs and increase efficiency. Accurately
anticipating resource needs encourages more effective purchasing to accommodate future growth.
Production obstacles such as bottlenecks and equipment failures can be predicted and avoided
altogether with constant monitoring of hardware and software operations.

Does HEAVY.AI Offer a Capacity Management Solution?

In planning hardware and infrastructure sizing, it is crucial for a capacity planning manager to
manage and monitor daily data ingestion volume, data volume for one-time historical load, the
data retention period, multi-data center deployment, and the time period for which the cluster is
sized. It is imperative to incorporate the computing power of GPUs for processing and extracting
insights from these enormous datasets with accuracy and at real-time speeds. As the pioneer in
GPU-accelerated analytics, the HEAVY.AI platform is used to find insights in data beyond the
limits of mainstream CPU-based analytics tools.

Question No: 2 What is Least Square Method? How is demand forecasted through
Least Square Method? Discuss with examples

Answer:

What Is the Least Squares Method?

The least squares method is a form of mathematical regression analysis used to determine the line
of best fit for a set of data, providing a visual demonstration of the relationship between the data
points. Each point of data represents the relationship between a known independent variable and
an unknown dependent variable.

KEY TAKEAWAYS

The least squares method is a statistical procedure to find the best fit for a set of data points by
minimizing the sum of the offsets or residuals of points from the plotted curve.

Least squares regression is used to predict the behavior of dependent variables.

The least squares method provides the overall rationale for the placement of the line of best fit
among the data points being studied.

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Understanding the Least Squares Method

This method of regression analysis begins with a set of data points to be plotted on an x- and y-
axis graph. An analyst using the least squares method will generate a line of best fit that explains
the potential relationship between independent and dependent variables.

The least squares method provides the overall rationale for the placement of the line of best fit
among the data points being studied. The most common application of this method, which is
sometimes referred to as "linear" or "ordinary," aims to create a straight line that minimizes the
sum of the squares of the errors that are generated by the results of the associated equations, such
as the squared residuals resulting from differences in the observed value, and the value anticipated,
based on that model.

The Line of Best Fit Equation

The line of best fit determined from the least squares method has an equation that tells the story of
the relationship between the data points. Line of best fit equations may be determined by computer
software models, which include a summary of outputs for analysis, where the coefficients and
summary outputs explain the dependence of the variables being tested.

Least Squares Regression Line

If the data shows a leaner relationship between two variables, the line that best fits this linear
relationship is known as a least-squares regression line, which minimizes the vertical distance from
the data points to the regression line. The term “least squares” is used because it is the smallest
sum of squares of errors, which is also called the "variance."

In regression analysis, dependent variables are illustrated on the vertical y-axis, while independent
variables are illustrated on the horizontal x-axis. These designations will form the equation for the
line of best fit, which is determined from the least squares method.

In contrast to a linear problem, a non-linear least-squares problem has no closed solution and is
generally solved by iteration. Carl Friedrich Gauss claims to have first discovered the least-squares
method in 1795—although the debate over who invented the method remains.1

Example of the Least Squares Method

An example of the least squares method is an analyst who wishes to test the relationship between
a company’s stock returns, and the returns of the index for which the stock is a component. In this
example, the analyst seeks to test the dependence of the stock returns on the index returns.

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To achieve this, all of the returns are plotted on a chart. The index returns are then designated as
the independent variable, and the stock returns are the dependent variable. The line of best fit
provides the analyst with coefficients explaining the level of dependence.

What Is the Least Squares Method?

The least squares method is a mathematical technique that allows the analyst to determine the best
way of fitting a curve on top of a chart of data points. It is widely used to make scatter plots easier
to interpret and is associated with regression analysis. These days, the least squares method can be
used as part of most statistical software programs.

How Is the Least Squares Method Used in Finance?

The least squares method is used in a wide variety of fields, including finance and investing. For
financial analysts, the method can help to quantify the relationship between two or more
variables—such as a stock’s share price and its earnings per share (EPS). By performing this type
of analysis investors often try to predict the future behavior of stock prices or other factors.

What Is an Example of the Least Squares Method?

To illustrate, consider the case of an investor considering whether to invest in a gold mining
company. The investor might wish to know how sensitive the company’s stock price is to changes
in the market price of gold. To study this, the investor could use the least squares method to trace
the relationship between those two variables over time onto a scatter plot. This analysis could help
the investor predict the degree to which the stock’s price would likely rise or fall for any given
increase or decrease in the price of gold.

Question No: 2 Critically discuss and analyze the Classical Inventory Model and its
distinguished features with examples.
What Is Inventory?
Inventory is the accounting of items, component parts and raw materials that a company either
uses in production or sells. As a business leader, you practice inventory management in order to
ensure that you have enough stock on hand and to identify when there’s a shortage.

