Maryland International College

School of Graduate Studies

Operation Management (Code: MBA- 751)
Instructor: Dr. Gashaw T. (Asst. Prof)
August 13, 2021
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Name: - Alemitu Tesfaw Mekonnen ID No SMBA/035/12

General Instruction
1. Write your Full name and ID number
2. Please read the questions carefully and attempt all the questions.
3. Total Mark: 50%
4. Use your own words to answer the questions. Don’t copy and paste.
5. Answers which are found to be identical will be automatically dis-qualified.
6. Brief, direct, and complete answers are required for full marks.
7. Use PDF or Word format or Good Handwriting (the Handwriting must be
Scanned and submitted by the email) to submit your answer.
8. You are expected to work for 48 hours i.e., from Friday 6:00 PM (August 13/2021)
- Sunday 6:00 PM (August 15/2021).
9. Your answer should be submitted via micmbaom@[Link]

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Instruction: Read the questions below carefully and attempt all questions accordingly.

1. Discuss the mechanisms used in your organization to know customer needs and how
your organization satisfy customer needs better than competitors.
Before you start promoting your business you need to know what your customers want and why.
Good customer research helps you work out how to convince your customers that they need your
products and services.
Identify your customers
The first step of customer research is identifying your customers. Your market research should
help you understand your potential customers. Further customer research can help you develop a
more detailed picture of them and understand how to target them. It will also highlight key
characteristics your customers share, such as:
Gender
Age
Occupation
Disposable income
Residential location
Recreational activities.
Understand why they shop
Once you've identified who your customers are, you can find out what motivates them to buy
products and services. For example, consider if they make decisions based on:
Work demands
Family needs
Budget pressures
Social or emotional needs
Brand preferences.
Identify preferred shopping methods
As well as understanding why they shop, you will also want to understand how they shop. To
learn about your customers' preferred method and means of shopping, consider if they:
Shop online, over the phone or in stores
Make spontaneous or carefully considered buying decisions.
Consider their spending habits
Different types of customers will be willing to spend different amounts. Find out what financial
capacity and spending habits your customers have. For example, consider:
Their average income
The portion of their income they spend on the type of products or services you sell
If they budget.

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 Find out what they think of you
Learn about your customers' views and expectations of your business and rivals. For example,
find out what they think of you’re:
Products and services
Customer service
Competitors.

2. Critical evaluate the service design process of your organization. Besides, discuss the
influence of marketing, finance, human resource and other operational departments
on service design.
Basically, service design focuses on the overall service experience and the design of the service
delivery process and strategy. It focuses on crucial points of contact with customers such as
initial contact, engagement phase, and feedback on post-consumption experiences. The planning
phase must focus on mapping all the key points where the client using the service meets the
company. User motivation and feelings at touch points should be analyzed first in order to design
a service that complements the current processes with the results of the analysis, and supports the
interaction between the user and the service providers.
in the case of a bank, the entire banking process is part of the service, from the moment the
customer walks in the bank, takes a number, waits in line, gets information and talks to a bank
employee or pays money into his account until he leaves the bank. The customer’s experience at
different points of the whole process basically determines what they would think of that
particular bank. While planning a banking service experience, you also need to find a balance
between user needs, the business processes of bank employees, and the particulars of each
location
In order for banks to meet the ever-changing needs of the market, they need to focus on the next
points
Building a customer-centric business model
Optimizing resource allocation
Simplification of business and operating models
Acquiring customer information advantage
Stimulating internal innovation
Risk management
Marketing/Sales
Marketing consists of all that a company does to identify customers’ needs and design products
and services that meet those needs. The marketing function also includes promoting goods and
services, determining how the goods and services will be delivered, and developing a pricing

