Operations Management (MB241): April 2005

Operations Management (MB241): April 2005

Section A : Basic Concepts (30 Marks)
• This section consists of questions with serial number 1 - 30.
• Answer all questions.
• Each question carries one mark.
1. Which of the following is false with respect to maturity stage of Product Life Cycle?
(a) The growth rate in sales decreases but sales continue to be either constant or increase slowly
(b) Emphasis is on efficiency
(c) Emphasis is on low cost
(d) Over-capacity exists in the industry
(e) Emphasis is on customized product design and production in small batches.
< Answer >
2. Which of the following is not true in case of Point Rating technique?
(a) It is based on the ranking of various weighted factors that influence the choice of location
(b) Locations are ranked by the appropriate weightages given to each factor
(c) Evaluation should be only quantitative and not qualitative
(d) Implementation of this type of system requires careful judgement
(e) Location with highest score is considered superior.
< Answer >
3. Which of the following is not correct regarding Make-or-Buy Analysis?
(a) Purchase managers, with the assistance of production engineers, generally do a Make-or-buy
analysis for materials
(b) It is made based on the break-even analysis
(c) A fixed cost is associated with purchasing the material
(d) Break-even demand is the demand at which the total cost of making a product is equal to the total
cost of buying the product
(e) Managers use this analysis to determine if the purchase cost of a product from a supplier is less
than the production cost if the product was made in-house.
< Answer >
4. The process of capturing data about the flow of items through automatic means such as bar coding, and
using this information to support planning and scheduling of production activities is an example of
(a) CAD (b) Direct CAM (c) Indirect CAM
(d) CIM (e) FMS.
< Answer >
5. If the capacity requirements cannot be modified to match the available capacity, managers can adjust
the requirements by using which of the following strategies?
I. I. Subcontracting a part of the work.
II. II. Adding a shift or making the operators work overtime.
III. III. Hiring some personnel and thereby increasing manpower.
(a) Only (I) above (b) Only (II) above
(c) Only (III) above (d) Both (II) and (III) above
(e) All (I), (II) and (III) above.
< Answer >
6. 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 number of Kanbans can be altered according to the estimated future demand for the products.
< Answer >
7. Which of the following is a function of Operational Planning component of Supply Chain Management
(SCM)?
(a) Order release (b) Incoming inspection
(c) Supplier capacity planning (d) Accounts payable
< Answer >
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(e) Internal materials handling.
8. Which of the following is not true with respect to Gantt Charts?
(a) They are simple bar charts used to schedule operations
(b) Their purpose is to provide ease and clarity in communicating the important job shop information
to managers
(c) They are basically of two types: Workload charts and Scheduling charts
(d) They help managers to identify idleness of equipment so as to make the best use of the available
facilities effectively
(e) They also help managers to identify hurdles like production breakdown and human performance.
< Answer >
9. The difficulties involved in transporting products and accessing established distribution channels
impede the process of globalization. This is an example of
(a) Economic Impediment (b) Managerial Impediment
(c) Institutional Impediment (d) Cultural Impediment
(e) Technical Impediment.
< Answer >
10. 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
leaders are creating alliances with those channel partners who are best able to fulfill the
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.
< Answer >
11. Which of the following is not true regarding Acceptance Plans used in quality control?
(a) They help to decide whether lots of raw materials, purchased parts and finished goods meet
prescribed quality standards
(b) On the basis of Acceptance Plans, operations managers can either accept or reject a lot
(c) Acceptance Plans have large sample sizes
(d) Acceptance Plans protect an organization by limiting the percentage of defective products that are
shipped to customers
(e) Average Outgoing Quality Curves and Operating Characteristic Curves are two important
concepts of Acceptance Plans.
< Answer >
12. Hybrid layout is commonly used to manufacture which of the following products?
(a) Aircraft (b) Car (c) Television (d) Paper (e) Beer.
< Answer >
13. Which of the following actions enhance(s) equipment maintenance in JIT manufacturing systems?
I. Organizations should design their equipment as simple as possible, reduce the variety of machines,
and standardize the replacement parts.
II. Organizations should collect information about the frequency and causes of equipment failure and
use this knowledge to allocate maintenance resources efficiently.
III. Organizations can rebuild equipment by replacing parts one by one, rather than all at once.
(a) Only (I) above
(b) Only (II) above
(c) Only (III) above
(d) Both (I) and (II) above
(e) All (I), (II) and (III) above.
< Answer >
14. Maximum managers spend most of their time working on large number of unimportant problems than
working on few important problems. The solution to this universal problem can be had by most
effectively using
(a) Value analysis (b) Job analysis (c) ABC analysis
(d) Make-or-Buy analysis (e) Break-even analysis.
< Answer >
15. Lakhan Company Limited wants to forecast the demand of its lawnmowers for the month of April,
2005. Actual and forecasted demand for last five months is as follows:
(in units)
< Answer >
3
Month Nov ’04 Dec ’04 Jan ’05 Feb ’05 Mar ’05
Forecast 110 120 145 155 180
Actual 80 106 133 162 170
The mean absolute percentage error (MAPE) of the above data is
(a) 12.98 % (b) 13.98 % (c) 14.98 % (d) 15.98 % (e) 16.98 %.
16. Which of the following is not true about constrained optimization models?
(a) An optimization model reduces the feasible solutions for a complex problem, to a manageable
number
(b) Optimization models make the decision-making process more objective
(c) Optimization models enable the decision-maker to solve practical problems mathematically
(d) Only an experienced and skilled modeler can formulate a practical problem into an optimization
model
(e) Non-quantifiable criteria like worker motivation level do not affect the effectiveness of the
solution.
< Answer >
17. 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 >
18. The major input in the master schedule for the made-to-stock items is the
(a) Customer’s order (b) Forecast of demand
(c) Material requirement planning (d) Rough cut capacity planning
(e) Shop floor control.
