Operations Management-(MB 241) : January 2006

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Operations Management-(MB 241) : January 2006

Section A : Basic Concepts (30 Marks)
· This section consists of questions with serial number 1 - 30.
· Answer all questions.
· Each question carries one mark.
· Maximum time for answering Section A is 30 Minutes.
1. The categories of decisions that are taken by operations managers are
I. Strategic decisions.
II. Tactical decisions.
III. Technical decisions.
IV. Operational decisions.
(a) (I), (II) and (III) above (b) (I), (II) and (IV) above
(c) (I), (III) and (IV) above (d) (II), (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.
< Answer >
2. Which of the following is a function of Directing?
(a) Issue job assignments and instructions
(b) Guide by informing correct work methods
(c) Give more challenging job assignments
(d) Support employees in training programs
(e) Encourage employees to seek perfection in their tasks.
< Answer >
3. Which of the following constitute the development of new products?
I. Idea generation.
II. Economic evaluation.
III. Market testing.
(a) Only (I) above (b) Both (I) and (II) above
(c) Both (I) and (III) above (d) Both (II) and (III) above
(e) All (I), (II) and (III) above.
< Answer >
4. ________________ is the average of the errors made by the forecast over a period of time without
considering the direction of error.
(a) Mean Square Error
(b) Mean Forecast Error
(c) Mean Absolute Deviation
(d) Mean Absolute Percentage Error
(e) Tracking Signal.
< Answer >
5. Demand for a product ‘X’ for Jan to June is given in the table. Calculate the demand for the product
using 3 – month simple moving average for July in units
Months Jan Feb March April May June
Demand
(In units) 100 150 160 120 180 140
(a) 127 (b) 137 (c) 147 (d) 157 (e) 167.
< Answer >
6. Revathi Works Private Limited earns a profit of Rs.75,000 by selling 25,000 units. The selling price
and variable cost per unit are Rs.25 and Rs.10 respectively. Then the Break even point occurs at
(a) 12,000 units (b) 15,000 units (c) 20,000 units (d) 25,000 units (e) 30,000 units.
< Answer >
7. Which of the following is an objective function for the information provided. A trader sells chairs and
tables at Rs.230 and Rs.580 each respectively, he procures them at Rs.180 and Rs.480 respectively.
(a) Maximize Z = 230x1+ 480 x2
(b) MinimizeZ = 180 x1+ 580 x2
(c) Minimize Z = 230 x1 + 580 x2
< Answer >
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(d) MinimizeZ = 50 x1 + 100 x2
(e) MaximizeZ = 50 x1 + 100 x2.
8. Which of the following symbols represent ‘storage’ in flow process chart?
(a) (b) Ñ (c) O (d) ÿ (e) D.
< Answer >
9. A firm achieved sales of 1000 units in the month of May when the forecast was for 900 units. The
estimated sales for the month of June for a smoothing constant of 0.1, are
(a) 850 units (b) 870 units (c) 890 units (d) 910 unit s (e) 930 units.
< Answer >
10. If a company works for 3 shifts of 8 hours each a day and setup time of each machine is one hour in
each shift. The daily demand is 3,780 units. The sum of task times (T) is 100 seconds. Then the
theoretical number (N t) of machines required is
(a) 2 workstations (b) 3 workstations
(c) 4 workstations (d) 5 workstations (e) 6 workstations.
< Answer >
11. Which of the following is not a reason for holding finished goods as inventory?
(a) Larger shipments can result in reduced incoming freight costs and material handling cost
(b) Production of products as and when the customers demand them can be uneconomical
(c) Quantity discounts can result from larger p urchase quantities
(d) Backlogs in customer orders may not always be allowed
(e) Maintaining stocks result in higher levels of production and lower production costs.
< Answer >
12. Which of the following constitute functions of M aster Production Schedule?
I. Translate aggregate plans.
II. Evaluate alternative schedules.
III. Identify material requirements.
IV. Generate capacity requirements.
(a) (I), (II) and (III) above (b) (I), (II) and (IV) above
(c) (I), (III) and (IV) above (d) (II), (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.
< Answer >
13. Which of the following is false regarding Kanban system?
(a) It requires some initial levels of inventory to begin with
(b) In this type of system, three different cards are used to initiate material transaction
(c) Kanbans operate in closed loops and continue to operate until the Materials Manager withdraws
them
(d) The system does not depend on the people involved in the process
(e) The nu mber of Kanbans can be altered according to the estimated future demand for the products.
< Answer >
14. Hybrid layout is commonly used to manufacture which of the following products?
(a) Aircraft (b) Car (c) Television (d) Paper (e) Beer.
< Answer >
15. In “thin jobs” workers tend to become bored and unproductive. They are assigned different jobs to
improve their productivity. Doing different types of work provides some variety that can stimulate
workers to be more productive in their jobs. This management approach is known as
(a) Job enlargement (b) Job enrichment (c) Job rotation
(d) Job design (e) Job analysis.