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strategy to capture market share while remaining competitive. In today’s technology-driven
business environment, marketing is also responsible for building and overseeing a company’s
Internet presence (e.g., the company website, blogs, social media campaigns, etc.). Today, social
media marketing is one of the fastest growing sectors within the marketing function.
The goal of Sales is to close the revenue the company needs in order to operate profitably,
especially in B2B businesses. Again, depending on the nature of the market and the company
size, Sales functional areas can vary in structure and approach: inside/outside representation,
vertical/horizontal focus, direct, etc. Sales works to exploit the leads created by Marketing and
activities generated by the sales force itself.
Finance
The Finance function involves planning for, obtaining, and managing a company’s funds.
Finance managers plan for both short-term and long-term financial capital needs and analyze the
impact that borrowing will have on the financial well-being of the business. A company’s
finance department answers questions about how funds should be raised (loans vs. stocks), the
long-term cost of borrowing funds, and the implications of financing decisions for the long-term
health of the business.
Accounting is a crucial part of the Finance functional area. Accountants provide managers with
information needed to make decisions about the allocation of company resources. This area is
ultimately responsible for accurately representing the financial transactions of a business to
internal and external parties, government agencies, and owners/investors. Financial Accountants
are primarily responsible for the preparation of financial statements to help entities both inside
and outside the organization assess the financial strength of the company. Managerial
accountants provide information regarding costs, budgets, asset allocation, and performance
appraisal for internal use by management for the purpose of decision-making.
Operations
Operations is where inputs, or factors of production, are converted to outputs, which are goods
and services. Operations is the heart of a business providing goods and services in a quantity and
of a quality that meets the needs of the customers. Operations control the supply chain, including
procurement and logistics.
3. Critically discuss the role of total quality management on improving customer
satisfaction by applying six sigma principles.
Quality is not only a strategic weapon for competing in the current marketplace, but it also means
pleasing consumers, not just protecting them from annoyances. Therefore, a company’s specific
advantage is to identify and then compete on one or more of the dimensions of quality
Total Quality Management (TQM) is undergoing a revival under a new name, six-sigma. Many
organizations have discovered that such methodologies under appropriate leadership can be
applied in such a way as to restore the strength of quality initiatives. The basic tenants of TQM
include strong customer focus, elevated employee involvement, continuous improvement,

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enlightened leadership, and management by fact. There is concern, however, that TQM has lost its
luster and has become less effective under the pressures of competing business priorities. Six-
sigma provides a highly disciplined approach to quality improvement, assures follow-through
using a five step process, and clearly assigns personnel responsibility. Specific customer oriented
metrics are identified and tracked until a control system is in place to maintain the improved
processes. All required features of TQM are found in the correct application of six-sigma. This
paper examines the problems associated with total quality management and suggests a revival
under a newer name, the rather odd reference to a statistical feature of the normal distribution
known as ‘six-sigma’
Quality goals and a failure to break down internal barriers” and conclude that Six Sigma can
overcome these deficiencies, stating that Six Sigma’s expansion heralds a rebirth of the quality
movement. “Six Sigma represents a new holistic, multidimensional systems approach to quality
that replaces the form, fit and function specification of the past” “Six Sigma is a program aimed
at the near elimination of defects from every product, process, and transaction”. Many
organizations have come to realize that achieving zero-defect goods and services can lead not only
to customer satisfaction but also to improved internal efficiency and reduced costs. Companies are
adopting a Six Sigma program to the point where it is going to make any sort of significant
difference to the bottom line in any meaningful period of time. What the six-sigma process brings
to TQM is a methodology for disciplined quality management. Many companies found that when
six-sigma is integrated into their current business system, almost all of the elements of TQM are
in place. Six-sigma strengthens TQM efforts through a strategic approach that emphasizes strong
executive involvement, bottom-line accountability, extensive practical, training, and personnel
devoted to getting worthwhile improvement projects carried out. The requirement for high-level
champions, black-belt project leaders, green-belt team members, and a solution process puts these
elements together. It becomes a comprehensive system with the structure and discipline needed to
assure focus and accountability.
The list of companies implementing six sigma is long and growing longer, despite the cost and
resources devoted to deployment. Military contractors, government agencies, hospitals, package
delivery firms, food processors, and many others have found six sigma to be cost effective and
worthwhile. Various black belts interviewed for portions of this research invariably reported that
even when some projects did not realize the potential predicted, there were qualitative
improvements that had a positive effect at one point or another. TQM is not dead; it has merely re-
surfaced in another form, arguably better and more likely to produce the results anticipated.
4. Discuss with examples the role of supply chain management to achieve organization
mission, vision and core objectives.
Supply chain management is the integrated process-oriented planning and control of the flow of
goods, information and money across the entire value and supply chain from the customer to the
raw material supplier. Supply chain management encompasses the planning and management of
all activities involved in sourcing and procurement, conversion, and all logistics management
activities. Importantly, it also includes coordination and collaboration with channel partners, which

