MBA 512 (Sec-1) (Operation Management) Topic:

Application of Operations Management techniques in AsusTek Computers Ltd.

Submitted to:
Dr. M. Ahsan Akhter Hasin Instructor, Operations Management

Prepared by:
01 02 03 04 S. M. Nahid Newaz Md. Shamsul Arefin Md. Khalequezzaman Kazi Mahtab Hossain ID: 0420185 ID: 0820330 ID: 0430102 ID: 0820407

Submission Date: 12/12/2013

Table of Contents
No. 1.0 Topic
Introduction of Operations Management 1.1 Role of Operations Management in organizations

Page No 1-3

1.2 Forecasting Method 1.3 Origin of the report 1.4 Objective of the report 2.0
Products of Asus 2.1 History of AsusTek Computer Inc. 2.2 Distribution Process of AsusTek Computer Inc.

3-5

3.0

Enterprise Resource Planning (ERP) 3.1 Avail of having ERP 3.2 ERP in AsusTek Computer Inc.

5-8

4.0 5.0

DATA DESCRIPTION Procedure, Observation and Data Analysis

5.1 SIMPLE MOVING AVERAGE

8 9-13

5.2 SINGLE EXPONENTIAL SMOOTHING 5.3 REGRESSION ANALYSIS

6.0 7.0 8.0 9.0

Measuring the Forecasting Error by - Mean Absolute Deviation (MAD) RESULTS AND DISCUSSION Conclusion Bibliography

13 15 16 17

Letter of Transmittal

To, Dr. M. Ahsan Akhter Hasin School of Business Independent University, Bangladesh Subject: Letter of Transmittal Dear sir, We take pleasure in submitting for your consideration on the Assignment on Application of Operations Management techniques in HP Bangladesh. We would like to express our gratitude to our instructor Dr. M. Ahsan Akhter Hasin, who gave us this opportunity to prepare this assignment. We commend this assignment to you to give high priority to its response to the findings and recommendations.

Yours sincerely, S. M. Nahid Newaz ID: 0420185 Md. Shamsul Arefin ID: 0820330 Md. Khalequezzaman ID: 0430102 Kazi Mahtab Hossain ID: 0820407

1.0 Introduction of Operations Management

Operations management is an area of management concerned with overseeing, designing, and controlling the process of production and redesigning business operations in the production of goods or services. It involves the responsibility of ensuring that business operations are efficient in terms of using as few resources as needed, and effective in terms of meeting customer requirements. It is concerned with managing the process that converts inputs in the forms of materials, labor, and energy into outputs in the form of goods and or services.

1.1 Role of Operations Management in organizations

Operations management provides versatile activities of a particular organization. Operations Management Implies of an efficient forecasting techniques to predict the future demand of the produced final products & as well as taking the corrective decisions regarding the production planning and inventory management. It could be denoted as one of the major tasks of the operation management team of that firm. Different forecasting methods are being used in every aspect of todays modern business.

1.2 Forecasting Method

Through intensive study, it has been found that, forecasting study works best while recognized models are used together. There are various types of forecasting methods such as: Qualitative study, Time series analysis, Causal method etc. For this particular assignment, we have used some methods of Time series analysis like Simple Moving Average, Single Exponential Smoothing, and Regression Analysis etc. Various models, mostly quantitative time series models have been used to determine the forecasted future monthly sales quantity of Laptops for the month of November 2013. For the simplicity of the work, actual monthly sales data have been taken from the November month of the year 2012 till to the second last month of the year 2013 (12Months). There are various methods of measuring errors like MAD (Mean absolute deviation), TS (Tracking signal), MSE (Mean Squared Error), MSD (Mean Squared Deviation) and MAPE (Mean Absolute Percentage) etc. But we have used
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only MAD (Mean Absolute Deviation) to measure errors. The more methods we will use to find the forecasting quantity of sold Asus Laptops the more accurate our forecast will be. Although in our assignment we have used limited methods to forecast, but still, it is our belief that the accuracy level of this particular assignment is satisfactory.

AsusTek Computer Inc.

AsusTek Computer Inc. pursues technological and aesthetic perfection through continuous innovation. We place ourselves in our customers shoes to develop a deep understanding of, and genuine empathy for, their needsenabling us to create user experiences that transcend the norm.

AsusTek Computer Inc. Places great importance on employee virtues. Five characteristics have been identified as key to the smooth development of processes and relationships. The five ASUS virtues are: Humility, Integrity, Diligence, Agility and Courage.

AsusTek Computer Inc. a technology-oriented company with a global staff of more than ten thousand and blessed with one of the world's top R&D teams, is renowned for highquality products and cutting-edge innovation. As a leading company in the new digital era, ASUS offers a complete product portfolio to compete in the new millennium.