< Answer >
19. Which of the following factors does not affect the degree of Backward Integration?
(a) The costs associated with producing components versus buying them
(b) The investments necessary to produce components in-house
(c) The capability of existing technology to produce components
(d) The ability of the organization to market its products
(e) The availability of funds to support the integration.
< Answer >
20. A computerized system that enables customers and suppliers or departments within the same
organization to share and transmit information electronically in real time is known as
(a) Computer aided design (b) Computer aided manufacturing
(c) Electronic data interchange (d) Artificial Intelligence
(e) Flexible manufacturing system.
< Answer >
21. Which of the following inputs/outputs of the MRP system contains the list of materials and their
quantities used to produce one unit of the product?
(a) Master production schedule file (b) Bill of materials file
(c) Inventory record file (d) Planned order releases (e) Control reports.
< Answer >
22. Which of the following is not true in respect of the steps followed in Enterprise Resource Planning
(ERP) implementation?
(a) Evaluation of the ‘as-is’ situation of the business is done
(b) Decision is made about the desired ‘would be’ situation for the business
(c) Business process reengineering is carried out to achieve the desired result
(d) The various packages available in the market are evaluated only on the basis of the price of the
package
(e) The requisite hardware and networks are installed before the implementation of the ERP package.
< Answer >
23. Which of the following is false about strategic decisions?
(a) They usually have a time frame that extends up to seven years or more
(b) They are very broad in nature
(c) They are usually taken by top-level managers
(d) They have a great impact on the long-term effectiveness of the organization
(e) They do not affect short-term and mid-term organizational decisions.
< Answer >
24. Which of the following is not an advantage of Job Specialization? < Answer >
4
(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.
25. 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?
(a) Historical Analysis (b) Predetermined Motion Times
(c) Work Sampling (d) Standard Data (e) Employee Self-Timing.
< Answer >
26. To test certain newly developed combat weapons, the Indian Army has decided to use robots which are
capable of perceiving the environmental conditions of the battlefield through tactile or visual perception
and can make necessary and suitable decisions by using their on-board computers. These robots are
examples of
(a) Fixed sequence robots (b) Variable sequence robots
(c) Physically operated robots (d) Numerical control robots (e) Intelligent robots.
< Answer >
27. Which of the following quality functions is most important in the manufacture of aeroplanes?
(a) Reliability (b) Durability
(c) Serviceability (d) Conformance (e) Aesthetics.
< Answer >
28. Watches are examples of which of the following types of industries?
(a) Assemble-to-stock (b) Fabricate-to-stock
(c) Assemble-to-order (d) Fabricate-to-order (e) Manufacture-to-order.
< Answer >
29. Which of the following pure planning strategies to absorb demand fluctuations is prone to have high
risk of stockout costs?
(a) Varying the workforce size in response to the output requirements
(b) Varying the size of inventory
(c) Back orders
(d) Sub contracting
(e) Adjusting plant capacity.
< Answer >
30. 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 >
END OF SECTION A
Section B : Problems/ Caselet (50 Marks)
• This part 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 Part B.
1. A project consisting of eight activities has the following characteristics:
Time-Estimates (in weeks)
Activity Preceding Most Optimistic Most Likely Most Pessimistic
A None 2 4 12
B None 10 12 26
C A 8 9 10
D A 10 15 20
E A 7 7.5 11
5
E A 7 7.5 11
F B, C 9 9 9
G D 3 3.5 7
H E, F, G 5 5 5
You are required to:
a. Draw network diagram for the project.
b. Prepare activity schedule for the project, showing Earliest Start Time, Earliest Finish Time, Latest Start Time
and Latest Finish Time.
c. Determine the critical path and the expected project completion time.
d. Determine Z value if a 30-week deadline is imposed.
(2 + 6 + 1 + 1 = 10 marks) < Answer >
2. A manufacturing company manufactures a product which has a 6-month demand cycle as shown below. Each unit
of the product requires 10 hours to be manufactured. There are currently 20 workers employed in the company.
The hiring costs are Rs.3,000 per person and layoff costs are Rs.4,000 per person. The company is planning to
adopt varying workforce strategy.
Particulars Month 1 Month 2 Month 3 Month 4 Month 5 Month 6
Demand (in units) 310 540 380 40 220 320
Workdays 22 19 21 21 22 20
There is one shift operation of 8 hours per day. The workers are hired or laid off at the start of each month, as per
requirement.
You are required to calculate
a. The number of workers required each month.
b. The hiring cost and layoff cost each month.
(4 + 6 = 10 marks) < Answer >
3. The manager of a company wants to develop the material requirements plan for an item for the next twelve weeks.
Note that this item has an independent demand which necessitates that a safety stock of 40 units be maintained.
Order quantity = 70 units Week
Lead time = 4 weeks
Safety stock = 40 units
1 2 3 4 5 6 7 8 9 10 11 12
Gross requirements 20 20 25 20 20 25 20 20 30 25 25 25
Planned Receipts 70
On hand at the end
of the period
65
Planned order release
You are required to complete the material requirements plan for the item shown above.
(5 marks) < Answer >
Caselet
Read the caselet carefully and answer the following questions:
4. Explain briefly what you understand by “Next-generation Supply Chain” of Motorola.
(7 marks) < Answer >
5. Analyse and discuss the ‘Supplier Relationship Management’ and ‘Sourcing and Procurement’ initiatives
undertaken by Motorola for efficient supply chain management.
(11 marks) < Answer >
6. Talking about the future of Motorola’s supply chain management, Theresa Metty, Chief Procurement Officer,
stresses on the need of automation. What steps will you take to bring automation in Motorola’s supply chain?
(7 marks) < Answer >
Motorolaís Battle with Supply and Demand Chain Complexity
After having scored solid victories in 2002, Motorola is still continuing its battle with the complexity in its supply and
demand chain. Its Personal Communications Sector (PCS), responsible for 41% of the firm’s $26.7 billion annual sales,
launched the lion’s share of its supply and demand chain initiatives.