< Answer >
16. Which of the following is not an advantage of Job Specialization?
(a) It results in lower production time and higher productivity by the Learning Curve Effect due to
repetition
(b) It results in simpler work instructions and easy production control because of consistence in work
assignment
(c) It always results in higher work satisfaction
(d) There is ease in recruiting new workers because fewer skills are required
(e) There is scope for higher degree of mechanization or automation.
< Answer >
17. In which of the following Work Measurement Techniques, managers generally determine reasonable
standards for new common tasks, basing on the standards previously set for old common tasks, and
usually maintain a database of the standard time required for work elements with information obtained
through previous studies?
< Answer >
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(a) Historical Analysis (b) Predetermined Motion Times
(c) Work Sampling (d) Standard Data
(e) Employee Self-Timing.
18. A two-bin system of inventory control is usually adopted in which of the following Inventory Systems?
(a) Fixed Order Quantity System (b) Fixed Order Period System
(c) Periodic System (d) Periodic Review System
(e) Fixed-Interval System.
< Answer >
19. Which of the following types of layout is commonly used for JIT Manufacturing?
(a) L-shape (b) U-shape (c) Straight line
(d) Comb arrangement (e) Dendrite arrangement.
< Answer >
20. Variable-sequence robots are most useful for which of the following production systems?
(a) Product focused (b) Process focused (c) Flow-shop
(d) Assembly line (e) Line flow.
< Answer >
21. Roshni Ltd., a bulb manufacturing company, has earned reputation in the market because of long life of
its bulb filaments. This is an appropriate example of which of the following quality dimensions?
(a) Features (b) Conformance (c) Serviceability
(d) Durability (e) Aesthetics.
< Answer >
22. Which of the following priority scheduling rules is based on the assumption that the jobs that consume
more processing time are more valuable for the organization?
(a) Earliest due date (b) Shortest processing time
(c) Longest processing time (d) First in, first serve
(e) Last in, first serve.
< Answer >
23. The doctor in charge of the surgical department wants the purchase manager to procure some surgical
scissors as early as possible. For this purpose, he has submitted a document containing a clear
specification of required materials, quantity required and probable date of requirement. This document
is referred to as
(a) Purchase order (b) Purchase requisition
(c) Request for proposal (d) Request for quotation
(e) Request for comments.
< Answer >
24. Which of the following gives rise to a truly virtual corporation that allows contact with any customer or
supplier at any time?
(a) SCM (b) ESCM (c) CAD (d) CAM (e) CIM.
< Answer >
25. A company uses infra-red imaging to examine the problem areas identified without dismantling the
machine, so that the extent of damage can be determined before stopping the machine. This is an
example of which type of maintenance?
(a) Periodic maintenance (b) Irregular maintenance
(c) Predictive maintenance (d) Remedial maintenance
(e) Decentralized maintenance.
< Answer >
26. The appropriate type of layout for the purpose of automobile manufacturing is
(a) Process layout (b) Product layout
(c) Grouping technology layout (d) Fixed position layout
(e) Hybrid layout.
< Answer >
27. Which of the following is not true for the simplex method for linear programming problem for
maximization of the objective function?
(a) The algorithm for simplex method is iterative in nature
(b) The value of the constraint in the right-hand side of each of the constraints should be non-negative
(c) Each of the decision variables of the problem should be non-negative
(d) The algorithm detects whether the problem is infeasible, is unbounded or has multiple optima
(e) The algorithm is not suitable when there are more than two decision v ariables.
< Answer >
28. Which of the following is false in relation to Demand Chain?
(a) Instead of building and operating their supply chain from manufacturer to market, Demand Chain
< Answer >
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leaders are creating alliances with those channel partners best able to fulfill consumers’ needs and
wants
(b) The players in today’s emerging Demand Chains are different from those in traditional supply
chains
(c) Responsibilities are assumed by the Demand Chain as a whole
(d) In a Demand Chain, products don’t necessarily originate from manufacturers
(e) The best scenario exists when every member of the Demand Chain monitors the consumer market.
29. Which of the following is not a specific tool of Total Quality Management (TQM)?
(a) Kaizen
(b) Quality Circle
(c) Quality Improvement Team
(d) Total Productivity Management
(e) Gantt Chart.
< Answer >
30. Stationery, cleaning materials and lubricants which are used in operation of an organization, form part
of
(a) Raw materials (b) Consumables
(c) Finished products (d) Work-in-progress
(e) Strategic stocks.
< Answer >
END OF SECTION A
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Section B : Problems/Caselets (50 Marks)
This section consists of questions with serial number 1 – 6.
Answer all questions.
Marks are indicated against each question.
Detailed workings/explanations should form part of your answer.
Do not spend more than 110 - 120 minutes on Section B.
1. Abhijit Private Limited manufactures heaters. At present the cost of heaters is arrived based on the cost of labor.
Ramsingh, who joined as a materials manager opines that the cost of heater is linearly dependent upon the cost of
material. The following table shows the cost of heater, cost of labor and the cost of material per unit.