1.3 Origin of the report

This production research report study is all about an appropriate forecasting model for a specific company AsusTek Computer Inc. Asia Pacific- Bangladesh, in predicting future quantity for production or order. The origin of the data used in the method was taken from forecast and the actual sales, for the period November 2012 to October 2013. Finally the forecast is calculated for the period of November 2013.

1.4 Objective of the report

The purposes of this report are: 1. To develop a suitable and accurate forecasting technique to predict future monthly Laptops sales quantity for the month of December, 2013 and to find out an appropriate forecasting model to use in predicting future quantity for production or order of the year 2013 (December) of Asus. 2. To partially fulfill the requirements of the course named Operation Management.

2.0 Products of Asus

Asus offers a wide range of products and services. The products line: Computers & Accessories Laptop Desktop Mobile Phones Tablets Personal digital assistants (PDAs), Servers, Computer monitors,
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 Motherboards, Graphics cards, Sound cards, Optical disc drives, Computer networking devices, Computer cases, Computer components and Computer cooling systems.

2.1 History of AsusTek Computer Inc.

AsusTek Computer Inc. was founded in Taipei in 1989 by T.H. Tung, Ted Hsu, Wayne Hsieh and M.T. Liao, all four having previously worked at Acer as computer engineers. At this time, Taiwan had yet to establish a leading position in the computer-hardware business. Intel Corporation would supply any new processors to more established companies like IBM first, and Taiwanese companies would have to wait for approximately six months after IBM received their engineering prototypes. By 2009, AsusTek Computer Inc. was receiving Intel engineering sample ahead of its competitor.

2.2 Distribution Process of AsusTek Computer Inc.

Asus is an international brand worldwide. They have their unique distribution channel for Bangladesh. They market their product through a domestic renowned company. Asus import their product from China and the product come to the Chittagong port and then it send to the warehouse, from where the product delivered to the different showroom located in the country. Lastly the showroom or the direct sales force can sell to the end user.

Head Office (Dhaka)

AsusTek Computer Inc. 19/2, West Panthapath, Salim Center (3rd~5th & 7th floor), Dhanmondi, Dhaka-1205. Tel.: (88-02) 8123273~5, 8123283~4, Fax: (88-02) 9145687, 9120045 Mailto: info@globalbrand.com.bd

Branch Office (Dhaka)

AsusTek Computer Inc. BCS Computer City, IDB Bhaban (1st floor), Shop no. SR-123/6, Agargaon, Dhaka. Phone: (88-02) 8123281, 9133776.

Distributor
Global Brand Pvt. Ltd. 19/2, West Panthapath (3rd~5th & 7th floor) Dhanmondi, Dhaka-1205, Bangladesh E-mail: sales@globalbrand.com.bd, info@globalbrand.com.bd,

3.0 Enterprise Resource Planning (ERP)

Systems integrate internal and external management of information across an entire organizationembracing finance/accounting, manufacturing, sales and service, customer relationship management, etc. ERP systems automate this activity with an integrated software application. ERP facilitates information flow between all business functions inside the organization, and manages connections to outside stakeholders.

Enterprise system software is a multi-billion dollar industry that produces components that support a variety of business functions. IT investments have become the largest category of capital expenditure in United States-based businesses over the past decade. Enterprise systems are complex software packages that offer the potential of integrating data and processes across functions in an enterprise. Although the initial ERP systems focused on large enterprises, there has been a shift towards smaller enterprises also using ERP systems.

Organizations consider the ERP system a vital organizational tool because it integrates varied organizational systems and enables flawless transactions and production. However, an ERP system is radically different from traditional systems development. ERP systems can run on a variety of computer hardware and network configurations, typically employing a database as a repository for information.

3.1 Avail of having ERP:

Every department can work independently and they no need to ask for help. Guarantees quick process of information flow in the organization. Reduces the trouble of paper work. Serving the customers efficiently and provides prompt services to the consumer and ensures that less error happens while processing information. It helps to gain competitive advantage. Easy to access the data in the system and user friendly Saves time. Stops stealing information The most important advantage of Enterprise Resource Planning is its accounting applications. ERP can integrate revenue information, profit analysis and cost of manufacturing and other financials. If a company wants to compete with global players, company should start implementing ERP. With use of ERP any organizations can get reduce the cost and lots of time will be saved.
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3.2 ERP in AsusTek Computer Inc.