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launched the lion’s share of its supply and demand chain initiatives.
The Strategy
Its strategic direction for supply and demand chain enablement, however, couldn’t be simpler, say company executives
and outside consultants, and can apply to firm of any size. At Motorola, the supply and demand chain are viewed
holistically, and individual links then tackled based on two criteria, according to Theresa Metty, Chief Procurement
Officer:
• “What functionality needs to be delivered first because it is a prerequisite to functionality that will be delivered
later?” Metty explains that, in particular, Motorola uses this as its rationale for defining the specific sequence of
projects it plans to roll out in the future.
• “What functionality can we deliver that will generate the payback needed to fund the next phase? So it is a selffunding,
pay-as-you-go model,” she says.
The Initiatives: Next-generation Supply Chain
To understand the communications company’s strong commitment to supply chain revolution, one must first
understand its definition of ‘supply chain’. For Motorola, it means everything from engineering and design
collaboration with engineering to strategic sourcing and procurement, to manufacturing and distribution to materials
management and logistics to customer fulfillment.
Metty adds, “It extends beyond that at both ends as we tap into our suppliers’ supply chains and, increasingly, into our
customers’ supply chains through our Collaborative Planning, Forecasting and Replenishment (CPFR), as well as our
Vendor-Managed Inventory (VMI) initiatives.”
Collaborative Planning, Forecasting and Replenishment (CPFR) and Vendor-Managed Inventory (VMI)
Defined
Collaborative Planning, Forecasting and Replenishment (CPFR) is about complete collaboration and information
sharing between trading partners, including the merchandising process, item/category selection and seasonal and
promotional planning. CPFR aims to seamlessly link the manufacturer to consumer, allowing trading partners to see the
entire supply chain from one end to the other.
In Vendor-Managed Inventory (VMI), the manufacturer or supplier is responsible for all decisions regarding product
inventories at the retailer. Hence, the control of the replenishment decision moves to the manufacturer instead of the
retailer. VMI requires the retailer to share demand information with the manufacturers to allow them to make inventory
replenishment decisions.
Supplier Relationship Management
Vital to PCS’ supply and demand chain success are tight linkages with its suppliers. Motorola’s Semiconductor
Products Sector (SPS) works collaboratively with PCS—as SPS does with other key accounts—via conjoint business
processes and systems, and data sharing.
Steve Foster, director of business planning for SPS’ Wireless and Broadband Systems group, explains that SPS engages
with PCS during the product definition stage, from the very ideation of what a product might look like. By the time they
reach the phase of making the physical product, they are well prepared from a resources point of view.
Sourcing and Procurement
Supplier-related initiatives play a substantial role in Metty’s two-year supply and demand chain roadmap. Not
surprisingly, PCS’ sourcing and procurement departments are hotbeds of innovation. For example, says John Miller, the
sector’s corporate vice-president and director, worldwide strategic sourcing: “We implemented a strategic cost
reduction process that is a structured and collaborative process with our suppliers to identify opportunities to remove
cost from the supply chain and follow through to execution. Cost reduction generated is $16 million against a cost of
$300,000” Savings from the group’s strategic cost management program were used to help fund other initiatives that
involved an investment, Miller says.
Additional accomplishments in the procurement arena include:
• Establishing an approved supplier list, which directs the development community to use suppliers that have been
fully evaluated by a cross-functional team and have a history of acceptable to world-class performance in meeting
Motorola PCS’ requirements.
• Organizing platform commodity teams to partner with development engineering and, ultimately, with key
suppliers. “These teams are co-led by a technology expert in the commodity from engineering and the sourcing
global commodity manager,” Miller explains. “Their responsibilities are to create and manage the approved
supplier list, approved parts list and to work with suppliers on future technology requirements.”
• Creating an approved parts list that emphasizes the use of industry standard components. The list aims to reduce
cost, lower inventory and reduce overall complexity of PCS’ products. Additionally, measurement of these criteria
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cost, lower inventory and reduce overall complexity of PCS’ products. Additionally, measurement of these criteria
enables performance assessment of product development teams.
• Developing a skills and knowledge area assessment tool for all strategic sourcing associates and mapping it to
training/development activities to improve the overall performance of the organization.
• “Creating a sourcing market intelligence team that provides our cross-functional commodity teams (with) market,
supplier and competitive intelligence,” Miller says. “It also tracks market pricing against Motorola pricing to
ensure us a competitive advantage.”
The Future
“I think there’s a tremendous amount in the supply chain that can be automated or digitized, where human beings don’t
need to be involved in the transaction,” Metty concludes. “The beauty of it is that you not only have a more efficient
supply chain as a result, but you can remove the field resources that performed non-value-added, routine things and
replace them with people who are managing strategic supplier relationships, looking for the technology leaders,
creating technology road maps and making sure our product road maps complement our suppliers’ component road
maps.”
END OF SECTION B
Part C : Applied Theory (20 Marks)
• This part consists of questions with serial number 7 - 8.
• Answer all questions.
• Points are indicated against each question.
• Do not spend more than 25 -30 minutes on Part C.
7. The Operations Manager of Ghalib Automobile Parts Ltd., a medium-size company, which manufactures different
automobile parts like axles, chassis and others, wants to bring in automation in its assembly line, on account of
increased competition. He has sought the help of an outside consultant for the purpose. The consultant however,
has cautioned him that before adopting automation, he should be fully aware of the advantages and disadvantages
of automation. What according to you are the advantages and disadvantages of automation? Discuss.
(10 marks) < Answer >
8. Mohan Suitings and Shirtings, which has earned quite a name in this field, wants to expand overseas, so as to
exploit the opportunities of globalization, in order to gain competitive advantage. What are the various sources of
global competitive advantage? Explain.
(10 marks) < Answer >
END OF SECTION C
END OF QUESTION PAPER
Suggested Answers
Operations Management (MB241): April 2005
1. Answer : (e)
Reason : The Product Life Cycle depicts the various stages a product goes through during its lifetime.
