Expert answer:Operations Management 8+
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Student 1
The organization has the choice in production either by concentrating at one site or by spreading
production on multiple facilities. The decision of this made at the top level management and
communicated down. Each way has benefits to the organization, in case of concentrating, the
organization will revel economies of the scale. In case of having multiple facilities for
production, the organization will benefit by reducing transportation cost, enhance learning about
the organization, and increase product specific efficiency.
If the organization decide on having centered sites or multiple facilities, it must look into the
following: location, competition, history of the site, building’s infrastructure. Centralized
manufacturing strategy is having one main facility from which the product is transported and
distributed. It makes ensuring high quality as the managers can validate one process and reduce
the need to having complicated technology process to transfer other sites.
Having multiple facilities for manufacturing, transporting, and distributing the product called
decentralized strategy. It increases capital investment to set up these facilities (Baumers &
Dickens & Tuck & Hague, 2016). There is a substantial challenge of demonstrating product and
process consistency across multiple manufacturing sites (Davie, 2013). distribution of products
manufactured is costly, it might be less costly to have another facility in another geographic
location that is less expensive to ship products to local markets.
SPIMACO is a Saudi Pharmaceutical Industries & Medical Appliances Corporation that was
established in 1986. SPIMACO Addwaeih’s core business is medical and pharmaceutical, which
includes development, manufacturing, and sales of pharmaceutical products and medical
appliances. SPIMACO main manufacturing facility is located in Al–Qassim; the pharmaceutical
Plant was planned, constructed and equipped up to the highest quality levels. SPIMACO serves
successfully several markets locally and internationally and has built superior relations with
regulatory bodies and the medical professions at large (Quality in SPIMACO, 2016). The
company centralized facility to develop, manufacture, and distribute products to local and
international markets. Choosing to be centralized is very important in this industry as medicines
require the specific environment in developing and in manufacturing. The complexity of this
industry operations made having single manufacturing facilities more suitable as the company
ensuring that products are exactly within the specifications.
References
Baumers, M., Dickens, P., Tuck, C., & Hague, R. (2016). The cost of additive manufacturing:
machine productivity, economies of scale and technology-push. Technological forecasting and
social change, 102, 193-201.
Davie, N. (2013). How many facilities? Centralized vs decentralized manufacture.
Commercializing Living Therapies. Retrieved from https://www.signalsblog.ca/how-manyfacilities-centralized-vs-decentralized-manufacture/
Quality in SPIMACO. (2016). Manufacturing. Retrieved
from http://www.spimaco.com.sa/manufacturing/quality
Student 2
Decision theory stands for a wide-ranging methodology to decision formulating. It is
appropriate for different operations management determinations, such as location
planning, equipment selection, product and service design, and capacity planning (Stevenson,
2012). Decision theory is an interdisciplinary vision to which philosophers, economists,
psychologists, computer scientists and statisticians supply their proficiency and expertise
(Pettigrew, 2015). On the other hand, decision theories from all regulations contribute to a
number of fundamental concepts and merits.
As an important part of supply chain management, the distribution system design is a
strategic issue for large scale corporations (Tang, Tang, & Wang, 2013). The key components of
the distribution system design are the facility location and customer allocation. The facilities
should be located near the warehouses to decrease the transportation cost and the capacity of
each facility should supply the demands of the customers allocated to it. Recently, various
logistics centers have been established around large cities for quickly distributing freights (Tang,
Tang, & Wang, 2013).
The location planning problem is a classical problem in the field of operations research. In
other words, the solution to the problem aims to maximally meet the resource demand by a given
number of facilities (Du, & Sun, 2015). Specifically, the intermediate value problem, the
maximal covering location problem and the center problem are the three classical models of the
location problem. The solution to the intermediate value problem, which could provide the
shortest distances from service requiring places to the destinations, was posed by Hakimi in
1964. The covering location problem can be divided into the maximal covering location problem
and the set covering location problem ReVelle posed the maximal covering location problem by
restricting the optimal location sites of the service centers to the network nodes. The set covering
location problem was first posed by Roth , who resolved the location problem of fire centers, the
optimal ambulance location and other emergency service facilities. Different from the set
covering the location problem, the center problem is the minimax problem, which calculates the
minimax distance from any service requiring places to the nearest facilities under the constraint
of a fixed number of facilities (Du, & Sun, 2015).
Location decisions confront both new and existing organizations. Growth, market shifts,
depletion of raw materials, and the introduction of new products and services are among the
reasons organizations are concerned with location decisions (Stevenson, 2015). The importance
of these decisions is underscored by the longterm commitment they typically involve and by
their potential impact on the operating system. The primary location options available to existing
organizations are to expand an existing location, move to a new location, maintain existing
facilities while adding another facility in a new location, or do nothing. In practice, the major
influences on location decisions are location of raw materials, labor supply, market
considerations, community-related factors, site-related factors, and climate. Foreign locations
may be attractive in terms of labor costs, abundance of raw materials, or as potential markets for
a firm’s products or services. Problems organizations sometimes encounter in foreign countries
include language differences, cultural differences, bias, and political instability. A common
approach to narrowing the range of location alternatives is to first identify a country or region
that seems to satisfy overall needs and then identify a number of community-site alternatives for
more in-depth analysis. A variety of methods are used to evaluate location alternatives. Those
include locational cost-profit-volume analysis, factor rating, and the center of gravity
method. There are numerous commercial software packages available for location analysis.
Many packages employ linear programming or mixed integer programming algorithms. In
addition, some software packages use heuristic approaches to obtain reasonable solutions to
location problems (Stevenson, 2015).
References:
Du, G., & Sun, C. (2015). Location planning problem of service centers for sustainable home
healthcare: Evidence from the empirical analysis of shanghai. Sustainability, 7(12),
15812-15832. doi:10.3390/su7121578
Pettigrew, R. (2015). Transformative experience and decision theory. Philosophy and
Phenomenological Research, 91(3), 766-774. doi:10.1111/phpr.12240
Stevenson, W. J. (2015). Operations Management (12th ed.). McGraw-Hill Education. 978-0-07802410-8
Tang, J., Tang, L., & Wang, X. (2013). Solution method for the location planning problem of
logistics park with variable capacity. Computers & Operations Research, 40(1), 406417. doi:10.1016/j.cor.2012.07.011
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