Cost of heater (Rs.) 25 28 27 30 32 38 39 43
Cost of labor (Rs.) 12 15 13 20 17 25 27 22
Cost of materials (Rs.) 3 4 3 6 4 8 8 7
You are required to determine the cost of a heater using regression analysis if the cost of
a. Labor is Rs.18
b. Material is Rs.5
(5 + 5 = 10 marks) < Answer >
2. Alternative Solution Ltd. has developed an environmental friendly, product for which it expects significant
demand in the near future. But the existing facility cannot meet the forecasted demand. So the company conducts
a survey of three different locations. The company identifies some critical factors for evaluating the suitability of
the locations. The table given below lists the factors considered, the corresponding weightages assigned to them,
and the grade for each location.
You are required to identify the best location for establishing a new facility.
Location rating
Factor Factor Rating
A B C
1. Transportation cost 4 8 5 6
2. Labor availability 5 5 7 8
3. Supplier availability 6 5 4 6
4. Climate conditions 3 7 6 5
5. Government incentives 7 4 6 7
6. Labor cost 4 6 5 5
7. Cost of real estate 6 6 7 6
(6 marks) < Answer >
3. Adithi Restaurant is known for its pizzas. It sells only pizzas. It is a policy of restaurant to add Rs.12 to the cost of
ingredients of each pizza to arrive at the price. The establishment expenses per month are as follows. Rent of
premises Rs.8,000, Managers salary Rs.7,500. Wages of workers Rs.14,500. These expenses remain fixed. At
present sales are 5,000 pizzas per month.
Restaurant owner’s son Mr. Prakash who has recently passed his MBA, suggests as follows. He expects sales
would go up by 2,500 units per month if R s.10 is added to the cost of ingredients and if Rs.8 is added to the cost of
ingredients then the sales would go up to the extent of 4,000 units per month.
You are required to evaluate and advise the owner in the light of the above. Also find out the Break – Even –
Point for each situation.
(9 marks) < Answer >
4. The arrivals of vehicles in a petrol station can be assumed to follow Poisson distribution. The number of vehicles
arriving in the station in an hour is 125. The station can attend around 150 vehicles on an average in an hour.
You are required to find out
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a. The probability that a customer will have to wait for service,
b. Mean length of the system,
c. Mean length of the queue,
d. Mean waiting time in the system,
e. Mean waiting of a customer in the queue.
(1 + 1 + 1 + 1 + 1 = 5 marks) < Answer >
Caselet
Read the caselet carefully and answer the following questions:
5. Why were the employees apprehensive about the new proposal in which the representative of a supplier would be
stationed at Chem India plant?
(10 marks) < Answer >
6. What are the other alternatives available to Chem India to resolve the inventory problem?
(10 marks) < Ans wer >
Chem India Ltd. manufactures and supplies chemicals compounds, which are used by firms, manufacturing detergents
and soaps. It is a leading player in the Indian industry with clients ranging from HLL, Colgate Palmolive, Henkel-Spic,
etc. The chemicals used to manufacture these compounds, are supplied to it by Raj Chemicals, which operates from
Thane in Maharashtra. Raj Chemicals is one of the biggest suppliers of chemicals in India and has a large number of
clients. It manufactures various chemicals at its state-of-the -art treatment plants. Chem India is one of its biggest
customers.
As the demand for the chemical compounds increased, Chem India experienced inventory shortages. Therefore, it
proposed to Raj Chemicals that its representative should be stationed at the Chem India plant. The representative would
be on the payroll of Raj Chemicals but would work for Chem India at its plant. He would send orders to Raj Chemicals
and supervise and monitor the order management activities, the demand and production of chemical compounds and
would also be involved in manufacture planning at Chem India.
A typical purchase process involves three steps: Business planning, aggregate production planning and production
scheduling. In business planning; the management predicts the annual demand for the chemicals produced. On the basis
of the business plan, a production plan, which gives details of resource requirements, is prepared. The master
production schedule contains details of resource requirements for individual products.
Four persons are involved in the existing purchase process. They are design engineer, materials planner, purchasing
department personnel and supplier salesperson. The engineers create specifications for items. Materials planner
maintains the inventory and informs the purchase department if a particular- material is required. The purchase
department then locates the suppliers who can meet the requirements. The salespersons visit the plants and oversee the
demands of the customers.
Under the new proposal, the representative of Raj Chemicals, who was stationed at Chem India, would place the orders
with Raj Chemicals. He would be allowed to use Chem India's computer systems and had access to information related
to material procurement, demand, etc. The representative was to be treated as an employee of Chem India but would be
on the rolls of Raj Chemicals.
The new proposal, however, created apprehensions among employees of Chem India. This included a few departmental
heads and other senior managers. They doubted the logic behind giving access to certain classified information like
procedures related to vendor selection, quality checking, etc. to the representative of a vendor who was supplying raw
materials.
END OF SECTION B
Section C : Applied Theory (20 Marks)
This section consists of questions with serial number 7 - 8.
Answer all questions.
Marks are indicated against each question.
Do not spend more than 25 -30 minutes on section C.
