Operations Management (MB241) : July 2005

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Question Paper

Operations Management (MB241) : July 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. The Operations Manager has asked the new management trainee to prepare a process chart for a Pizza
assembly process at a fast-food restaurant. He has used certain symbols to prepare the process chart.
One such symbol is a circle that represents
(a) Operation (b) Transportation (c) Storage
(d) Delay (e) Inspection.
< Answer >
2. The planning division of a manufacturing organization wants to formulate its aggregate output plan for
the coming six months on the basis of historical data available with it. For this purpose, which of the
following models should it use?
(a) Linear Programming (b) Linear Decision Rules
(c) Heuristic Model (d) Computer Search Model (e) Data Model.
< Answer >
3. Indian Space Research Organization (ISRO), which is involved in space research, manufacturing of
rockets and other related works, may adopt which of the following types of Facility Layout?
(a) Service Facility Layout (b) Fixed Position Layout
(c) Grouping Technology Layout (d) Product Layout
(e) Process Layout.
< Answer >
4. Out of the following materials handling equipment, used by a cement manufacturing company, which
one can be classified as a fixed path equipment?
(a) Trucks (b) Forklifts (c) Mobile cranes (d) Conveyors (e) Tractors.
< Answer >
5. Which of the following forecasting methods uses a quantitative model to forecast the demand?
(a) Delphi method (b) Nominal group technology
(c) Historical analogy (d) Exponential smoothing
(e) Executive committee consensus.
< Answer >
6. Companies prefer to choose Asian countries for low-labor-cost services such as electronics assembly,
textile making and information technology enabled services (ITES). Which of the following strategic
advantages are they trying to derive by adopting this policy?
I. Comparative advantage.
II. Economies of scale.
III. Proprietary product technology.
(a) Only (I) above (b) Only (II) above
(c) Only (III) above (d) Both (I) and (II) above
(e) Both (II) and (III) above.
< Answer >
7. Which of the following is not true for the simplex method of 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 on 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 variables.
< Answer >
8. An activity is said to be ahead of the schedule, if the critical ratio for the activity is
(a) Equal to one (b) Less than one (c) More than one
(d) Equal to zero (e) Greater than zero but less than one.
< Answer >
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9. Which of the following is not true for the program evaluation and review technique (PERT) of project
management?
(a) PERT provides a graphical display of projects that help the users understand the relationships
among the activities
(b) PERT can be used in situations where two or more projects have to be planned together to share
the available resources
(c) The PERT network always begins with a single node and ends with a single node, with at least a
single continuous path in between the two nodes
(d) The slack time for an activity is the time by which that activity can be delayed without delaying
the total project
(e) The slack time for critical activities is zero.
< Answer >
10. A popular tractor manufacturing company uses an MRP (Materials Requirement Planning) system to
manage its complex production process, that involves many components and sub-assemblies. An
MRP system is used because of the many advantages offered by it. However, it might not be
advantageous in some respects. Which of the following is not an advantage of an MRP system?
(a) Reduced per unit cost of production
(b) Low inventory levels, especially for in-process materials
(c) Lesser time required for planning and implementing an MRP system
(d) Optimized production scheduling
(e) Reduced set-up and tear-down costs.
< Answer >
11. The quality inspection team of the client company has been told by the Quality Control Manager to be
more vigilant in checking whether the products manufactured by the contractee firm were as per the
agreed upon specifications. This aspect refers to which of the following quality dimensions?
(a) Performance (b) Conformance (c) Reliability (d) Serviceability (e) Durability.
< Answer >
12. Which of the following is an electronic copy of information explaining the procedure to produce a
product?
(a) Routing sheet (b) Routing file
(c) Routing paper (d) Routing document
(e) Route collection system.
< Answer >
13. Routing information with respect to job scheduling activities includes
I. Sequence of operations in the production process.
II. List of operations to be performed by a worker.
III. Skills required by an employee to perform the task.
(a) Only (I) above (b) Both (I) and (II) above
(c) Both (I) and (III) above (d) Both (II) and (III) above
(e) (I), (II) and (III) above.
< Answer >
14. A hotel which schedules various resources like room, bed, food and other facilities to serve multiple
customers together uses which of the following systems?
(a) Appointment System (b) Reservation System
(c) Strategic Product Pricing (d) ERP system
(e) JIT System.
< Answer >
15. 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) Centralized maintenance
(c) Predictive maintenance (d) Remedial maintenance
(e) Decentralized maintenance.
