Operations Management (MB241) : January 2004 Suggested Answers

Suggested Answers
Operations Management (MB241) : January 2004
(10 marks) <>
END OF SECTION C
END OF QUESTION PAPER
1. Answer : (c)
Reason : Operational Decisions are short-term decisions which are routinely taken and generally have a time
frame of less than a week. They address the problems at the grass-roots level such as scheduling the
weekly production, assigning jobs to persons etc.
Hence, from above discussion, we can infer that option (c) is correct.
Options (a), and (e) are incorrect because they fall under the purview of Strategic Decision.
Options (b) and (d) are incorrect because they fall under the purview of Tactical Decision.
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2. Answer : (d)
Reason : A company that has a Short product cycle can put new products into production quickly and introduce
them to the market at breakneck speed. In this way, it can achieve first-mover advantage over its
competitors.
Hence, from above discussion, we can infer that option (d) is correct.
Option (a) is incorrect. In Production flexibility, organizations specialize in having highly flexible and
rapidly responsive operations. Hence, it is not applicable in this case.
Option (b) is incorrect. An organization can have a production process and capacity that allows it to
produce a product and satisfy a customer’s request quickly. This is called Quick delivery. Hence, it is
not applicable in this case.
Option (c) is incorrect. An organization that produces a product of higher quality than its competitors
can increase its sales volume even while commanding a higher price. Hence, it is not applicable in this
case.
Option (e) is incorrect. Product variety can provide competitive advantage to organizations in certain
industries. It is not applicable in this case.
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3. Answer : (b)
Reason : A Linear Programming problem has a well defined single objective.
Hence, from above discussion, we can infer that option (b) is not true about Linear Programming.
Option (a) is true because it is the definition of Linear Programming.
Option (c) is true because it is applicable when there are alternative courses of action to solve the
problem.
Option (d) is true because the decision variables are flexible enough to take any non-negative
(including fractional values) values within a range.
Option (e) is true because the achievement of the objective function is restricted by a set of binding
factors or constraints.
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4. Answer : (e)
Reason : In Cellular Manufacturing, total production area is divided into cells, each cell consisting of a group of
dissimilar machines which work on products that have similar shapes and processing requirements.
Parts are grouped into families that follow a common sequence of steps. This requires maintenance of a
computerized parts classification and coding system.
Hence, from above discussion, we can infer that option (e) is correct.
Option (a) is incorrect. Product Focussed Design is mostly used in production departments that are
organized according to the type of product or service being produced. Equipment or work processes are
arranged according to the progressive steps by which the product is made. Hence, it is not applicable in
this case.
Option (b) is incorrect. In Process Focussed Design, similar equipment or functions are grouped
together. It is usually used to produce small quantities (or batches) of different items on relatively
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general-purpose machinery, which is less expensive. Hence, it is not applicable in this case.
Option (c) is incorrect. Discrete Unit Manufacturing refers to the production of distinct products like
radio or television sets. It is not applicable in this case.
Option (d) is incorrect. Process Manufacturing involves the movement of materials such as screening,
storing, mixing etc. It is not applicable in this case.
5. Answer : (c)
Reason : Hybrid layout is a combination of different types of layouts. For example, a plant may have basically
adopted a process layout, but one section of it could be using a product layout. e.g. television.
Hence, from above discussion, we can infer that option (c) is correct.
Option (a) is incorrect. Aircraft manufacturing makes use of a fixed position layout.
Option (b) is incorrect. Car manufacturing makes use of a product layout.
Option (d) is incorrect. Paper manufacturing is an example of process manufacturing.
Option (e) is incorrect. Beer manufacturing is an example of process manufacturing.
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6. Answer : (e)
Reason : Computer Search is a set of directions that systematically guides a computer in evaluating a set of
alternative aggregate plans. It is used by many managers to find the optimal aggregate plan. It is a very
flexible model and the cost functions need not be constant and linear.
Hence, from above discussion, we can infer that option (e) is not correct with respect to Computer
Search used in aggregate planning.
Option (a) is correct because it is the definition of Computer Search.
Option (b) is correct because the possible combinations of workforce levels and output rates for each
period in the planning horizon are explored by the computer.