7. Mitchell corporation launched a new motor bike. Initial sales were good but slowly the customer feedbacks were
not as positive as before. The reason was attributed to lack of spare parts inventory with the company.
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Explain the importance of spare parts inventory in improving customer service.
(10 marks) < Answer >
8. Mr.Thaparia, the Operations Manager of ABC Cement Ltd., is facing problems in planning because of the lack of
good forecasting infrastructure. When he asked the Vice President, Operations, about putting the right
infrastructure in place, the VP asked him, “Tell me the reasons why we need to put infrastructure for forecast and
make investment in it.” Help
Mr. Thaparia in explaining to the VP the reasons for developing the right infrastructure for making forecasts.
(10 marks) < Answer >
END OF SECTION C
END OF QUESTION PAPER
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Suggested Answers
Operations Management (MB241): January 2006
Section A : Basic Concepts
1. Answer : (b)
Reason : The categories of decisions that are taken by operations managers are strategic decisions,
Tactical decisions and operational decisions.
< TOP >
2. Answer : (a)
Reason : Issue job assignments and instructions is a function of Directing. b, c, d and e are the functions
of Training and Developing Personnel.
< TOP >
3. Answer : (e)
Reason : The following are the important steps involved in the development of new products. Idea
generation, feasibility studies, prototype design, prototype testing, initial design of production
model, Economic evaluation, market testing, final design of product model.
< TOP >
4. Answer : (c)
Reason : Mean absolute deviation is the mean of the average of the errors made by the forecast over a
period of time w ithout considering the direction of error.
< TOP >
5. Answer : (c)
Reason : 3 month simple moving average =
120 1780 140
3
+ +
= 146.67 ; 147 .
< TOP >
6. Answer : (c)
Reason : Contribution per unit = Selling Price – Variable Cost
= 25 – 10 = Rs.15
Contribution on 25,000 units = 25,000 × 15 = Rs.3,75,000
Profit = Contribution – Fixed Cost
Fixed Cost = Contribution – Profit
= 3,75,000 –75,000 = Rs.3,00,000
BEP =
Fixedcost
Contribution/unit
BEP =
3,00,000
15
= 20,000 units.
< TOP >
7. Answer : (e)
Reason : Let x1, be the chairs and x2 be the tables and the z is the total profit. Then the objective
function
Profit per chair = 230 – 180 = Rs.50
Profit per table = 580 – 480 = Rs.100
MaximizeZ = 50 x1 + 100 x2
.
< TOP >
8. Answer : (b)
Reason:
Symbol Activity
O Operation
Transport
ÿ Input
D Delay
Ñ Storage
< TOP >
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9. Answer : (d)
Reason : FJune = a DMay + (1 –a) FMay
= 0.1 × 1000 + (1 – 0.1)900
= 100 + 810 = 910 units.
< TOP >
10. Answer : (d)
Reason : Each machine works for 7 hours per shift
In a day each machine works for 3 shifts and productive t ime is 21 hours
Each machine produces per day
= (21 × 60 × 60 ) / 100 = 756 units.
For producing 3780 units, number of machines required = 3780 / 756 = 5 machines.
< TOP >
11. Answer : (c)
Reason: It is a reason for holding raw-material as inventory. Rest of the options are reasons for holding
finished goods as inventory.
< TOP >
12. Answer : (e)
Reason: All the four along with effective utilization of capacity are functions of master production
schedule.
< TOP >
13. Answer : (d)
Reason : Kanban system is a production and inventory system that was developed by Toyota Motor
Company. It is a control system which uses a signaling device to regulate JIT flows. Kanban
means “sign” or “instruction card” in Japanese. In a paperless control system, containers can
be used instead of cards.
However, the system depends more on the people involved in the process and fails totally if
the materials handling agent misses even a single Kanban card or a supplier fails to supply
materials in time.
Hence, from above discussion, we can infer that option (d) is false regarding Kanban system.
Option (a) is true because it requires some initial levels of inventory to begin with.
Option (b) is true because in this type of system, three different cards are used to initiate
material transaction: Production authorization card, Vendor authorization card and
Conveyance authorization card
Option (c) is true because Kanbans operate in closed loops and continue to operate until the
Materials Manager withdraws them.
Option (e) is true because the number of Kanbans can be altered according to the estimated
future demand for the products.
< TOP >
14.
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.
< TOP >
15. Answer : (c)
Reason : (a) This is the wrong answer. The need for variety in a job can be dealt with by increasing
the complexity of the job with different work tasks, called job enlargement. In a
repetitive assembly operation, highly specialized work tasks might consists of only a
single job task like bolting a front bumper on an automobile. Now suppose that
additional tasks are added, such as putting the back bumper and trim work on the
automobile. By adding the additional tasks, we are enlarging the job the worker
performs. We are transforming a thin job into a thick job that will provide the worker
with variety, and hopefully, more interesting work overall.
