Operations Management Issue, capacity planning, high demand, strategy, service quality impairment, decision tree, small expansion, large expansion, load distance, optimization
In the above scenario, Jackson Medical Diagnostics Lab faces a critical operations management issue in its capacity planning and expansion. The question is from the general manager, who raises their concern about whether the lab can be in a position to produce such demand in the future since capacity clearly limits expanded demand currently. Against the continued and steady growth of the lab over the years, with a forecast indicating high chances of sustained high demand for its services in the next five years, the expansion becomes a critical decision.
The operations management issue relates to the decision of the best strategy that the lab should undertake in its expansion. The paper looks into two strategic options that the lab would take in its expansion. The two options are a small expansion, buying up offices adjacent to the lab, and a large-scale expansion, moving to a different floor in the same building. Therefore, it is critical as it has a direct impact on profitability, efficiency, and the ability of the lab to keep up with the increasing volume without loss or service quality impairment (Ruffini, 2022).
[...] An assessment ought to be done that looks into different factors like the existing capacity utilization, forecasted demand, possible profitability for different expansion alternatives, and potential operational implications for the decision (Ruffini, 2022). Besides, compatibility with the infrastructure, such as layout planning and facility design, should be determined for the expansion related to the future development of the lab. Component Decision Tree Analysis To analyze the expansion decision effectively, we can construct a decision tree that outlines the possible choices, associated probabilities, and profitability outcomes for Jackson Medical Diagnostics Lab. Decision Tree In this decision tree E represents the expansion decision. [...]
[...] Planning and Facility Location Component Operations Management Issue In the above scenario, Jackson Medical Diagnostics Lab faces a critical operations management issue in its capacity planning and expansion. The question is from the general manager, who raises their concern as to whether the lab can be in a position to produce such demand in the future since capacity clearly limits expanded demand currently. Against the continued and steady growth of the lab over the years, with a forecast indicating high chances of sustained high demand for its services in the next five years, the expansion becomes a critical decision. [...]
[...] Given the data table R O P E B S R 350 30 40 28 5 O 410 76 42 23 P 15 295 2 E 37 8 B 3 S We calculate the load distance for each room combination: LD = 350 * 15 = 5250 LD = 30 * 15 = 450 LD = 40 * 15 = 600 LD = 28 * 15 = 420 LD = 5 * 15 = 75 LD = 410 * 15 = 6150 LD = 76 * 15 = 1140 LD = 42 * 15 = 630 LD = 23 * 15 = 345 LD = 15 * 15 = 225 LD = 295 * 15 = 4425 LD = 2 * 15 = 30 LD = 37 * 15 = 555 LD = 8 * 15 = 120 LD = 3 * 15 = 45 Now, we sum up all the individual load-distance values: Total LD = LD + LD + LD + LD + LD + LD + LD + LD + LD + LD + LD + LD + LD + LD + LD = 5250 + 450 + 600 + 420 + 75 + 6150 + 1140 + 630 + 345 + 225 + 4425 + 30 + 555 + 120 + 45 = 15870 Therefore, the primary purpose layout load distance is 15,870 feet. This measure implies the total walking distance that employees are required to travel all around the layout. It aids in highlighting possible bottlenecks that may result from an inefficient layout and might be resolved through layout optimization. The performance review of the employee movement distance will enable an understanding of the current process efficiency and prediction of optionality factors to minimize the employee travel distance, improving operational effectiveness and productivity on the production line. [...]
[...] PH and PL represent the probabilities of high demand and low demand, respectively. Given the probabilities provided (PH = 0.60, PL = 0.40) and the profitability estimates for each scenario, we can calculate the expected profitability for each expansion option: Expected Profitability of Small Expansion (EPSE): EPSE = (PH * ProfitSmallHigh) + (PL * ProfitSmallLow) = (0.60 * $55,000) + (0.40 * $35,000) = $33,000 + $14,000 = $47,000 Expected Profitability of Large Expansion (EPLE): EPLE = (PH * ProfitLargeHigh) + (PL * ProfitLargeLow) = (0.60 * $90,000) + (0.40 * $52,000) = $54,000 + $20,800 = $74,800 When compared to EPSE and EPLE, the large expansion option yields a higher expected profitability. [...]
[...] References Ruffini, K. (2022). Worker Earnings, Service Quality, and Firm Profitability: Evidence from Nursing Homes and Minimum Wage Reforms. The Review of Economics and Statistics, pp. 1-46. [...]
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