Option (c) is correct because a very systematic search is done with the help of inbuilt specific rules.
Option (d) is correct because it may not yield the optimal plan sometimes, as all the possible plans are
not examined.
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7. Answer : (a)
Reason : As per the Economic Order Quantity (EOQ) model developed by F.W.Harris, the cost of an item is
independent of the order quantity i.e., no economies of scale are involved in the purchase of materials.
Hence, from above discussion, we can infer that option (a) is not a correct assumption of the Economic
Order Quantity (EOQ) model developed by F.W. Harris.
Options (b), (c), (d) and (e) are all correct assumptions of the Economic Order Quantity (EOQ) model.
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8. Answer : (b)
Reason : Purchase requisition is a document containing a clear specification of required materials, quantity
required and probable date of requirement.
Hence, from above discussion, we can infer that option (b) is correct.
Option (a) is incorrect. Purchase order is a legal document that authorizes the supplier to produce the
goods. Hence, it is not applicable here.
Option (c) is incorrect. Request for proposal is a request for bids that indicates the specifications for a
software project or other system needs. Hence, it is not applicable here.
Option (d) is incorrect. Quotation is a document given by the suppliers, in which they quote the price
per unit of material, the delivery schedule, the mode of transportation and special conditions of the
supplier, if any. Hence, it is not applicable here.
Option (e) is incorrect. Request for Comments (RFC) is a set of technical and organizational notes
about the Internet (originally the ARPANET), beginning in 1969. Hence, it is not applicable here.
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9. Answer : (d)
Reason : Specialization of labour is a two-edged sword in job design as it has both potential advantages and
disadvantages. Becoming a specialist in some particular area can provide a worker a great sense of
pride. The fewer the tasks a worker does and the narrower the range of his responsibilities, the more
skilled and efficient the worker becomes, up to a point. There are simpler work instructions and ease in
production control because of consistence in work assignment.
Hence, from above discussion, we can infer that option (d) is not a disadvantage of Job Specialization.
Options (a), (b), (c) and (e) are all disadvantages of Job Specialization.
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10. Answer : (c) <>
Reason : Work Sampling is a technique of analyzing work by taking a number of observations, usually, at
random, to see the relative frequency with which various elemental activities take place. This technique
does not require extensive training to perform and can be performed simultaneously on several workers.
The technique is extensively used to measure the performance of workers involved in doing indirect
labour jobs and can be adopted in service organizations like schools and hospitals.
Hence, from above discussion, we can infer that option (c) is correct.
Option (a) is incorrect. Time Study involves a process of timing a worker as the job is done, summing
up the times for the necessary elements of the job, incorporating a time allowance for personal and rest
breaks, and estimating the total time that is required to perform the job. Hence, it is not applicable here.
Option (b) is incorrect. Standard Data is a technique in which standards for any new common tasks are
determined based on the standards previously set for old common tasks. A database of work element
durations with information obtained through previous studies is used as standard data. Hence, it is not
applicable here.
Option (d) is incorrect. Historical Analysis makes use of historical data to set work standards. In this
technique, the output of a particular worker or department, over a specific period of time, is divided
with the number of work hours expended to arrive at the normal time (assuming that the performance
was consistent over the period of time). Hence, it is not applicable here.
Option (e) is incorrect. In Employee Self-Timing, workers are asked to set work standards for
themselves. Hence, it is not applicable here.
11. Answer : (b)
Reason : Processing operations involve the manipulation of a tool by a robot to perform a process on the work
part. Spot welding, continuous arc welding and spray-painting are some examples of such applications.
Hence, from above discussion, we can infer that option (b) is correct.
Option (a) is incorrect. Materials handling applications include materials transfer and machine loading
and unloading. Hence, it is not applicable here.
Option (c) is incorrect. Assembly involves assembling of parts to form the end product. Hence, it is not
applicable here.
Option (d) is incorrect. In a typical inspection job, the robot positions a sensor with respect to the work
part and determines whether or not the part is consistent with the quality specifications. Hence, it is not
applicable here.
Option (e) is incorrect. Neither Materials handling nor Assembly is applicable here.