(b) This is the wrong answer. In job enrichment we not only increase the variety of job
tasks with job enlargement but also provide for the psychological growth and enrichment
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of the worker. We accomplish job enrichment by making individual more accountable
for his or her own work (increasing the job responsibility), removing unneeded
management controls (which makes workers believe that the organization trusts them
more), granting the worker sufficient authority and freedom to carry out their
responsibilities, increasing the flow of information about the job and organization.
(c) This is the right answer. In ‘thin jobs’ (those containing few different work tasks),
workers tend to become bored and unproductive. Job rotation involves the assignment
of workers to different jobs. That is, one day a worker performs one type of job and the
next day he performs an entirely different type of job. Doing different types of work
provides some variety that can stimulate workers to be more productive in their jobs.
(d) This is the wrong answer. Job design is the process of determining the specific tasks and
responsibilities to be carried out by each worker in the organization. It encompasses the
formal specifications and informal expectations of an employee’s work related activities,
including both the structural and inter -personal aspects of the job. It describes the
decisions on issues like who is to perform the job, where it is to be performed, and how.
(e) This is a wrong answer. Job anal ysis 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. Job analysis includes every information on the nature of
duties to be performed, scope of responsibilities, and all the other information on job
content.
16. Answer : (c)
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.
However, specialization is not preferable for some jobs because, if specialized, they become
monotonous and boring for workers. Therefore, it results in loss of work satisfaction.
Hence, from above discussion, we can infer that option (c) is not an advantage of Job
Specialization.
Option (a) is an advantage of Job Specialization because it results in lower production time
and higher productivity by the Learning Curve Effect due to repetition.
Option (b) is an advantage of Job Specialization as it results in simpler work instructions and
easy production control because of consistence in work assignment.
Option (d) is an advantage of Job Specialization as there is ease in recruiting new workers
because fewer skills are required.
Option (e) is an advantage of Job Specialization because there is scope for higher degree of
mechanization or automation.
< TOP >
17. Answer : (d)
Reason : 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. It is not necessary to determine
work standards for the common tasks every time, since it is a repetition of the same exercise.
A database of work element durations with information obtained through previous studies is
used as standard data. It is also cost-effective as management can get rid of the costs and
interruption involved in having an analyst approaching a worker.
Therefore, from above discussion, we can infer that option (d) is correct.
Option (a) is incorrect. Historical Analy sis 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). It is not applicable
here.
Option (b) is incorrect. Predetermined Motion Times is a technique of setting work standards
that uses the recorded data on standard time for each of the basic motions associated with
performing a task and sums them up to determine the time required to perform the whole task.
It is not applicable here.
Option (c) is incorrect. 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. It is less costly, and is particularly useful to observe lengthy work cycles.
It is an economical way to observe many workers performing a single operation that is
< TOP >
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widespread in the organization. It is usually used to measure the performance of workers
involved in doing indirect labour jobs. It is not applicable here.
Option (e) is incorrect. In Employee Self-Timing, workers are asked to set work standards for
themselves. It is used in setting work standards, especially for white-collar workers. It is not
applicable here.
18. Answer : (a)
Reason : Fixed Order Quantity System assumes a perpetual inventory accounting system in which the
inventory records are updated every time the materials are added to or removed from
inventory. Managers apply the concept of Fixed Order Quantity System to adopt a two-bin
system of inventory control. In this system, two bins, one big and another small are used to
physically hold a material in inventory. As the material is used, it is withdrawn from the larger
bin. Orders are triggered when the large bin becomes empty and the material in the small bin
is used until the next material replenishment. When the material arrives, both the bins are
filled and the cycle is repeated.
Hence, from above discussion, we can infer that option (a) is correct.
Option (b) is incorrect. Fixed Order Period System is one in which managers review the
inventory levels periodically and orders are placed for materials in sufficient quantities.
Orders are always placed at equal intervals of time. A two-bin system of inventory control is
not used in this system.
Option (c) is incorrect because Periodic System is another name for Fixed Order Period
System where a two-bin system of inventory control is not used.
Option (d) is incorrect because Periodic Review System is another name for Fixed Order
Period System where a two-bin system of inventory control is not used.
Option (e) is incorrect because Fixed-Interval System is another name for Fixed Order Period
System where a two-bin system of inventory control is not used.
< TOP >
19. Answer : (b)
Reason : JIT manufacturing system consists of an integrated set of activities designed to achieve high -
volume production, using minimal inventories of raw and semi-finished materials and finished
goods. The principle underlying JIT is that nothing will be produced until it is needed i.e., the
materials arrive “Just-In-Time” when they are needed.
U-shape layout makes the system more flexible, making it easy to change the production level
in response to changes in demand. Hence it is used in JIT manufacturing.
Therefore, from above discussion, we can infer that option (b) is corre ct.
Option (a) is incorrect. L-shape layout is commonly used in assembly line.
Option (c) is incorrect. Straight line layout is commonly used in assembly line.
Option (d) is incorrect. Comb arrangement layout is commonly used in assembly line.
Option (e) is incorrect. Dendrite arrangement layout is commonly used in assembly line.