Enterprise Resource Planning of AsusTek Computer Inc. gives clear idea about their operational strategy. Currently company uses ORACLE ERP; they started using this new ERP from August 2009. In AsusTek Computer Inc. every year company spends $ 3.7 billion for their ERP implementation and giving training for their workers. Previously company was using GXS ERP solutions for operations and to consolidate their supplier information. Since 2001 company was using GXS ERP in their company, with the use of that AsusTek Computer Inc. standing as an example of truly global organization. They implemented ERP when they want to cut reporting and analysis period, improve performance, and reduce maintenance costs and to achieve complete visibility into global stock and marketing and sales costs. After implementing ERP their company moved to third place in Plasma TV market, and they positioned at 5th place in cell phone segment. Company maintains their all information in ERP. They are updating each and every outgoing and incoming raw material and finished goods & unfinished goods. Company sends message to every department with the uses of ERP and company Chief IT Manager Mr. Wang said that by using ERP company reduced their order placing times and order processing time and he added that now company are able to process their order without errors. Since AsusTek Computer Inc. is an electronic company they started using ERP before 8 years now company enjoys the benefits of Enterprise Resource Planning. AsusTek Computer Inc. selected ERP very carefully because they had higher scare of information stealing but after using ERP they are maintaining their information in privacy. There are some disadvantages in implementation of Enterprise Resource Planning said by Wong; they spend nearly 2 months to train their employees and implementation ERP needs more money than any other implementation. But after start using ERP Company gained their investment within 2 years and it reduced the risk involvement in information flows. Company delivers the product in time they started using ERP because it gives clear cut information all

supplies and finished products. With the use of ERP company utilizes their supply chain management and customer relationship management very well. Hence I found that Enterprise Resource Planning helps company to save the time and to minimize the errors henceforth it leads to improve the performance of organization and increases the profit of the organization.

4.0 DATA DESCRIPTION

A time series is a time ordered sequence of observations of a variable. Time series analysis uses only the time series history of the variable being forecasted in order to develop a model for predicting future values. Analysis of time series that are requires the analyst to identify the underlyingbehavior of the series. This can often be accomplishing by merely plottingthe data and visually examining the plot. ASUS is one of the worlds famous Companies in producing and supplying digital goods like laptops, pc technology, server, tablet and other products. The main operation of ASUS is Transforming ASUS into a top-level innovative and diversified electric/electronic manufacturer with strong competitive power. ASUS aims to become an even stronger global contender by unleashing our powers of imagination to anticipate, ahead of others, and capitalize on the coming trends in the world business environment. Here we use monthly sold quantity or number of pieces sold of Laptops in ASUS from November 2012 to October 2013 which generates a sample size of 12 observations. As we said earlier, the data are monthly sold quantity of laptops of ASUS from November 2013 to October 2013. Thus a total of 12 observations are used in this analysis.

5.0 Procedure, Observation and Data Analysis

The purpose of this report is to compare the results of several forecasting methods to determine which model appears most appropriate for the given time series. The use of historical data contains hidden information which may prove useful in our attempt to forecast future number of Laptops sold quantity of per month. Our implicit assumption is that the underlying variables which influence Laptops sold quantity in the past will continue to influence in future. The computation method of different forecasting model is done with the help Microsoft Excel. In this report we examine the forecasting accuracy of several models, including Moving Average, Regression Analysis and Exponential Smoothing (single). We have also used MAD as measures of accuracy.

5.1 SIMPLE MOVING AVERAGE When demand of a product is neither growing, nor declining rapidly, and it does not have any seasonal effect, then this method is applicable. Formula is: Ft = (At-1 + At-2 +At-3 +----------------------------------+ At-n)/n Where Ft = Forecast for period t. n = No. of periods to be averaged. At-1 = Actual occurrences in the past period. At-2 = Actual occurrences in the two period ago. At-n= Actual occurrences up to n period ago. Month S/N (pcs) 1 November 2012 1
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Year

Period

Actual sell

3 Months MA Forecast (pcs)

-

120

2 3 4 5 6 7 8 9 10 11 12

December January February March April May June July August September October

2012 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013

2 3 4 5 6 7 8 9 10 11 12

145 117 153 178 142 165 186 200 254 290 271

127 138 149 158 162 164 184 213 248

F13 Nov. 2013 = 254+290+271 = 272 Pcs. (When 3 Month MA Forecast) 3

SIMPLE MOVING AVERAGE

350 300 250 200 150 100 50 0 1 2 3 4 5 6 7 Period 8 sell 9 10 11 12 13 14

Chart 1: Graphical representation of Simple Moving Average.

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5.2 SINGLE EXPONENTIAL SMOOTHING

Single exponential smoothing calculates data by computing exponentially weighted averages and provides short-term forecasts. This procedure works best for data without a trend or seasonal component. Each new forecast is based on the previous forecast plus a percentage of the difference between that forecast and the actual value of the series at that point. That is: Next forecast = Previous forecast + (Actual - Previous forecast) Where (Actual- Previous forecast) represents the forecast error and is a percentage of that Error, then more concisely, Ft = Ft-1 + (At-1- Ft-1) Where, Ft = Forecast for the next period (week, month, quarter, year, etc.), Ft-1 = Forecast for the previous period, At-1 = Actual demand/sales for the previous period = Smoothing constant (0-1) or Ft = At-1+ (1-) Ft-1

Let, Smoothing Constant: Alpha () Smoothing Constant: Alpha () Smoothing Constant: Alpha () = 0.60 = 0.40 = 0.25

Ft = At-1+ (1-) Ft-1 = 0.60 (271) = 0.40 (271) = 0.25(271)

+ (1- 0.60) 248 + (1- 0.40) 248 + (1- 0.25) 248

= 261.8 or 262 Pcs. =257.2 or 258 Pcs. = 253.75 or 254 Pcs.