In the maturity stage, which follows the growth stage, the growth rate in sales decreases but
sales continue to be either constant or increase slowly. Emphasis is on efficiency, low cost
and mass production.
Hence, from above discussion, we can infer that option (e) is false with respect to maturity
stage of Product Life Cycle, as emphasis is on standardization and mass production.
All other options regarding maturity stage of Product Life Cycle are true as per the above
discussion.
< TOP >
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2. Answer : (c)
Reason : Point Rating technique is based on the ranking of various weighted factors that influence the
choice of location. Here, evaluation should not only be quantitative, rather it should be more
qualitative as the information required to make the decisions is often incomplete, and the
prediction of the future conditions difficult.
Hence, from above discussion, we can infer that option (c) is not true in case of Point
Rating technique.
Option (a) is true because it is the definition of Point Rating technique.
Option (b) is true because locations are ranked by the appropriate weightages given to each
factor.
Option (d) is true because implementation of this type of system requires careful judgement.
Option (e) is true because location with highest score is considered superior.
< TOP >
3. Answer : (c)
Reason : A Make-or-Buy analysis is used to find out whether it is feasible to manufacture parts inhouse
at a lower cost or procure them from external vendors more cheaply. There is no fixed
cost associated with purchasing the material.
Hence, from above discussion, we can infer that option (c) is not correct regarding Make-or-
Buy analysis.
Option (a) is correct, as purchase managers, with the assistance of production engineers,
generally do a Make-or-Buy analysis for materials.
Option (b) is correct, as it is made based on the break-even analysis.
Option (d) is correct, as Break-even demand is the demand at which the total cost of making
a product is equal to the total cost of buying the product.
Option (e) is correct, as it is the definition of Make-or-Buy analysis.
< TOP >
4. Answer : (c)
Reason : Indirect CAM refers to the use of computers to indirectly support manufacturing operations.
It involves the process of capturing data about the flow of items through automatic means
such as bar coding, and using this information to support planning and scheduling of
production activities. Operations managers generally apply indirect CAM for activities such
as capacity planning, purchasing, inventory controlling, quality reporting and so on.
Hence, from above discussion, we can infer that option (c) is correct.
Option (a) is incorrect. Computer Aided Design (CAD) is a set of specialized software and
hardware that is used to design products directly on computer terminals. So, it is not
applicable here.
Option (b) is incorrect. Direct CAM links computers directly to one or more machines such
that the production processes are monitored and controlled with the help of computer signals.
Computer Numeric Controlled (CNC) machines are used which store the instructions for
making parts within their own computers and use them to control their operations. So, it is
not applicable here.
Option (d) is incorrect. Computer Integrated Manufacturing (CIM) system includes all the
engineering functions of CAD/CAM and the business functions of the firm as well. These
business functions include order entry, cost accounting, employee time records and payroll,
and customer billing. So, it is not applicable here.
Option (e) is incorrect. Flexible Manufacturing System (FMS) is a set of automated machines,
which are controlled by a central computer to produce a variety of products on the same
machinery, by automatically changing the machine settings, as required. So, it is not
applicable here.
< TOP >
5. Answer : (e)
Reason : If the capacity requirements cannot be modified to match the available capacity, managers
can adjust the requirements by using the following strategies:
I. Missing some customer orders and thereby losing sales.
II. Adding a shift or making the operators work overtime.
III. Hiring some personnel and thereby increasing manpower.
IV. Subcontracting a part of the work.
V. Transferring work to or personnel from another work center that is relatively less
loaded.
< TOP >
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loaded.
Hence, from above discussion, we can infer that option (e) is correct.
Options (a), (b), (c) and (d) are not correct as all of the three given strategies are applicable
and not just one or two strategies.
6. 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 >
7. Answer : (c)
Reason : Operational Planning component pertains to the process by which the company specifies the
objectives, tasks, resources and measurements needed to guide Supply Chain Management
(SCM) operations. Its functions include commodity planning, supplier capacity planning,
planning of supplier evaluation and certification processes and definition of measurements
for supporting the system.
Hence, from above discussion, we can infer that option (c) is correct.
Option (a) is incorrect. Order release is a function of Order-to-Delivery process component
of SCM.
Option (b) is incorrect. Incoming inspection is a function of Order-to-Delivery process
component of SCM.
Option (d) is incorrect. Accounts payable is a function of Order-to-Delivery process
component of SCM.
Option (e) is incorrect. Internal materials handling is a function of Order-to-Delivery process
component of SCM.
< TOP >
8. Answer : (e)
Reason : Gantt Charts are simple bar charts used to schedule operations. However, they do not
account for hurdles like production breakdown and human performance.
Hence, from above discussion, we can infer that option (e) is not true with respect to Gantt
Charts.
Option (a) is true because it is the definition of Gantt Charts.
Option (b) is true because their purpose is to provide ease and clarity in communicating the
important job shop information to managers.
Option (c) is true because they are basically of two types: Workload charts and Scheduling
charts.
Option (d) is true because they help managers to identify idleness of equipment so as to
make the best use of the available facilities effectively.
< TOP >
9. Answer : (a)
Reason : In Economic Impediment, global activities become uneconomical for organizations when
different national markets demand different product varieties. Also, the difficulties involved
in transporting products and accessing established distribution channels impede the process
of globalization.
Hence, from above discussion, we can infer that option (a) is correct.
< TOP >
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Option (b) is incorrect. Managerial Impediment means that managers have to operate in an
extremely challenging global environment, although they may not have the necessary global
experience.
Option (c) is incorrect. In Institutional Impediment, government rules and regulations hinder
the process of globalization.
Options (d) and (e) are incorrect because Cultural Impediment and Technical Impediment
have not been separately classified as categories of Impediment.
10. 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 same 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.
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.
