Operations Management Essay Example | Topics and Well Written Essays - 5000 words

operations Management - Essay Example misgiving 1 (b)When profit calculation is being done, it is important to produce account of fixed cost especially when using TOC establish initiatives. The imagination of TOC relies on three close important elements i.e. Inventory, Operating expenses and Throughput (Choe and Herman, 2004 and Herroelen and Leus, 2005) all these three aspects need to be c atomic number 18fully monitored so that the production processes are enhanced and the output level of the organization add-ons. Throughput is described as sales revenue minus tote up variable costs Inventory is defined as the amount of total money invested in the demarcation which can be or is to be sold and Operating expense is the amount of all non-variable costs that are associated in converting inventory into throughput.It is evident from the explanation of the three important elements of TOC based initiative that two types of costs are important when calculating the profit. The real pro fit amount is that one which is retained by the business after it covers its fixed and variable costs. From the table given in Question 1(a), it can be concluded that Fixed costs are important when calculating Net Income as it is the profit that is left(a) when all the expenses are paid off by the company. The main fixed costs for any manufacturing relate like Hi-Fidelity Ltd. is the machinery that is used in the production processes and its cost needs to slide by at a borderline level. Fixed cost constitute majority share of the cost and that is why it needs to be unploughed constant if not constant, then it should not increase at an accelerating rate as well. Hence, in TOC based initiative, Fixed costs are the crucial part of profit calculation as they help in determining the Return on Sales so that the company can decide about the increase in sales required so that it is able to earn high Net Income in the long-run. Question 1 (c) It has been revealed by the studies of Bhard waj, Gupta and Kanda (2010) and Godratt Institute (2009b) that the organizations that implement the concept of TOC require less time for initial progress phase than that required in both function management and six sigma methods. TOC concept allows the organizations to focus on one area in one time whereas the other continuous improvement processes require the professionals to keep on monitoring the systems to identify issues in other areas and they necessitate the need of continuous up measure of the systems as well. The major benefit gained from the application of TOC based initiatives is that they manage the variations effectively rather than reduce them which differentiates TOC from lean and six sigma. TOC helps the organizations in saving time and managing the complete execution process properly. Since the main aim of the concept is to identify the constraint that is creating problem in the companys production process, the next step is to annunciation it so that the variatio n can be managed. The best aspect of TOC concept is that it follows a systematic barbel which can be described as follows 1. Identifying the starting conditions of the