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5.3 REGRESSION ANALYSIS

Regression analysis is useful when the trend is increasing or decreasing. The forecast followsthe basic regression formula which is Y= a + bx, where Y is the forecast for the month foundby the value of a, b and period x.

S/N

Month

Year

Period (X)

Actual sell (Y) 120 145 117 153 178 142 165 186 200 254 290 271 Y=2221

XY

X2

1 2 3 4 5 6 7 8 9 10 11 12

November December January February March April May June July August September October

2012 2012 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013

1 2 3 4 5 6 7 8 9 10 11 12 X=78

120 290 351 612 890 852 1155 1488 1800 2540 3190 3252

1 4 9 16 25 36 49 64 81 100 121 144 X2 =650

XY=1654 0

Forecast for the next month would be:

XY n x y
b=

X2 n x

16540 12 (6.5) 185.08 650 12 (6.5) 2

= 14.7116 or 15 (approximately)

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a = y - b x

= 185.08 - (15*6.5)

= 87.58 or 88

So, Forecast for the next period, Y13 Nov. 2013 = a + b (13) {As Y= a + bx} Y 13 Nov. 2013 = 88 + 15*13 = 283 Pcs.

Sell
350 300 250 200 150 100 50 0

Graph 2: Regression Analysis System

6.0 Measuring the Forecasting Error by - Mean Absolute Deviation (MAD)

There may be difference between actual sales and forecast amount. It is necessary not only to forecast, but also to measure error for future adjustment. Forecast Error is measured using Mean Absolute Deviation (MAD) MAD= | At-Ft | / n Where, n= No. of periods. At = Actual sales in period t. Ft = Forecasted sales in period t

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S/N

Month

Year

Period

Actual sell

3 Months MA Forecast (Pcs.)

|At-Ft |

1 2 3 4 5 6 7 8 9 10 11 12

November December January February March April May June July August September October

2012 2012 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013

1 2 3 4 5 6 7 8 9 10 11 12

120 145 117 153 178 142 165 186 200 254 290 271

127 138 149 158 162 164 184 213 248 Total Deviation

36 14 5 23 82 108 34 51 12 310

When Moving Average Length is 3 So, MAD = 310/9 = 34.44 or 35 Pcs. (Approximately)

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350 300 250 200 150 100 50 0 1 2 3 4 5 6 7 8 9 10 11 12 13

Period

Sell

3 months Forecast

Forecast Error

Graph 3:Mean Absolute Deviation (MAD)

7.0 RESULTS AND DISCUSSION

The observed the results are combined and shown as follows:

Serial no 01

Forecasting methods Simple Moving Average

Results F13 November 2013= 272 pcs

(When 3 Month MA Forecast)

Error by MAD

02

Single Exponential Smoothing

262 pcs (When = 0.60) 258 pcs (When = 0.40) 254 pcs (When = 0.25)

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03

Regression Analysis

283 pcs

The purpose of forecasting is to reduce the risk in decision-making. For our chosen company ASUS, appropriate forecasting technique examining help to identify the peak orderproducing-delivering-customer service season, and help managers plan accordingly to handle the peak load very effectively and efficiently. Forecasting also helps in scheduling staff and resources and in financial planning. To forecast future quantity for producing or quantity for order to sell of any home products or appliances; it must have a forecasting method that is reliable and accurate. It must also minimize costs, of course, but lowest cost is not an absolute priority, given the serious financial ramifications of forecast error. The forecast should be cost-effective; the benefits should overweight the costs. Therefore it makes a great deal of sense to experiment with various forecasting models to determine which model generates the most reliable results.

8.0 Conclusion
To that end this report examines the forecasting accuracy of several models, including , Simple Moving Average, Exponential Smoothing, Regression Analysis, By examining these models using MAD, as measures of accuracy, our evaluation shows that Regression analysis is giving moderate result(rationally acceptable ) in terms of the original data and resulting less error comparatively to other forecasting techniques .

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9.0 Bibliography

Sources used in this report have followed theories and information from the following books and corporate office: 1. Chase; Aquilano and Jacobs (2000), Production and Operations Management: Manufacturing and services (8th ed.), Irwin- McGraw Hill. 2. ASUS Bangladesh (2013), ASUS Products. Retrieved November 26, 2013, from http://www.asus.com/bd/.

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