< TOP >
11. Answer : (c)
Reason : Acceptance Plans help to decide whether lots of raw materials, purchased parts and finished
goods meet prescribed quality standards.
Acceptance Plans do not have large sample sizes because their inspection costs are higher.
Hence, from above discussion, we can infer that option (c) is not true regarding Acceptance
Plans used in quality control.
Option (a) is true, as it is the definition of Acceptance Plans.
Option (b) is true. Operations managers can either accept or reject a lot, on the basis of
Acceptance Plans.
Option (d) is true. Acceptance Plans protect an organization by limiting the percentage of
defective products that are shipped to customers.
Option (e) is true. Average Outgoing Quality Curves and Operating Characteristic Curves
are two important concepts of Acceptance Plans.
< TOP >
12. 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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13. 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.
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11
• 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.
14. 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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15. Answer : (b)
Reason : MAPE =
100
n
 
  .
n
t t
t 1 t
A F
A
−
= Σ
.
Month
Forecast
(Ft)
Actual (At) At - Ft
t t
t
A F
A
− t t
t
A F
A
−
Feb 110 80 –30 –0.375 0.375
Mar 120 106 –14 –0.132 0.132
Apr 145 133 –12 –0.090 0.090
May 155 162 +7 +0.043 0.043
Jun 180 170 –10 –0.059 0.059
Total 0.699
∴MAPE =
100
5 × 0.699
= 13.98 %.
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16. Answer : (e)
Reason : (a) This is a true statement about Constrained Optimization Model (COM). An
optimization model is so informative that it reduces the feasible solutions for an
otherwise complex problem to a manageable number. It also clarifies the situation for
the decision-maker, enabling him to evaluate the alternatives.
(b) This is a true statement for COM. Optimization models make the decision-making
process more objective. They help resolve the disagreement of conflicting constraints
and help the decision-maker to obtain an acceptable solution.
(c) This is a true statement for COM. Optimization models enable the decision0maker to
solve practical problems mathematically, or by using a computer, which is otherwise
not possible.
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12
(d) This is a true statement for COM. Optimization models also have inherent drawbacks.
They can sometimes result in poor decisions. Only an experienced and skilled modeler
can formulate a practical problem into an optimization model. Omission of any of the
decision variables or constraints could result in a disastrous situation wherein the
solution obtained is far from being optimal.
(e) This is not true for COM. The solution obtained for the model is not always the
optimal solution for the real problem underlying the model. This is because models
evaluate the solutions only with respect to a few quantifiable criteria. Non quantifiable
criteria like worker motivation level that are not taken into account while evaluating the
alternatives often affect the effectiveness of the solution arrived at through a model.
17. 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 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 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. Job analysis includes every information on the nature of
duties to be performed, scope of responsibilities, and all the other information on job
content.
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18. Answer : (b)
Reason : (a) This is a wrong answer. Customerís order is the essential input for make-to-order
items in Master scheduling or master production scheduling (MPS). For make-to-order
items, detailed scheduling of time and materials required is very essential. This is
because the items and quantities specified are unique to a particular customer order.
Also the employee work time must be carefully balanced against due date of the orders,
it should not happen that they are just busy producing items that can go into stock and
eventually be sold.
(b) This is the right answer. The major input for the make-to-stock items in master
schedule is the forecast of demand. Requirements often flow from the need to
replenish plant or distributor inventories of end products or service parts.
(c) This is the wrong answer. The material requirement planning enables the
implementation of the master production schedule by showing the time-phased
requirements for releasing and receiving of materials. MRP does not form input for
MPS.
(d) This is the wrong answer. Rough cut capacity planning; also called resource
requirement planning is the process of testing the feasibility of master production
schedules in terms of capacity. It ensures that a proposed MPS does not overload any
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13
schedules in terms of capacity. It ensures that a proposed MPS does not overload any
key department, work center or machine, not making the MPS feasible. The rough cut
capacity planning is the quick and inexpensive method to find and correct the gross
discrepancies between the capacity requirements of MPS and available capacity.
(e) This is a wrong answer. Shop floor control are the activities that execute and control
shop floor operations such as assigning jobs to the machines and work centers,
sequencing the processing of jobs, detailed scheduling, and monitoring and adjusting
materials and work flows from station to station.
19. Answer : (d)
Reason : Backward Integration expands the ownership of the production and distribution chain
backwards, i.e., towards the source of supplies. Therefore it is not affected by the ability of
the organization to market its products. Rather Forward Integration is affected by it.
Hence, from above discussion, we can infer that option (d) is correct because it affects
Forward Integration and not Backward Integration.
Options (a), (b), (c) and (e) are incorrect because they affect degree of Backward
Integration.
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20. Answer : (c)
Reason : (a) This is the wrong answer. Computer aided design (CAD) is a technique for
specifying designing, implementing, introducing and using computer based systems for
design purposes. It makes use of computer systems (also known as CAD system) to
assist in the creation, modification, analysis and optimization of a design.
(b) This is the wrong answer. Computer aided manufacturing (CAM) is a method of
automation wherein computers are used either directly to control the processing
equipment or indirectly to support manufacturing operations. The machines usually
perform a variety of operations, receiving instructions from the computer on the
sequence and specifications of its operations.
(c) This is the correct answer. Electronic data interchange (EDI) is a computerized system
using which customers and suppliers or departments within the same organization can
share and transmit information electronically in real time. For instance, a computer in
the purchase department of an organization can scan inventory records of its stores
department in order to determine the items whose quantities are below reorder levels.
The computer can prepare purchase orders and store them electronically in the mailbox
of the corresponding vendors. The vendor’s computer can then pick up the acceptable
orders, enter them into the order-entry system and prepare a pick list to withdraw the
items from its inventory and a packing slip to ship the items.
(d) This is the wrong answer. Artificial Intelligence (AI) refers to the capacity of a digital
computer to perform tasks commonly associated with the higher intellectual processes
characteristic of humans, such as the ability to reason, discover meaning, generalize or
learn from past experience. The term AI is also frequently applied to that branch of
computer science concerned with the development of systems endowed with such
capabilities.