< TOP >
20. Answer : (b)
Reason : In Process Focused Design, similar equipment or functions are grouped together. It is usually
used to produce small qu antities (or batches) of different items on relatively general-purpose
machinery. It has the flexibility to produce a wide spectrum of products in small batch sizes.
Variable-sequence robots are an extension to Fixed-sequence robots and are designed to
provide an easy change in the sequence of tasks performed. So, they are useful in Process
Focused production system.
Hence, from above discussion, we can infer that option (b) is correct.
Option (a) is incorrect. Product Focused Design is mostly used in production departments that
are organized according to the type of product or service being produced. It is used to produce
one or two products in very high volumes. Here, Fixed-sequence robots, which perform a
sequence of operations according to a given set o f procedures, are more appropriate.
Option (c) is incorrect. Flow -shop is another name for Product Focused Design, where Fixedsequence
robots are more appropriate.
Option (d) is incorrect. Assembly line is another name for Product Focused Design, where
Fixed-sequence robots are more appropriate.
Option (e) is incorrect. Line flow is another name for Product Focused Design, where Fixedsequence
robots are more appropriate.
< TOP >
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21. Answer : (d)
Reason : Durability relates to the expected operations life of a product.
Hence, from above discussion, we can infer that option (d) is correct.
Option (a) 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. However, it is not applicable here.
Option (b) is incorrect. Conformance reflects how well the product and its individual
components meet the established standards. So, it is not applicable here.
Option (c) is incorrect. Serviceability is concerned with how readily a product can be repaired
and the speed, competence and courtesy associated with that repair. So, it is not applicable
here.
Option (e) 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. So, it is not applicable here.
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22. 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, i t is not
applicable here.
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23. 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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24. 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 inc orrect. 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
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13
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.
25. Answer : (c)
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.
Hence, the given example is an example of Predictive Maintenance.
Periodic Maintenance occurs at regular intervals. An organization takes up such type of
maintenance based on either calendar or clock time or time of usage.
Preventive Maintenance includes maintenance activities performed to keep the equipment in
working condition before it breaks down.
Irregular Maintenance is a type of Preventive Maintenance which includes activities like
repairs, overhauls and tasks like cleaning up of spills.
Remedial Maintenance inclu des activities that restore facilities and equipment to an
acceptable working condition after a breakdown or malfunction has occurred or the normal
operations hindered.
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.
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26. Answer : (b)
Reason : Automobile is manufactured by assembling different parts. For this type of manufacturing
process the most appropriate layout would be assembly line or product layout.
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27. Answer : (e)
Reason : (a) This is true about simplex method. The algorithm for the simplex method is iterative in
nature and solves the problem in a systematic manner to find the optimum solution for
linear programming problem. It begins with the identification of an initial extreme point
of the feasible set from among the set of feasible solutions to the problem. The algorithm
then examines each edge intersecting at intersecting at the extreme point to determine
whether the objective function value improves by moving along atleast one of the edges.
(b) This is true about simplex method. The value of the constraint in the right-hand side of
each of the constraints should be non-negative. If not, it should be converted to a non
negative value I the first step.
(c) This is true about simplex method. Each of the decision variables of the problem should
be non-negative. Some problems, such as those that deal with cost minimization, have
decision variables with unrestricted sign.
(d) This is true about simplex method. The algorithm detects whether the problem is
infeasible, is unbounded or has multiple optima.
(e) This is not true about simplex method. The algorithm is suitable for any number of
decision variables. There is no restriction for the number of decision variables in simplex
method.
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28. Answer : (b)
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.
Moreover, the players in today’s emerging demand chains are the sam e as those in traditional
supply chains.
Hence, from above discussion, we can infer that option (b) is false in relation to Demand
Chain.
Option (a) is true because instead of building and operating their supply chain from
manufacturer to market, Demand Chain leaders are creating alliances with those channel
partners best able to fulfill consumers’ needs and wants.
Option (c) is true because responsibilities are assumed by the Demand Chain as a whole.
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14
Option (d) is true because in a Demand Chain, products don’t necessarily originate from
manufacturers; rather they can be developed at any point and by any player in the Chain,
based upon consumer information gathered by any entity and shared with all the partners.
Option (e) is true because the best scenario exists when every member of the Demand Chain
monitors the consumer market.
29. Answer : (e)
Reason : Gantt Chart is a simple bar chart used specifically to schedule operations. The purpose of the
Chart is to clarify, improve comprehension, and serve as a focus for discussion. It is not a
specific tool of Total Quality Management (TQM).
Kaizen is the Japanese concept of continuous improvement in all things.
Quality Circle is an initiative by volunteer employees to meet weekly to discuss their jobs and
problems. These employees attempt to devise solutions to problems and share the solutions
with the management. They are led by a supervisor or production worker and typically include
employees from a given production area.
Quality Improvement Team is another initiative to improve inter-department coordination and
functioning.
Total Productivity Management is an approach for optimizing effectiveness of production
means in a structured manner. It entails effective use of all company resources to enhance
customer satisfaction, in the context of clear business direction, an integrated, visible
improvement plan, a consistent set of improvement strategies and an appropriate measurement
system.