< Answer >
16. Which of the following is not a feature of JIT Purchasing?
(a) There is usually a single source of supply for a given part in nearby geographical area with a longterm
contract
(b) Purchasing is carried out in small lots, with frequent deliveries
(c) Suppliers have less freedom in design specifications
(d) There is less formal paperwork
(e) No percentage of rejects from a supplier is acceptable.
< Answer >
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17. Which of the following aspects of quality is usually measured by the mean time between failures
(MTBF) or the failure rate per unit time?
(a) Conformance (b) Durability (c) Serviceability (d) Reliability (e) Aesthetics.
< Answer >
18. The length of time required to replenish the inventory for a material, from the time that need for
additional material is sensed until the new order for the material is in inventory and ready for use is
called
(a) Inventory level (b) Inventory cycle
(c) Lead time (d) Demand during lead-time (e) Demand rate.
< Answer >
19. Which of the following is not a feature of Flexible Manufacturing System (FMS)?
(a) It 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
(b) It is generally used to produce a variety of parts that have similar processing requirements
(c) It is usually suitable for manufacturing products in high volumes
(d) It offers many advantages such as reduced direct labour, shorter response time, consistent quality
of products and better control over the manufacturing process
(e) It however requires huge capital investments in equipment and planning and control systems.
< Answer >
20. Which of the following systems represents the highest level of automation in manufacturing?
(a) Computer Aided Design (CAD)
(b) Computer Aided Manufacturing (CAM)
(c) Computer Integrated Manufacturing (CIM)
(d) Flexible Manufacturing System (FMS)
(e) Automatic Identification System (AIS).
< Answer >
21. Which of the following is false regarding the 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: Production
authorization card, Vendor authorization card and Conveyance authorization card
(c) A single-card system makes use of the conveyance card only
(d) Missing of only one Kanban card does not hamper the working of the system
(e) The dual-card system makes use of two separate cards, viz., conveyance card and vendor
authorization card.
< Answer >
22. The Bill of Materials (BOM) file is also referred to as
(a) Assembly Chart (b) Process Chart (c) Gantt Chart
(d) Inventory Records File (e) Indented Parts List.
< Answer >
23. 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 >
24. In order to maximize the number of completed jobs in the system, which of the following priority rules
should be used by a firm?
(a) First In, First Serve (b) Earliest Due Date
(c) Slack Time Remaining (d) Longest Processing Time
(e) Shortest Processing Time.
< Answer >
25. Which of the following is not true about Cellular Manufacturing?
(a) Parts spend less time in waiting before they are processed and this results in a significant decrease
in in-process inventory levels
(b) Products have similar shapes and processing requirements
(c) Grouping parts into families that follow a common sequence of steps often requires developing
and maintaining a computerized parts classification and coding system
(d) Cells are dedicated to a wide range of products
(e) Changeover times between batches of parts are considerably reduced.
< Answer >
26. Woodlands, a reputed hospital, has developed an innovative system to help physicians diagnose
bacterial infections. When supplied with the patient’s symptoms and test results, the system offers a
number of possible diagnoses, assigns confidence levels to each, and even suggests additional tests, if
< Answer >
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any. This is an example of
(a) Transaction Processing System (b) Executive Information System (c) Expert System
(d) Robotics (e) Electronic Data Interchange (EDI).
27. Comparing inventory levels to targets, falls more appropriately under which of the following activities?
(a) Planning (b) Organizing (c) Controlling (d) Motivating (e) Coordinating.
< Answer >
28. A Korean MNC manufactures micro-wave cookers. The demand for their product in last five months
(in 2005) is as follows:
Month Feb Mar Apr May June
Demand 7000 7500 8200 8500 7900
4-month moving averages for the demand of the product at the beginning of June and July (in 2005)
were respectively
(a) 7567, 8067 (b) 7820, 7820 (c) 7567, 8025 (d) 7800, 8025 (e) 8067, 8200.
< Answer >
29. Manager (operations) of a manufacturing factory is planning to set the production target for the month
of July (2005). He uses first-order exponential smoothing technique to forecast the demand. Actual and
forecasted demand for last four months (in 2005) are as follows:
Month Mar Apr May June
Forecast 52.0 43.6 44.6 47.8
Actual 40.0 45.0 49.2 52.0
The demand forecast for the month of July (2005) would be
(a) 47.9 (b) 48.6 (c) 49.3 (d) 50.7 (e) 51.6.