(e) This is the wrong answer. Flexible manufacturing System (FMS) is a form of flexible
automation in which several machine tools are linked together by a material-handling
system, with a central computer controlling all aspects of the system. This system is
generally used to produce a variety of parts that have similar processing requirements.
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21. Answer : (b)
Reason : (a) This is the wrong answer. The MPS file is one of the inputs to MRP system. The
master production schedule file contains information on issues like when and how
many units of each finished product are required, and the corresponding cumulative
lead-time requirements for activities such as purchasing, receiving, fabricating, and
assembling each one of them. This information is derived from the aggregate
production planning and control department.
(b) This is the right answer. The BOM is one of the inputs to MRP system. The Bill of
Materials (BOM) contains the list of materials and their quantities used to produce one
unit of a product. It consists of the complete list of all end products, the structure
(assemblies, subassemblies, parts, and raw materials) of products, and the quantity of
each item required for each higher level item in the product hierarchy. It also contains
information on whether the item is produced internally or purchased from external
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14
sources, and the purchase or production lead-time needed to acquire the items.
(c) This is the wrong answer. The inventory record file is one of the inputs for MRP
system. The inventory record file is a computerized file with a complete record of
each material held in inventory. It contains all the information on inventory levelslevels
at the beginning of the planning horizon and the details of the expected arrivals
of inventory during the period. It also contains supplementary information like names
and addresses of the prospective vendors, and the lead times that can be used to
purchase and other departments for planning purposes.
(d) This is the wrong answer. Planned order releases are output of MRP system. The first
step in the process of an MRP system is to ‘explode’ the end product into an assembly
chart. It starts with the time at which the product is required and then proceeds
backwards to determine each production or purchasing activity that is necessary to
make each succeeding item. The next step in an MRP system is to develop a material
requirement plan for each item in the BOM file. The system first identifies the gross
product requirements in the MPS and calculates the net product requirements by
subtracting the available units of items from it. The system then uses all this
information to determine planned order releases, which include the quantities to be
ordered so that the materials arrive just when they are needed.
(e) This is the wrong answer. Control reports are the output reports generated from MRP
system. Control Reports include statistical data on the status of inventory levels. These
reports highlight the inventory items that require the management’s attention to ensure
a regular supply of materials in right quantities.
22. Answer : (d)
Reason : (a) This is true for the steps followed in ERP implementation. In this step, team
responsible implementing ERP should attempt a thorough understanding of existing
business processes the organization is following for transacting its business. The
various business functions should be enumerated. Then the process used to achieve the
business transaction should be listed in detail. The process mapping technique can be
used here and should provide the following information:
• The flow of information
• The total number of decision points involved
• The total time needed to complete the business process
• The number of reporting points
(b) This is true for the steps followed in ERP implementation. In this step, decisions are
made regarding how the business process should finally look. Here benchmarking can
be used to ensure that the targets set are comparable to the best in the industry.
(c) This is true for the steps followed in ERP implementation. The existing processes are
reengineered to achieve the new business processes. The new processes should reduce
the business process cycle time significantly; the number of decision points should be
reduced to bare minimum; information flow should be streamlined. There should not be
a to-and-fro flow of information between departments.
(d) This is not true for the steps followed in ERP implementation. The various ERP
packages available in the market are evaluated on several parameters besides price of
the package like Global presence, Local presence, Investment in R&D, Target market,
Modularity, Obsolescence and ease and cost of implementation.
(e) This is true for the steps followed in ERP implementation. In this step, the installation
of hardware is planned. Hardware should arrive in time and not lie idle for long time
due to delays in implementation.
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23. Answer : (e)
Reason : Decisions made at the strategic level become the fixed conditions or operating constraints
under which the firm must operate in both the intermediate and short term. Hence, they
affect short-term and mid-term organizational decisions.
Hence, from above discussion, we can infer that option (e) is false about Strategic Decisions
because they do affect short-term and mid-term organizational decisions.
Option (a) is correct because Strategic Decisions usually have a time frame that extends up
to seven years or more.
Option (b) is correct because Strategic Decisions are very broad in nature.
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15
Option (c) is correct because Strategic Decisions are usually taken by top-level managers.
Option (d) is correct because Strategic Decisions have a great impact on the long-term
effectiveness of the organization.
24. 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.
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25. 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 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). 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 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.
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26. Answer : (e)
Reason : Intelligent robots are capable of perceiving the environmental conditions of the
workplace through tactile or visual perception and can make necessary and suitable
decisions by using their on-board computers.
Hence, from above discussion, we can infer that option (e) is correct.
Option (a) is incorrect. Fixed sequence robots perform a sequence of operations according to
a given set of procedures. So, these robots are not applicable in this situation.
Option (b) is incorrect. 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, these
robots are not applicable in this situation.
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16
robots are not applicable in this situation.
Option (c) is incorrect. Physically operated robot is like a mechanical arm that can be used
by an operator to perform some of his/her tasks. The primary objective of using a physically
operated robot is to protect the workers from the hazardous work environment. So, this type
of robot is not applicable in this situation.
Option (d) is incorrect. Numerical control robots perform a set of operations using numerical data
that is fed into them through devices like punched tapes and data cards. They are generally
used to perform manufacturing operations where high precision is required. These machines
require operator support for positioning the materials on which they have to work; once the
materials are in position, the robots can perform the set of activities according to the
program instruction. So, these robots are not applicable in this situation.
27. 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
of utmost importance in high value products such as aeroplanes, computers and others.
Hence, from above discussion, we can infer that option (a) is correct.
Option (b) is incorrect. Durability refers to the expected operations life of a product. It is
considered only after proper reliability is ensured.
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. It is also
considered only after proper reliability is ensured.
Option (d) is incorrect. Conformance reflects how well the product and its individual
components meet the established standards. It is also considered only after proper reliability
is ensured.