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12. Answer : (e)
Reason : Business planning process is a formal process which addresses both long- and intermediate-range plans
like new product introductions, levels of sales, new process requirements, capital investments and new
distribution strategies. And operations plan is a portion of intermediate-range business plan which the
operations department is responsible for implementing.
Hence, from above discussion, we can infer that option (e) is correct.
Option (a) is incorrect. Business planning process addresses both long- and intermediate-range plans
and not just long-range plan.
Option (b) is incorrect. Business planning process addresses both long- and intermediate-range plans
and not just intermediate-range plan.
Option (c) is incorrect. Business planning process addresses long- and intermediate-range plans and
operations plan also as it is included in the intermediate-range plan. Operations plan is not the only plan
addressed by business planning process.
Option (d) is incorrect. Business planning process addresses long- and intermediate-range plans and
operations plan also as it is included in the intermediate-range plan.
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13. Answer : (a)
Reason : Product Focussed Design is mostly used in production departments that are organized according to the
type of product or service being produced. A narrow range of activities is performed repeatedly on only
a few product designs.
Fixed sequence robots perform a sequence of operations according to a given set of procedures. These
robots are not very flexible and they lack the versatility to change their work sequence. Hence they are
used to perform a limited or fixed number of activities and are ideal for Product Focussed production
system.
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Hence, from above discussion, we can infer that option (a) is correct.
Option (b) is incorrect. In Process Focussed Design, similar equipment or functions are grouped
together. It is usually used to produce small quantities (or batches) of different items on relatively
general-purpose machinery. It requires flexible robots like variable sequence robots.
Option (c) is incorrect. Job-shop is another name for Process Focussed Design, which is not applicable
here.
Option (d) is incorrect. Intermittent system is another name for Process Focussed Design, which is not
applicable here.
Option (e) is incorrect. Functional layout is another name for Process Focussed Design, which is not
applicable here.
14. Answer : (e)
Reason : Operations control functions include purchasing parts and components, executing work orders,
monitoring material movements, checking worker performance, reviewing the distribution activities,
and so on. These activities are carried out by manufacturing line workers and staff supervisors.
Hence, from above discussion, we can infer that option (e) is correct.
Option (a) is incorrect. Top-level managers generally carry out product planning functions.
Option (b) is incorrect. Middle-level managers generally carry out operations planning functions.
Option (c) is incorrect. Operations control functions are carried out by both manufacturing line workers
and staff supervisors, and not manufacturing line workers alone.
Option (d) is incorrect. Operations control functions are carried out by both manufacturing line workers
and staff supervisors, and not staff supervisors alone.
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15. Answer : (c)
Reason : ERP has helped organizations realize order-winners and qualifiers by providing a software that
facilitates modeling of the logistics process in terms of items, bill of materials etc. Intelligent Resource
Planning is the software built into many ERP packages to provide advanced materials and capacity
planning facilities so as to take care of order-winners and qualifiers in a specific situation.
Hence, from above discussion, we can infer that option (c) is correct.
Option (a) is incorrect. Materials Requirement Planning (MRP) enables the implementation of the
Master Production Schedule by showing time-phased requirements for releasing and receiving of
materials. Hence, it is not applicable here.
Option (b) is incorrect. Manufacturing Resource Planning (MRP II) is an integrated information system
that shares data among and synchronizes the activities of production and the other functional areas of
the business like marketing, finance etc. It is not applicable here.
Option (d) is incorrect. During Information Process Reengineering, a company goes in for a review of
its functioning in order to make dramatic gains in the market. It is not applicable here.
Option (e) is incorrect. Dr. Michael Hammer defines BPR as “the fundamental rethinking and radical
redesign of business processes to achieve dramatic improvement in critical, contemporary measures of
performance such as cost, quality, service and speed.” It is not applicable here.
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16. Answer : (e)
Reason : Demand Chain focuses on the end-user. This focus on the end-user is fueling a paradigm shift from
supply to demand, causing companies to reexamine their roles in the supply chain.
A common misconception about demand chain thinking is that consumers always buy from retailers.