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30. Answer : (b)
Reason : Consumables are materials used in operation of an organization, but not forming part of the
finished product e.g., stationery, cleaning materials, lubricants etc.
Raw materials include all purchased goods that become part of the finished product.
Finished products are the goods which are in stock and ready to be supplied to the customers.
Work-in-progress refers to the work in various stages of completion between the processing
steps of the production system.
Strategic stocks are held for other than strictly operations purposes. Stocks of raw material
may be built up because of suspected industrial unrest at the suppliers’ place, of political
unrest in the supplying country, and other reasons.
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15
Section B : Caselets
Caselet 1
1. a. The linear relationship between the dependent variable and dependent variable is given by the straight line
equation.
Y = a + bX
The Cost of
Labor (X)
The Cost of
Heater (Y)
XY X2 Y2
12 25 300 144 625
15 28 420 225 784
13 27 351 169 729
20 30 600 400 900
17 32 544 289 1024
25 38 950 625 1444
27 39 1053 729 1521
22 43 946 484 1849
X 151 å = Y 262 å = XY 5164 å = 2X3065 å = 2Y å = 8876
Here, n = 8
X
X 151/8 18.88
n
å=
=
=
Y
Y 262/8 32.75
n
å=
= =
2 2
n( XY) ( X)( Y)
b
n( X ) ( X)
å -å å
=
å - å
Now substituting the values of S x, Sy, SXY, SX2 and SY2 from the table, we get b = 1.02. Next, we
calculate the value of constant a using the equation
A = Y - bX = 32.75- (1.02 ´ (18.88)) = 13.49
Substituting ‘a’ and ‘b’ in the straight line equation, we can obtain the value of the dependent variable based
on the independent variable.
To find the value of Y (dependent variable) for which the value of independent variable is 18, substitute the
value of constant a and b in the following equation.
Y = a + bX
Y = 13.49 + 1.02 × 18
Y = 31.85
So, the value of dependent variable (the cost of a heater) is 31.85 when the value of independent variable (the
cost of labor) is 18.
b. The linear relationship between the dependent variable and dependent variable is given by the straight line
equation.
Y = a + bX
The Cost of
Materials (X)
The Cost of
Heater (Y)
XY X2 Y2
3 25 75 9 625
4 28 112 16 784
3 27 81 9 729
6 30 180 36 900
4 32 128 16 1024
8 38 304 64 1444
8 39 312 64 1521
7 43 301 49 1849
X 43 å = Y 262 å = XY 1493 å = 2X263 å = 2 åY= 8876
16
Here, n = 8
X
X
n
43
5.375
8
å=
= =
Y
Y 262/8 32.75
n
å=
= =
2 2
n( XY) ( X)( Y)
b
n( X ) ( X)
å -å å
=
å - å = 2
8 1493 43 262
8 263 43
´ - ´
´ - =
11944 11266 678 2.6588
2104 1849 255
- = =
-
Now substituting the values of Sx, S y, SXY,
åX2 and
åY2 from the table, we get b = 2.6588. Next, we
calculate the value of constant a using the equation
A = Y- bX =32.75- (2.6588. ´ (5.375))= 32.75-14.29 =18.46
Substituting ‘a’ and ‘b’ in the straight line equation, we can obtain the value of the dependent variable based
on the independent variable.
To find the value of Y (dependent variable) for which the value of independent variable is 18, substitute the
value of constant a and b in the following equation.
Y = a + bX
Y = 18.46 + 2.6588 × 5 = 18.46 + 13.29
Y = 31.75
So, the value of dependent variable (the cost of a heater) is 31.75 when the value of independent variable (the
cost of labor) is 5.
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2.
Factor Factor Rating Location rating Weighted Score
1. Transportation cost 4 8 5 6 32 20 24
2. Labor availability 5 5 7 8 25 35 40
3. Supplier availability 6 5 4 6 30 24 36
4. Climatic conditions 3 7 6 5 21 18 15
5. Government incentives for the production
Of environmentally friendly products.
7 4 6 7 28 42 49
6. Labor cost 4 6 5 5 24 20 20
7. Cost of real estate 6 6 7 6 36 42 36
Total Score 196 201 220
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3. The problem has to be evaluated in three situations:
i. As per existing situation when Rs.12 is added to cost of ingredients
ii. When Rs.10 is added to cost of ingredients
iii. When Rs.8 is added to cost of ingredients
(i) Existing Situation : Adding Rs.12 to the cost of ingredients
Contribution per unit =Rs.12
Fixed cost = Rent + Managers Salary + Wages of workers
= 8000 + 7500 + 14500
= Rs.30,000
Break-Even-Point =
Fixed Cost
Contribution/Unit
=
30000
2500 units
12
=
Profit = Total Contribution – Fixed Cost
17
= 12 × 5,000 – 30,000
= 60,000 – 30,000
= Rs.30,000.