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can be suppliers, intermediaries, third party service providers, and customers. In essence, supply
chain management integrates supply and demand management within and across companies
The definitions of supply chain management indicate that it is a complex undertaking that extends
beyond the scope and capabilities of a single organization. Significant effort is needed to build and
maintain a supply chain network. This involves a tremendous action list that requires expertise,
time, and money—establishing strategies, building relationships and roles, aligning processes,
developing people, implementing technology, and investing in capacity.
Given these requirements and challenges, it is logical to wonder whether the pursuit of supply
chain management capabilities is worthwhile. The succinct answer is yes because organizations
need strong supply chain capabilities to profitably compete in the marketplace. Their key goals for
supply chain management should be to achieve efficient fulfillment of demand, drive outstanding
customer value, enhance organizational responsiveness, build network resiliency, and facilitate
financial success.
VISSION: Achieve Efficient Fulfillment
On the most basic level, the purpose of supply chain management is to make inventory readily
available in customer facing positions to fulfill demand. The fresh produce business adage “you
can’t sell from an empty wagon” highlights this fundamental purpose of supply chain management.
Organizations must pursue the goal of matching supply with demand in a timely fashion through
the most efficient use of cross-chain resources. Supply chain partners must work together to
maximize resource productivity, develop standardized processes, eliminate duplicate efforts, and
minimize inventory levels. Such steps will help the organization reduce waste, drive out costs, and
achieve efficiencies in the supply chain.
Reduction of supply chain expenses is a popular goal, particularly during times of economic
uncertainty when companies desire to conserve capital. Efficiency initiatives can focus on any
aspect of supply chain operations, though transportation and inventory are frequent cost control
targets.
MISSION: Drive Customer Value
Cost efficient fulfillment and inexpensive products are important, but supply chain managers must
also focus on value creation for their customers. Customers are the lifeblood of the organization
and create the need for a supply chain. Hence, a fundamental objective in supply chain
management must be to consistently meet or exceed customer requirements.
The goal of driving customer value begins with a market-driven customer service strategy that is
based on clearly understood customer requirements. Supply chain strategies, design, and
capabilities should emanate from these requirements. The result will be higher-quality service,
reduced variability, and fewer exceptions to address.

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 5. Critically evaluate challenges of Supply chain integration (internal integration,
forward, backward and horizontal integration) in your organization
Horizontal and Vertical Integration: An Overview
Horizontal integration and vertical integration are competitive strategies that companies use to
consolidate their position among competitors. Horizontal integration is the acquisition of a related
business. A company that opts for horizontal integration will take over another company that
operates at the same level of the value chain in an industry. Vertical integration refers to the process
of acquiring business operations within the same production vertical. A company that opts for
vertical integration takes complete control over one or more stages in the production or distribution
of a product.
While horizontal integration and vertical integration are both ways that companies grow, there are
important differences between the two strategies. Vertical integration occurs when a business owns
all parts of the industrial process while horizontal integration occurs when a business grows by
purchasing its competitors. This article will help explain the most important distinctions between
horizontal integration and vertical integration and will help companies decide which strategy is the
most advantageous for them by elucidating the pros and cons of each approach.
Forward Integration
Forward integration is a business strategy that involves a form of downstream vertical
integration whereby the company owns and controls business activities that are ahead in the value
chain of its industry, this might include among others direct distribution or supply of the company's
products. This type of vertical integration is conducted by a company advancing along the supply
chain.
A good example of forward integration would be a farmer who directly sells his crops at a local
grocery store rather than to a distribution center that controls the placement of foodstuffs to various
supermarkets. Or, a clothing label that opens up its own boutiques, selling its designs directly to
customers instead of or in addition to selling them through department stores.
Forward Integration – When there is a threat of forward integration into the industry by the
suppliers, their bargaining power is higher. There is a strong threat of forward integration when
the supplier supplies a very crucial part of the final product.
The Biggest Challenges in Supply Chains
Before bothering with the specifics of integration, it’s important to understand what problems plague
supply chains in the first place:

Order Changes and Cancellations: This happens at the end of the supply chain, and sends
reverberations throughout. The retailer is stuck with excess product, the wholesaler deals with fewer
orders and backing up inventory, and every other supplier feels the waves. Plus, consumer whim dictates
changes and cancellations, meaning there’s little way to predict it, and every case could have different
reasoning.

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Workers Unavailable: Companies provide quotes and production orders based on expected capacity,
and when workers are ill or otherwise unexpectedly absent, that can dramatically affect a supplier’s
capability. This scenario is especially true in the age of automation, where fewer workers are required but
each is responsible for overseeing the smooth production of many more units.

Production Facility Failure: Like with workers, unexpected mechanical or software problems with
manufacturing plants can devastate a supply chain, especially if it is operating on just-in-time, Lean
manufacturing methodologies.

Late Delivery of Materials: This logistical problem can stem from a number of transportation issues,
from as mundane as a traffic collision to as severe as genuine theft and piracy, depending on which
regions the supply chain serves.