Though consumers often buy from retailers, they are also searching for new ways to obtain products
and services. Increasingly, they are showing a willingness to buy from any entity in the supply channel
that will give them value pricing, quality products and efficient delivery systems.
Hence, from above discussion, we can infer that option (e) is false in relation to Demand Chain.
Option (a) is true because the focus is mostly on the end-user.
Option (b) is true because the players in today’s emerging Demand Chains are the same as those in
traditional supply chains.
Option (c) is true because responsibilities are assumed by the Demand Chain as a whole.
Option (d) is true because in a Demand Chain, products don’t necessarily originate from manufacturers.
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17. Answer : (c)
Reason : Critical Ratio (CR) is a job sequencing technique that is used to verify whether a job is on schedule or
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not. It is the ratio between the actual time that is remaining to complete the job and the scheduled time remaining
to complete the job. An activity with CR less than one is said to be behind schedule, and that which is
more than one is ahead of schedule. An activity with CR equal to one is on schedule.
Hence, from above discussion, we can infer that option (c) is correct.
Option (a) is incorrect. We have restricted our analysis to jobs which are not already overdue. So CR
analysis is not applicable here.
Option (b) is incorrect. An activity with CR less than one is said to be behind schedule.
Option (d) is incorrect. An activity with CR more than one is said to be ahead of schedule.
Option (e) is incorrect. An activity with CR between 0 and 1 is behind schedule.
18. Answer : (d)
Reason : Important principles and actions that enhance equipment maintenance in JIT manufacturing systems
are:
• Organizations should design their equipment as simply as possible, reduce the variety of
machines, and standardize replacement parts.
• Organizations should collect information about the frequency and causes of equipment failure and
use this knowledge to allocate maintenance resources efficiently.
• Organizations can rebuild equipment by replacing all worn parts at once, rather than replacing
them one by one.
• Organizations should carefully plan their purchases so that all parts are available when needed.
Hence, from above discussion, we can infer that option (d) is correct.
Option (a) is incorrect. Both actions (I) and (II) are applicable and not only (I).
Option (b) is incorrect. Both actions (I) and (II) are applicable and not only (II).
Option (c) is incorrect as organizations can rebuild equipment by replacing all worn parts at once,
rather than replacing them one by one.
Option (e) is incorrect. Action (III) is not applicable.
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19. Answer : (e)
Reason : The cost of undetected faults with respect to quality inspection includes customer complaint and
product replacement cost.
Hence, from above discussion, we can infer that option (e) is correct.
Option (a) is incorrect. The cost of undetected faults includes both customer complaint and product
replacement cost and not customer complaint alone.
Option (b) is incorrect. Stock-out Cost is the cost associated with stock out of inventories. So, it is not
applicable here.
Option (c) is incorrect. The cost of undetected faults includes both customer complaint and product
replacement cost and not product replacement cost alone.
Option (d) is incorrect. Ordering Cost is the cost associated with the process of purchasing materials for
inventory. So, it is not applicable here.
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20. Answer : (b)
Reason : The set of Irregular Preventive Maintenance activities, which detect problems while the equipment is
still performing at satisfactory levels and rectify the problems when the equipment is not scheduled to
be used are referred to as Predictive Maintenance activities. Newly developed sophisticated
technologies are used in this type of Maintenance.
Hence, from above discussion, we can infer that option (b) is correct.
Option (a) is incorrect. Remedial Maintenance includes activities that restore facilities and equipment to
an acceptable working condition after a breakdown or malfunction has occurred or the normal
operations hindered. So, it is not applicable here.
Option (c) is incorrect. In Centralized Maintenance, there is one large maintenance department for the
whole company. So, it is not applicable here.
Option (d) is incorrect. In Decentralized Maintenance, there are small maintenance departments for
each part of the company. Such departments may be justified if each part of the company needs a
different special skill, special equipment, or very rapid response. So, it is not applicable here.
Option (e) is incorrect. Contract Maintenance involves giving maintenance work to outsiders on a
contract basis. Occasionally, highly specialized or seasonal maintenance work may be contracted. So, it
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is not applicable here.