< Answer >
30. Roshni Ltd., a bulb manufacturing company, has earned a reputation in the market because of the 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 >
END OF SECTION A
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Section B : Problems/Caselet (50 Marks)
This section consists of questions with serial number 1 – 5.
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. A chair manufacturing company designs chairs using ergonomics to provide comfort during long working hours in
the workplace. The chair sells for Rs.130. There are 480 minutes available during the day, and there is an average
daily output of 50 chairs. There are 8 tasks. Following is the given information:
Task Task time (in minutes) Tasks that must precede
1 4 None
2 7 1
3 6 1, 2
4 5 2, 3
5 6 4
6 7 5
7 8 5
8 6 6, 7
You are required to
a. Calculate the cycle time.
b. Balance the assembly line.
c. Find out the efficiency of the assembly line.
(1 + 8 + 1 = 10 marks) < Answer >
2. Dutta Pharmaceuticals wishes to assign a set of jobs to a set of machines. The processing times (in minutes) of
four jobs 1,2,3,4 which are assigned to machines A,B,C,D are given below:
Jobs Machines
A B C D
1 15 9 5 10
2 10 5 6 9
3 17 8 7 12
4 19 10 8 7
You are required to
a. Determine the optimum processing sequence using Johnson’s Rule.
b. Find the total elapsed time.
(5 + 3 = 8 marks) < Answer >
3. Standard Electric Company produces incandescent light bulbs. The following data on the number of lumens for
40-watt light bulbs were collected when the process was in control.
Sample Observations
1 2 3 4
1 604 612 588 600
2 597 601 607 603
3 581 570 585 592
4 620 605 595 588
5 590 614 608 604
For a sample size of 4, the values of A2, D3 and D4 are 0.729, 0 and 2.282 respectively.
You are required to
a. Calculate control limits for an R-chart and an x -chart.
b. Find out whether the process is still in control when a new sample obtained the following readings: 570, 603,
623 and 583.
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(8 + 3 = 11 marks) < Answer >
Caselet
Read the caselet carefully and answer the following questions:
4. What are the various factors that have to be considered in making the location decision for Imaginative Toys?
Explain.
(15 marks) < Answer >
5. Discuss the different steps that Imaginative Toys should follow in order to make the location decision.
(6 marks) < Answer >
IMAGINATIVE TOYS
When Gerald Kramb arrived at the company office early on Monday, July 1, 1991, to review the end-of-the-year sales
and operating figures, several pressing matters commanded his attention. Sales had been much stronger than projected
in 1990 to 1991, and existing production capacity had been fully utilized, with excessive overtime, to meet demand.
Sales forecasts for the coming year indicated further rapid growth in demand, and Kramb knew that added capacity was
needed. Several alternatives were available to the company, and he wanted to be sure that all the key factors were
considered in making the decision.
Imaginative Toys was founded in Seattle, Washington, in 1975. When he founded the company, Gerald Kramb
envisioned that Imaginative Toys would develop and produce toys that “reach children’s imagination and bring out
their creativity”. He liked to call these toys “learning toys”. Two product lines quickly emerged as the mainstay of the
company: construction toys that were similar to Lincoln Logs and Legos, and maze and mind toys that focused on
solving puzzles and developing hand-eye coordination. The toys were quickly accepted in the marketplace and became
a popular choice for day care centers, preschool facilities, and elementary schools, as well as for parents.
Keys to success in this market were continual development of innovative products and a high level of product quality.
Toys needed to be both creative and durable. Two other important factors were timing and availability. New products
had to be ready to be introduced at the spring toy shows. Then sufficient capacity was needed to fill retail orders by late
summer in order to be ready for the Christmas buying season. Hence, Kramb knew that any capacity expansion
decisions had to be made soon to meet next spring’s production needs.
Because of the long-term nature of the decision, Kramb had asked Pat Namura, the marketing director, to prepare a
four-year sales forecast. This forecast projected strong growth in sales during the four-year period for several reasons.
First, the 1960s baby-boomers’ (baby-boomers are the 78 million people born in the United States between 1946 and
1964 and who grew up with TV advertising) children were reaching preschool and elementary school age, and child
care facilities were rapidly expanding to accommodate these children, whose parents typically both worked. A second
factor was the growth of international markets. Domestic sales remained strong, but international sales were growing at
the rate of 25 percent per year. An important factor to consider was that, in a trendy business such as toys, the European
market was one to two years behind the U.S. market. Namura attributed this lag to less developed television
programming targeted toward children.