The verb “inventory” refers to the act of counting or listing items. As an accounting term, inventory
is a current asset and refers to all stock in the various production stages. By keeping stock, both
retailers and manufacturers can continue to sell or build items. Inventory is a major asset on the
balance sheet for most companies, however, too much inventory can become a practical liability.

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  Inventory, which describes any goods that are ready for purchase, directly affects an
organization’s financial health and prosperity.
 While there are many types of inventory, the four major ones are raw materials and
components, work in progress, finished goods and maintenance, repair and operating
supplies.
 While there are many ways to count and value your inventory, the importance lies in
accurately tracking, analyzing and managing it. Insights gained from inventory evaluations
are necessary for success as they help companies make smarter and more cost-efficient
business decisions.

Inventory Explained
An organization’s inventory, which is often described as the step between manufacturing and order
fulfillment, is central to all of its business operations as it often serves as a primary source of
revenue generation. Regardless of the fact that inventory can be described and classified in
numerous ways, it’s ultimately its management that directly affects an organization’s order
fulfillment capabilities.

For example, in keeping track of raw materials, safety stock, finished goods or even packing
materials, businesses are collecting crucial data that influences their future purchasing and
fulfillment operations. Understanding purchasing trends and the rates at which items sell
determines how often companies need to restock inventory and which items are prioritized for re-
purchase. Having this information on hand can improve customer relations, cash flow and
profitability while also decreasing the amount of money lost to wasted inventory, stockouts and
re-stocking delays.

13 Types of Inventory
Raw Materials:
Raw materials are the materials a company uses to create and finish products. When the product
is completed, the raw materials are typically unrecognizable from their original form, such as oil
used to create shampoo.

Components:
Components are similar to raw materials in that they are the materials a company uses to create
and finish products, except that they remain recognizable when the product is completed, such as
a screw.

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Work In Progress (WIP):
WIP inventory refers to items in production and includes raw materials or components, labor,
overhead and even packing materials.

Finished Goods:
Finished goods are items that are ready to sell.

Maintenance, Repair and Operations (MRO) Goods:

MRO is inventory — often in the form of supplies — that supports making a product or the
maintenance of a business.

Packing and Packaging Materials:

There are three types of packing materials. Primary packing protects the product and makes it
usable. Secondary packing is the packaging of the finished good and can include labels or SKU
information. Tertiary packing is bulk packaging for transport.

Safety Stock and Anticipation Stock:

Safety stock is the extra inventory a company buys and stores to cover unexpected events. Safety
stock has carrying costs, but it supports customer satisfaction. Similarly, anticipation stock
comprises of raw materials or finished items that a business purchases based on sales and
production trends. If a raw material’s price is rising or peak sales time is approaching, a business
may purchase safety stock.

Decoupling Inventory:
Decoupling inventory is the term used for extra items or WIP kept at each production line station
to prevent work stoppages. Whereas all companies may have safety stock, decoupling inventory
is useful if parts of the line work at different speeds and only applies to companies that manufacture
goods.

Cycle Inventory:
Companies order cycle inventory in lots to get the right amount of stock for the lowest storage
cost. Learn more about cycle inventory formulas in the “Essential Guide to Inventory Planning.”

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Service Inventory:
Service inventory is a management accounting concept that refers to how much service a business
can provide in a given period. A hotel with 10 rooms, for example, has a service inventory of 70
one-night stays in a given week.

Transit Inventory:
Also known as pipeline inventory, transit inventory is stock that’s moving between the
manufacturer, warehouses and distribution centers. Transit inventory may take weeks to move
between facilities.

Theoretical Inventory:
Also called book inventory, theoretical inventory is the least amount of stock a company needs to
complete a process without waiting. Theoretical inventory is used mostly in production and the
food industry. It’s measured using the actual versus theoretical formula.

Excess Inventory:
Also known as obsolete inventory, excess inventory is unsold or unused goods or raw materials
that a company doesn’t expect to use or sell, but must still pay to store.

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What Is Inventory Process?
An inventory process tracks inventory as companies receive, store, manage, and withdraw or
consume it as work in progress. Essentially, the inventory process is the lifecycle of goods and raw
materials.

See a diagram of the inventory process flow and learn more by reading “The Essential Guide to
Inventory Planning.”

What Is Inventory Count?

An inventory count is the physical act of counting and checking the condition of items in storage
or a warehouse. An inventory count also checks the condition of items. For accounting purposes,
inventory counts help assess assets and debts.

Inventory counts help you understand which stock is moving well and inventory managers often
use this information to forecast stock needs and manage budgets. To learn more about inventory
counting, read the articles on “Taking Physical Inventory” and “Cycle Counting 101.”

Methods of Recording of Inventory

The two methods of recording inventory are periodic and perpetual. In periodic inventory, you
count stock at specific times and add the totals to the general ledger. In the perpetual method, you
record changes in stock as they occur.