21. Answer : (e)
Reason : Program Evaluation and Review Technique (PERT) is generally used for planning any project in
service or manufacturing operations, and scheduling jobs with multiple and concurrent activities. It is
applicable to any type of single project planning activity in any type of industry. It cannot handle
situations in which two or more projects have to be planned together to share the available resources.
PERT is an ideal technique for tactical-level planning and operational-level controlling of projects and
not strategic-level planning.
Hence, from above discussion, we can infer that option (e) is false regarding Program Evaluation and
Review Technique (PERT).
Option (a) is true because it is the definition of Program Evaluation and Review Technique (PERT).
Option (b) is true because it is applicable to any type of single project planning activity in any type of
industry.
Option (c) is true because it is ideal for planning projects in which activity times are known or certain.
Option (d) is true because it cannot handle situations in which two or more projects have to be planned
together to share the available resources.
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22. Answer : (d)
Reason : By globalizing their activities, organizations not only derive global experience, but also obtain the
benefits of economies of scale in their production and marketing activities.
Global organizations can obtain economies of scale by virtue of bargaining power, large production and
skills and expertise of salespersons. However, economies of scale can occur only when the customers
are willing to buy globally homogenous products.
Hence, from above discussion, we can infer that option (d) is correct.
Option (a) is incorrect. Global organizations can obtain economies of scale by virtue of bargaining
power, large production and skills and expertise of salespersons and not bargaining power alone.
Option (b) is incorrect. Global organizations can obtain economies of scale by virtue of bargaining
power, large production and skills and expertise of salespersons and not large production alone.
Option (c) is incorrect. Global organizations can obtain economies of scale by virtue of bargaining
power, large production and skills and expertise of salespersons. Option (IV) is not correct.
Option (e) is incorrect. Global organizations can obtain economies of scale by virtue of large
production and skills and expertise of salespersons and not heterogeneity of products.
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23. Answer : (e)
Reason : Ordering Cost is the cost associated with the process of purchasing materials for inventory. It includes
cost associated with preparing the purchase order, any expediting required, postage, telephone calls to
the vendor, setup cost if produced in-house, record-keeping and accounting cost and material receiving
cost.
Hence, from above discussion, we can infer that option (e) is correct.
Option (a) is incorrect. Warehouse rental is an example of Carrying Cost.
Option (b) is incorrect. Not only setup cost if produced in-house is an example of Ordering Cost, but
also postage.
Option (c) is incorrect. Not only postage is an example of Ordering Cost, but also setup cost if produced
in-house.
Option (d) is incorrect. Warehouse rental is an example of Carrying Cost.
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24. Answer : (d)
Reason : The concept of JIT Purchasing system was developed by the Japanese with the objective of reducing
purchase quantities to the maximum possible extent. This concept results in products being purchased
in very small quantities and arriving exactly in time for use in production. The basic idea is to reduce
the size of purchase quantities and to time them as closely to their need in production as possible. This
method eliminates raw materials inventory and the various costs associated with storing and moving it
as the incoming materials go directly to production.
Emphasis is placed on product quality, delivery performance and price and no percentage of rejects
from a supplier is acceptable.
Hence, from above discussion, we can infer that option (d) is not true regarding JIT Purchasing as no
percentage of rejects from a supplier is acceptable.
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Option (a) is true because there is usually a single source of supply for a given part in nearby
geographical area with a long-term contract.
Option (b) is true because purchasing is carried out in small lots, with frequent deliveries.
Option (c) is true because suppliers can be innovative in design specifications.
Option (e) is true because there is less formal paperwork since delivery time and quantity level can be
changed by telephone calls.
25. Answer : (c)
Reason : ABC classification system classifies the inventory items based on their total monetary value so that the
resources can be allotted on that basis. This system or analysis can be used to categorize problem areas
so that managers can spend most of their time working on the important few problems and minimal
time on the unimportant few.
Hence, from above discussion, we can infer that option (c) is correct.
Option (a) is incorrect. The objective of Value Analysis is to eliminate the chances of reordering a part
or a component, which is technically obsolete. So, it is not applicable here.
Option (b) is incorrect. Job Analysis investigates the job content, the physical circumstances in which
the job is done and the qualifications that are necessary to carry out the job responsibilities. So, it is not
applicable here.