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, companies can use this quality dimension to carve out a niche
market. However, it is not very relevant here.
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28. Answer : (a)
Reason : Assemble-to-stock combines multiple component parts into a finished product, which is
then stocked in inventory to satisfy customer demand. e.g., watches, electrical appliances
etc.
Hence, from above discussion, we can infer that option (a) is correct.
Option (b) is incorrect. In Fabricate-to-stock, items are manufactured directly by machines
rather than assembled by parts, and are stored in stock points to meet the anticipated
customer demand. e.g., electrical fuses. So, it is not applicable here.
Option (c) is incorrect. In Assemble-to-order, a final assembly is made according to the
customer’s orders. e.g., cars, crushers etc. So, it is not applicable here.
Option (d) is incorrect. In Fabricate-to-order, items are manufactured by machines to
customer orders. e.g., gears, ball bearings, conveyor belts etc. So, it is not applicable here.
Option (e) is incorrect. In Manufacture-to-order, items are either fabricated or assembled
completely in adherence to customer specifications. e.g., turbines, packing machines, heavy
machine tools etc. So, it is not applicable here.
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29. Answer : (c)
Reason : A back-order strategy assumes that customers are willing to wait for delivery and this
effectively smooths out production. But, this strategy may sometimes result in stock out
costs where customers may not wait till the product is delivered and switch off to some other
company’s product.
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30. 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 twobin
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.
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17
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.
18
Part B : Problems/Caselet
1. a. Network diagram for the project is as shown below:
b. Activity schedule is as under:
Time Estimates
(in weeks)
Expected time
(in weeks)
Variance
Earliest Time
(in weeks)
Latest Time
(in weeks)
Activity
to tm tp
te =
(to + 4 tm + tp)/6
σ2 =
{(tp - to)/6}2 Start
(Ei)
Finish
(Ei + Dij)
Start
(Lj - Dij)
Finish
(Lj)
A 2 4 12 5 25/9 0 5 0 5
B 10 12 26 14 64/9 0 14 1 15
C 8 9 10 9 1/9 5 14 6 15
D 10 15 20 15 25/9 5 20 5 20
E 7 7.5 11 8 4/9 5 13 16 24
F 9 9 9 9 0 14 23 15 24
G 3 3.5 7 4 4/9 20 24 20 24
H 5 5 5 5 0 24 29 24 29
c. The critical path is 1-2-4-5-6.
The expected project completion time = 5 + 15 + 4 + 5 = 29 weeks.
d. Variance of project = 25/9 + 25/9 + 4/9 + 0 = 6.
Z = (Desired project period - Expected project period) / (Standard Deviation of critical path activities)
=
30 29
6
−
= 0.41.
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2. Aggregate plan.
19
Particulars Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Total
1. Production reqd. 310 540 380 40 220 320
2. Production hrs.
reqd. (1 x 10) 3100 5400 3800 400 2200 3200
3. Worker-hrs.
available at 8/day 176 152 168 168 176 160
4. No. of workers
reqd. (2 ÷ 3) 18 36 23 3 13 20
5. No. of workers
hired 18 10 7
6. Hiring cost
(5 x 3000)
(in Rs.) 54,000 30,000 21,000 1,05,000
7. No. of workers
laid off 2 13 20
8. Layoff cost
(7 x 4000)
(in Rs.) 8,000 52,000 80,000 1,40,000
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3. Completed material requirements plan.
Order quantity = 70 Week
Lead time = 4 weeks
Safety stock = 40 1 2 3 4 5 6 7 8 9 10 11 12
Gross requirements 20 20 25 20 20 25 20 20 30 25 25 25
Planned Receipts 70 70 70 70
On hand at end of
period
65
45 95 70 50
100
30 75 55
105
35 75 50
95
25 70
Planned order release 70 70 70
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4. “Next-generation Supply Chain” of Motorola means everything from engineering and design collaboration with
engineering to strategic sourcing and procurement, to manufacturing and distribution to materials management
and logistics to customer fulfillment.
Its two main components are Collaborative Planning, Forecasting and Replenishment (CPFR) and Vendor-
Managed Inventory (VMI). CPFR is the latest in a long line of supply chain initiatives that have promised greater
profits through improved efficiencies and increased collaboration between trading partners. It is designed to link
the supply and demand processes allowing for a more consumer driven supply chain. CPFR aims to seamlessly
link the manufacturer to consumer, allowing trading partners to see the entire supply chain from one end to the
other. CPFR calls for complete collaboration and information sharing between trading partners, including the
merchandising process, item/category selection and seasonal and promotional planning. With Vendor-Managed
Inventory (VMI), the manufacturer or supplier is responsible for all decisions regarding product inventories at the
retailer. As a result, the control of the replenishment decision moves to the manufacturer instead of the retailer.
VMI requires the retailer to share demand information with the manufacturers to allow them to make inventory
replenishment decisions. VMI can allow the manufacturers to increase their profits as well as profits for the entire
supply chain by mitigating some of the effects of double marginalization.
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5. Supplier Relationship Management initiatives of Motorola:
• Collaborative Planning, Forecasting and Replenishment (CPFR). e.g., Motorola’s Semiconductor Products
Sector (SPS) works collaboratively with Personal Communications Sector (PCS).
• Conjoint business processes and systems.
• Data sharing.
• Involvement of supplier by the manufacturer at the product ideation and definition stage itself. e.g., SPS
engages with PCS during the product definition stage, from the very ideation of what a product might look
like.
20
Sourcing and Procurement initiatives of Motorola:
• Implementation of a strategic cost reduction process through collaboration with suppliers.
• Use of savings from the cost reduction process to fund other initiatives.
• Establishment of an approved supplier list that was fully evaluated by a cross-functional team.
• Formation of cross-functional teams consisting of commodity persons, development engineers and suppliers.
• Creation of an approved parts list that emphasizes the use of industry standard components.