(ii) If Rs.10 are added to the cost of ingredients
Then expected sales are 5,000 + 2,500 = 7,500 units
Break-Even-Point =
30000 3,000 units
10
=
Profit = (7500 × 10) –30,000
= Rs.45,000
(iii) If Rs.8 are added to the cost of ingredients
Then expected sales are 5,000 + 4,000 = 9,000 units
Break-Even-Point =
30000 3,750units
8
=
Profit = (9000 × 8) –30,000
= 72,000 – 30,000 = Rs.42,000
From the above calculations sales of 7500 units are lucrative which results in a higher profit of Rs.45,000.
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4. l = 125 vehicles / hour
m = 150 vehicles / hour
The probability that a customer will have to wait for service, P = (l / m) = 0.83
Mean length of the system LS = l / (m – l) = 5 vehicles
Mean length of the queue Lq = l2 / (m – l) = 4.16
Mean waiting time in the system, WS = 1 / (m – l) = 0.04
Mean waiting of a customer in the queue, Wq = (l/m) (1/(m–l))
= (25/50) (1/(150–125))
= 0.033.
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5. The employees of Chern India were apprehensive about the new proposal because of the following reasons:
The new proposal would have brought changes in the existing system. Human beings generally resist change.
Therefore, they opposed the idea. If this idea is implemented, they would have to change their style of working.
Under the new proposal, the representative of Raj Chemicals would be treated as an employee of Chem India. This
meant he would have access to all the departments. He might access certain information like quantity and price of
parts bought from vendors. This information might give an edge to Raj Chemicals during future contract
negotiations. .
Purchase personnel might have felt that they would lose control over the procurement process. It might also
impinge on classified information like price and quality, which would be of use during future negotiations.
The representative can come across some sensitive information about the' organization, whi ch might place Chem
India at a disadvantage.
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6. Chem India can use technology to resolve the inventory problem. It would be better to integrate the information
systems of both the organizations so that they can exchange in formation about their production schedules and
plans. An extended ERP system, which uses extranet to integrate the information system, would solve the
problem. Both firms could share the information on real -time basis. It would be easier for both of them to respond
to changes in the other's production plans. They can adjust their inventory position and revise their production
schedules. It will also make them more responsive to changes in the market. Since both reveal to each other the
same amount of information, the disadvantages will be equal for both of them if one uses it against the other.
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Section C: Applied Theory
7. During the purchase of a repairable product, one of the important considerations is the availability of spare parts. It
becomes more significant especially for products like motor vehicles, electronic goods, etc. The operational life of
the product is more than the operational life of individual components. So generally products like motor bikes can
18
be made operational just by replacing the defective parts. When a customer buys a product, availability of spare
parts is one of the major factors that influence his decisions. However, most organizations overlook the importance
of the spare parts inventory in the after sales service.
Production of the spare parts does not require any changes in process as they are the same components that go into
the making of the product. For instance, after a period of time the brake shoes may get worn and need to be
replaced. A customer cannot operate the bike without the brakes: If new brake shoes are not available, he may
decide to purchase the parts from some other manufacturer. Such a situation would first of all lead to customer
dissatisfaction and secondly the business opportunity that existed for the spare parts would also be lost to some
other manufacturer.
The key decision for an organization that maintains the spare parts inventory is to identify the level of spare parts'
inventory required. One way of identifying the requirements is through finding out the breakdown or defect rate of
individual items. For instance, generally for motor bikes, manufacturers maintain larger inventory of the moving
parts where the chances of breakdown are more. The spare parts inventory' such as engine covers, fuel tanks, etc
are kept at lower levels as the chances of their breaking down during the normal life time of the product are
remote.
Spare parts in addition to improving the customer service also provide an additional source of revenue for the
company once the product is sold. Many organizations have successfully adopted this policy where they sell initial
product at low profit's but spare parts are priced high
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8. While developing a future plan of action, managers should have a point of reference. Forecasting provides the
point of reference. For a cement industry, the amount of raw material to be procured is large and the transportation
cost is also significant. Besides, the production lead time is also longer. Therefore it is important for Mr. Thaparia
to know the demand in the market so that the raw material procurement and then effective production schedule can
be generated.
Forecasting will help the organization in the following areas:
a. If the forecasts are made on the basis of a scientific method, the chances of being accurate increase
significantly. Good forecasts help in improving the performance of the organization.
b. Using demand forecasts, the organization can plan its production and delivery schedules so that market
requirements can be met efficiently and effectively.
c. Demand forecasts give a fairly good idea of what is required in the future. This information would help in
minimizing the inventory costs of the organization. It will also help in reducing the waste and in planning its
activities better.
d. Through demand forecasts, managers can know about the future demand. This information will help them
assess whether capacity expansion is required in the near future. As the capacity exp ansion involves
considerable investment in cement industry, it is important to find out the future demand so that capacity
expansion decisions can be taken.
e. Good and accurate forecasts can improve the quality of decision making in the operations control area.
f. Forecasting is essential to predict the requirement for materials of all types, the time that will be available for
procurement, the likelihood and duration of equipment failure, the scrap or error rates and so on.
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