Option (d) is incorrect. A Make-or-buy analysis is used to find out whether it is feasible to manufacture
parts in-house at a lower cost or procure them from external vendors more cheaply. So, it is not
applicable here.
Option (e) is incorrect. Break-even analysis is used to find out when total cost equals total revenue. So,
it is not applicable here.
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26. Answer : (b)
Reason : Control Report includes statistical data on the status of inventory levels. It highlights the inventory
items that require the management’s attention for ensuring a regular supply of materials in right
quantities.
Hence, from above discussion, we can infer that option (b) is correct.
Option (a) is incorrect. Change Report is prepared to revise the purchase orders, whenever the orders
are not achieved in time. So, it is not applicable here.
Option (c) is incorrect. Planning Report includes several types of information on material (inventory)
requirements. Example of such a report is inventory forecast, purchase commitment report etc. Hence,
it is not applicable here.
Option (d) is incorrect. Authorized Order Release is a document that empowers the purchase
department to procure a specific quantity of inventory items required for use in a specific period.
Hence, it is not applicable here.
Option (e) is incorrect. Change Report and Planning Report are not applicable here, as per the above
discussion.
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27. Answer : (c)
Reason : Longest Processing Time rule gives first priority to jobs that take the longest amount of processing
time. It is based on the assumption that the jobs that consume more processing time are more valuable
for the organization.
Hence, from above discussion, we can infer that option (c) is correct.
Option (a) is incorrect. In Earliest Due Date rule, the job with the earliest due date is run first. Hence, it
is not applicable here.
Option (b) is incorrect. The rule of Shortest Processing Time is based on the concept that cost reduction
is possible by maximizing the flow of completed jobs. Hence, it is not applicable here.
Option (d) is incorrect. First In, First Serve is a simple rule according to which jobs arriving at a work
center are processed in the same order as their arrival. Hence, it is not applicable here.
Option (e) is incorrect. In Last In, First Serve rule, as orders arrive they are placed on the top of the
stack; the operator usually picks up the order on top to run first. Hence, it is not applicable here.
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28. Answer : (a)
Reason : Reliability refers to the probability of a product’s failure within a specified time. It is usually measured
as the mean time between failures (MTBF) or the failure rate per unit of time. It is very important in
high value products such as aeroplanes, computers and others.
Hence, from above discussion, we can infer that option (a) is correct.
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Option (b) is incorrect. Serviceability is concerned with how readily a product can be repaired and the
speed, competence and courtesy associated with that repair. It is not applicable here.
Option (c) is incorrect. Perceived quality is directly related to the reputation of the firm that
manufactures the product. It is not applicable here.
Option (d) is incorrect. Aesthetics is an area where there is high degree of individual judgement. In
terms of aesthetics, good quality to one group of customers may be perceived as poor quality to another
group. It is not applicable here.
Option (e) is incorrect. The wider the variety of products and/or variations a company can offer its
customers, the higher the perceived quality of those products because customers perceive customization
as a dimension of quality. It is not applicable here.
29. Answer : (b)
Reason : Electronic Supply Chain Management (ESCM) system makes use of Internet technologies to integrate
the entire supply chain, from the raw materials supplier to the end-user of the product. Therefore, it
results in a truly virtual corporation that allows contact with any customer or supplier at any time.
Hence, from above discussion, we can infer that option (b) is correct.
Option (a) is incorrect. Supply Chain Management (SCM) is the management of relationships by a firm
with all its trading partners involved in the supply chain. However, it does not make use of Internet
technologies to integrate the entire supply chain. Hence, it is not applicable here.
Option (c) is incorrect. Computer Aided Design (CAD) is a set of specialized software and hardware
that is used to design products directly on computer terminals. Hence, it is not applicable here.
Option (d) is incorrect. Computer Aided Manufacturing (CAM) is a specialized computer system,
which translates the CAD information into instructions for automated machines, so that they perform
the necessary production operations. Hence, it is not applicable here.
Option (e) is incorrect. Computer Integrated Manufacturing (CIM) system includes all the engineering
functions of CAD/CAM and the business functions of the firm as well. Hence, it is not applicable here.
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30. Answer : (b)