Suppliers’ Conflicting Obligations: Independent suppliers all have one honest goal - make as much
money as possible by taking on as many orders as possible. In non-integrated chains, this means they
might have some tolerance for overlap between different customers’ orders. Should one customer decide
to increase production, another suddenly might be out of a production facility because the supplier
overcommitted.

Adversarial Relationships: Whether for the conflicting obligations cited above, or for simple reasons
of maintaining secrecy and negotiation advantages, customers and suppliers may have a relationship
that’s more foe than friend. They don’t share risks or benefits and lose out on potential gains from
working more closely together.

Transactional Relationships: Even when not adversarial, supplier and customer relationships in non-
integrated chains could be “just business,” emphasizing direct delivery and cost with no added value.
Every deal is a new negotiation, focused on the bottom line, and terribly short-sighted.

Limited Communications: Non-integrated supply chains may only talk to firms just one or two links
away from them, whether up or down the chain. If they have a buying relationship with the link before
them, focused on minimizing cost, and a selling relationship with the next link, focused on maximizing
profit, they can’t learn about bigger impending problems or greater opportunities further up or down the
chain.

BARRIERS TO INTERNAL INTEGRATION

Organizations must recognize obstacles, or barriers, that often serve to inhibit internal process
integration. Integration barriers originate in traditional practices related to organization structure;
measurement systems, inventory ownership, information technology and knowledge transfer
capability. Organization structure traditionally prevents cross-functional process from being
implemented for conducting business. Most traditional organizations are structured to divide
authority and responsibility according to functional work. That means both structure and budget
closely follow the work to be performed. The traditional practice is to assemble all persons related
to performing specific work into a functional department. Each of these departments becomes
concerned with achieving its own functional excellence. Since the goal of integration is
cooperation among functional areas, the formal organizational structure can hinder success.
Functions if excellently executed would combine to create overall superior performance.

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Successful integration of a process such as logistics requires mangers to look beyond their
organizational structure and facilitate cross-functional coordination. This may or may not be best
accomplished by creating a new organization structure. Regardless of the organization structure
realignment how an organization deals with cross-function matters is essential for successful
process integration. Cross-functional coordination was made difficult by the traditional
measurement systems. Most measurement systems mirror organization structure.
Managers may, at times have to assume increase costs within their functional area for the sale of
lower costs throughout the process. Unless a measurement system is created that does not penalize
managers, it would be more difficult to achieve logistical integration. To successfully facilitate
integration of logistics functions, managers must be encouraged to view their specific functions as
part of process rather than as stand-alone activities.
Unless a measurement system is created that does not penalize managers it would be more difficult
to achieve logistical integration. Inventory ownership is to maintain adequate supply to gain
comfort and protect against uncertainties like demand uncertainty and operational uncertainty.
The availability of inventory can support the economy of scale. Forward commitment of inventory
can also serve to facilitate sales. Creating benefits are associated with related costs. The critical
issue is the cost benefit relationship and risks related to incorrectly located or obsolete inventory.
The key resource to achieve integration is information technology. Sharing of information among
various functional departments can be helpful in achieving internal integration. Knowledge
transfer capability is another important factor required for internal integration. Limitation in the
ability to share experience can act as a barrier to internal integration. Failure to transfer information
or knowledge containment leads to foster the functional orientation by developing workforce
composed of specialists. The failure to transfer knowledge can also create a barrier to continued
integration when an experienced employee retires or for some other reason leaves the firm.
In many cases, replacement personnel are not available to "learn" from experienced worker. The
more serious situation is a failure of many firms to develop procedures and systems for transferring
cross functional knowledge. Transfer of this type of knowledge and experience can contribute
greatly to internal integration.
Backward Integration
 Inefficiencies
Implementing backward integration can result in inefficiencies. By acquiring the supplier of raw
materials required in the production process, the company will limit competition, resulting in
sluggishness and lack of innovation. The company will be less motivated to spend money on
research and development. As a result, the quality of the company’s end product(s) may decline,
and the costs of managing customer complaints will increase.
 Substantial investment
Another disadvantage of backward integration is the substantial investment that will be needed to
finance the acquisition. The company may be forced to utilize all its cash reserves and even take

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up more debts to finance the acquisition. If the company is unable to repay the debts or enjoy the
benefits of the acquisition, it will face the risk of default and even liquidation.
 Challenges Specific to Vertical Integration
Maintaining strong leadership in a company with a mixed set of cultures (i.e. manufacturing,
design, marketing, etc.)Potential loss of strategic core competencies through overexpansion
Higher costs for initial investments in upstream and downstream companies Less flexibility to
changes due to all partners relying on the same products’ performance Weakened incentives for
suppliers to control quality and price due to lack of competition and guaranteed sale

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