• Development of a skills and knowledge area assessment tool for all strategic sourcing associates and its
mapping to training/development activities to improve the overall performance of the organization.
• Creation of a market intelligence team that provides Motorola’s cross-functional commodity teams (with)
market, supplier and competitive intelligence.
All the above initiatives taken by Motorola are really praiseworthy and these are taking Motorola in the right
direction.
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6. As rightly pointed out by Theresa Metty, Chief Procurement Officer, automation can be brought into the supply
chain. According to me, this is possible with the help of Artificial Intelligence (AI) and also Electronic Data
Interchange (EDI) that enables electronic sharing of information in real-time, thus making supply chain
management more efficient at Motorola. Other than AI and EDI, one can even go for Electronic Supply Chain
Management (ESCM) which helps in business-to-business integration across the entire supply chain through the
Internet. The advantages of ESCM are many, and include timely order-processing, improved inventory tracking
and management, improved accuracy in order fulfillment, support for JIT manufacturing and improved customer
service.
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Part C: Applied Theory
7. Advantages of automation are as follows:
1) Improvement in productivity: Machines can perform repetitive and monotonous tasks continuously without
fatigue or loss in productivity. In addition, automated machines are capable of producing more units than
humans in a given time period.
2) Efficient use of materials: Increased process control makes more efficient use of materials, resulting in less
scrap/waste.
3) Improvement in the quality of the product: It is a common belief that quality is an outcome of good
workmanship of humans. However this is not always true. Automated systems generally perform the various
manufacturing process with lesser variability than human workers. This results in greater control and
consistency in product quality.
4) Improvement in work environment for the workers: Worker safety is another important reason that justifies
the automation of an industrial operation. As automated systems do not require human intervention, they help
safeguard workers against the hazards of the factory environment. Another benefit of automation is the
reduction in the average number of working hours per week for the worker.
5) Reduced factory lead-time: Automation enables organizations to process a typical production order
expeditiously, thus reducing lead-time.
Disadvantages of automation are as follows:
1) Negative feedback from the employees: Automation may lead to dissatisfaction in employees and unions,
which may disrupt the normal functioning of the organization. The reasons for dissatisfaction can be
resistance to change or fear of losing job.
2) High initial investment: The initial capital investment is very high for an automated system.
3) Higher level of maintenance needed: As automated systems are complex, they require higher levels of
maintenance and the cost of maintenance can be substantial. The cost includes training of maintenance
personnel, repairing costs, tools and equipment maintenance cost, etc.
4) Less flexible: Automated systems are less customizable in terms of the number of possible products that can
be manufactured when compared with manually operated systems.
5) Requirement of technical manpower: As most of these automated systems are complex, a competent and
skilled person is required to operate the system.
In spite of these disadvantages, automation technology, if used wisely and effectively can yield substantial
opportunities in future. By automating the production process, workers can be relieved from repetitive, hazardous,
and unpleasant work. The level of automation in an organization depends on its requirements.
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and unpleasant work. The level of automation in an organization depends on its requirements.
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8. The sources of global competitive advantages can be broadly classified as:
• Comparative advantages
• Economies of scale
• Proprietary product technology
Comparative Advantages
The comparative advantage of a country can be defined as its ability to produce goods and services cheaper than
other countries. Organizations generally globalize their operations to take advantage of opportunities provided by
other economies or markets or for obtaining resources. That is, organizations establish their units where they can
derive maximum comparative advantage. These comparative advantages may be in the form of low labor costs,
availability of natural resources, availability of skilled manpower, etc. Many Asian countries provide cheap labor
and skilled manpower, prompting many large corporations to establish manufacturing bases in Asia.
Economies of Scale
Globalization can also provide organizations competitive advantage in terms of economies of scale. By expanding
their operations in different countries, organizations can obtain the benefits of economies of scale in their
production and marketing activities. If there are economies of scale in production, organizations can achieve a
cost advantage by centralizing production and catering to a large customer base. When the market size is big (i.e.
global market), organizations can achieve a cost advantage through the large-scale production of goods. Toyota's
commanding position in the light-duty truck market worldwide can be attributed to their high volume of
production. If products are sold worldwide, sales (in terms of volume) increase while the fixed cost incurred in
their production decreases' as it is spread across a larger volume. As a resul t, products can be priced competitively.
Sony obtained this advantage by selling its Walkman across the globe after making minor changes in labeling for
marketing the product in different markets.
Organizations operating globally can also obtain economies of scale in purchasing. For global productions, the
purchasing requirements of organizations will be high and their bargaining power will be high. When
organizations place large orders, suppliers also benefit and are able to achieve economies of scale. As a result,
they are also able to keep costs low and pass on the benefits to manufacturers in the form of low, prices. Since the
bargaining power of television manufacturers like Sony and Aiwa is high, they can get transistors and diodes at
cheaper rates than other manufacturers. And because they order in bulk, their suppliers achieve economies of
scale.
Organizations can also obtain economies of scale in their marketing function, but they often choose to customize
their marketing activities on the basis of the requirements of specific national markets. Economies of scale in
marketing are generally evident in industries such as heavy construction, and aircraft manufacturing. These
industries use the same salespeople and promotion strategy for promoting their p roducts in different markets.
The ability to take advantage of economies of scale is influenced by the needs of local requirements. If markets
worldwide accept the same product without major modification, organizations can achieve economies of scale.
Proprietary Product Technology
Organizations that have spent a considerable amount in developing proprietary technology can take full advantage
of the technology if they cater to the global market. Intel was able to dominate the microprocessor market for
personal computers and servers through the development of proprietary product technology. Generally, the ability
to derive benefits from proprietary technology is important for organizations operating in microprocessor,
semiconductors, aircrafts, turbines, and pharmaceuticals industries. The costs of research and development for
developing a new product and/or modifying a product are significant in these industries. Thus, these firms require a
market that is spread across the world to recoup the high cost of the research and development of products.