Although any type of business can use periodic inventory, small organizations frequently use it,
especially when there are no plans to scale the business. The periodic method requires no special
software or equipment. Organizations that use perpetual inventory recording methods and require
real-time counting often use scanners and point-of-sale (POS). To learn more about each method,
read “The Periodic System: Is It the Right Choice?” and “The Definitive Guide to Perpetual
Inventory.”

What Is Inventory Turnover?

Inventory turnover is the number of times a company sells or uses an item in a specific timeframe,
which can reveal whether a company has too much inventory on hand. To determine inventory
turnover,

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What Is Inventory Analysis?
Inventory analysis is the study of how product demand changes over time and it helps businesses
stock the right amount of goods and project how much customers will want in the future.

A well-known method for performing inventory analysis is ABC analysis. To perform an ABC
analysis, group goods into three categories:

A inventory: A inventory includes the best-selling products that require the least space and cost
to store. Many experts say this represents about 20% of your inventory.

B inventory: B items move at a similar rate to A items but cost more to store. Generally, this
represents about 40% of your inventory.

C inventory: The remainder of your stock costs the most to store and returns the lowest profits. C
inventory represents the other 40% of your inventory.

Benefits of Inventory Analysis

Inventory analysis raises profits by lowering costs and supporting turnover. It also:

Improves Cash Flow: Inventory analysis helps you identify and reorder items you sell often, so
you don’t spend money on inventory that moves slowly.

Reduces Stockouts: When you understand which inventory customers want most, you can better
anticipate demand and prevent stockouts.

Increases Customer Satisfaction: Analyzing inventory offers insight into what and how
customers purchase goods.

Reduces Wasted Inventory: Understanding what, when and how much people buy minimizes
the need to store obsolete products, as well as when products expire so you can have a strategy
behind using them.

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Reduces Project Delays: Learning about supplier lead times helps you understand when to reorder
and how to avoid late shipments.

Improves Pricing from Suppliers and Vendors: Inventory analysis can lead you to order high
volumes of products regularly rather than small volumes on a less reliable schedule. This regularity
can put you in a stronger position to negotiate discounts with suppliers.

Expands Your Understanding of the Business: Reviewing inventory provides insights into your
stock, customers and business.

Question No; 5. What is safety engineering? Discuss and analyze the importance of
safety engineering with examples.

Answer:
What Does Safety Engineering Mean?
Safety engineering is a field of engineering that deals with accident prevention, reducing the risks
associated with human error, and deriving safety benefits from engineered systems and designs.

It is associated with industrial engineering and system engineering and applied to manufacturing,
public works and product designs to make safety an integral part of operations

The purpose of safety engineering is to control risk by reducing or completely eliminating it. It also aims
to reduce the rate of failures and if failure does occur, it is not life threatening. Safety engineering usually
begins during the design of a system or product development.

Safety engineers often make use of computer models, prototypes, or recreations of a situations to assess the
hazards and risks. Safety engineers consider a number of factors that may affect the safety of a situation or
product, including design, technical safety, material reliability, legislation, and human factors.

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WHAT SAFETY ENGINEERS DO
A professional safety engineer is trained in studies that include industrial hygiene, engineering hazard
controls, system and process safety, ergonomics, and health manag construction safet y. It also safety and
health, and safet laws, regulations and stan and health management, product safety and construction safety.
It also encompasses environmental safety and health, and safety, health and environmental laws, regulations
and standards as well as accident investigation and analysis. Safety engineers are usually already engineers
in other disciplines such as industrial engineering, mining engineering etc. They develop procedures and
design systems that keep workers, users of a facility (or even people in the vicinity) from getting sick or
injured and keep property from being damaged. They combine their knowledge of health or safety and of
systems engineering to make sure that chemicals, machinery, software, furniture and other products are not
going to cause harm to people or buildings. In other words, they anticipate, identify and evaluate hazardous
conditions and practices. They develop hazard control designs, methods, procedures and programs which
they implement, administer as well as advise others on such programmes. It is not unusual for safety
engineers to consider software, chemical, electrical, mechanical, procedural, and training problems at the
same time.

Conclusion
Many of the most ethically important safety issues in engineering design refer to hazards that cannot be
assigned meaningful probability estimates. It is appropriate that at least two of the most important strategies
for safety in engineering design, namely safety factors and multiple safety barriers, deal not only with risk
(in the standard, probabilistic sense of the term) but also with uncertainty. Currently there is a trend in
several fields of engineering design towards increased use of probabilistic risk analysis (PRA). This trend
may be a mixed blessing since it can lead to a one sided focus on those dangers that can be assigned
meaningful probability estimates. PRA is an important design tool, but it is not the final arbitrator of safe
design since it does not deal adequately with issues of uncertainty. Design practices such as safety factors
and multiple barriers are indispensable in the design process, and so is ethical reflection and argumentation
on issues of safety. Probability calculations can often support, but never supplant, the engineer’s ethically
responsible judgment.

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