Finally, Imaginative Toys had just launched a new line of toys, and initial sales figures were very promising. The new
line of toys was called Transformers. Much like a puzzle, each of the transformers could be rearranged and snapped
together to form two to four different toys. Designs were patterned after the robotic characters in children’s Saturday
morning cartoon shows. Namura was sure that this new line was just beginning to take off.
As Kramb reviewed the alternatives, he wished that expanding existing facilities were a viable option. Were the
necessary space available, adding to the Seattle facilities would put much less pressure on the company’s already thin
management structure. As it was, suitable space was nowhere to be found in the Seattle area. However, the processes
used to manufacture the three product lines could be replicated easily at any location. All three line processes were
labor intensive, with plastic parts molding being the only skilled position. The construction toys consisted of molded
plastic parts that were assembled into kits and packaged for shipment. The maze and mind toys required some parts
fabrication from wood and metal materials. Then these parts were assembled into toys that were packed for shipment.
The transformers were made from molded plastic parts that were then assembled with various fasteners and packed for
shipment. The operating costs breakdown across all three toy lines was estimated to be 30 percent materials, 30 percent
labor, 20 percent overhead, and 20 percent transportation and distribution. Obtaining the raw materials used to
manufacture the toys would not be a problem for any location.
Kramb and his staff had researched two alternative locations for expansion. One was in a maquiladora (factory in
Mexico run by a foreign company and exporting its products to the country of that company) in Nogales, Mexico,
across the border from Tucson, Arizona. The improving trade relations and projected relaxation of tariffs and duties
made this an attractive alternative. Labor costs also could be substantially reduced. If skilled labor was not available to
mold and fabricate the parts, these operations could be done in the United States and the parts could be shipped across
the border to Nogales for assembly and packaging.
The second alternative was to locate in Europe. A plastic injection molding company outside Brussels had decided to
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close and was looking for a buyer. Labor costs would be comparable to those in Seattle, but transportation cost would
be 10 to 15 percent higher on toys shipped back to the U.S. market. However, the Brussels location was attractive
because of the European Community’s projected single-market program. It was designed to bring free movement of
people, goods, capital, and services to the EC by January 1, 1993. The 1988 Cecchini report developed for the European
Commission forecasted an increase of 5 percent in the gross EC product from this program. By producing in Brussels,
Imaginative Toys also could avoid the 6 percent tariff on goods entering the EC.
As Kramb prepared to meet with his staff, he wondered how the company would be affected by expanding to a
multisite operation. Conceivably, the decision would be to expand into both Mexico and Europe. If the sales projections
held, the demand would support a three-plant network.
END OF SECTION B
Section C : Applied Theory (20 Marks)
This section consists of questions with serial number 6 - 7.
Answer all questions.
Marks are indicated against each question.
Do not spend more than 25 -30 minutes on Section C.
6. A medium size manufacturing company wants to integrate its various departments. viz., Finance, Production,
Marketing and HR, with the help of ERP, for more efficient functioning. For this purpose it has hired you as an
outside consultant to lay down the correct ERP implementation methodology. What according to you will be the
correct ERP implementation methodology? Elaborate.
(10 marks) < Answer >
7. Enablers are responsible for the overall performance of Supply Chain Management (SCM). The SCM enablers are
a group of carefully conceived and defined behaviours and approaches that allow, encourage and reinforce a
firm’s commitment to high performance SCM practices. Describe in detail the different SCM enablers.
(10 marks) < Answer >
END OF SECTIONC
END OF QUESTION PAPER
Suggested Answers
Operations Management (MB241) : July 2005
1. Answer : (a)
Reason : The circle symbol in a process chart represents Operation activity.
Hence option (a) is the correct answer.
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2. Answer : (c)
Reason : The organization should use Heuristic Model, as such a model is based
on historical aggregate planning data available with it. Hence option (c)
is the correct answer.
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3. Answer : (b)
Reason : A Fixed Position Layout is used when the product is bulky,
large,heavy or fragile and remains stationary at one location.
Manufacturing and construction firms locate the product in a fixed
position and transport workers, materials, machines and sub-contractors
to and from the product. Examples of such layouts are those designed
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for ship construction, aircraft manufacturing, rocket manufacturing etc.
(a) A Service Facility Layout brings together the customers and the
organization’s services. Two extremely different types of layouts of
service facilities exist, based on the different degrees of customer
contact. At one extreme is that layout which is totally designed
around the customer receiving service functions, and the other is that
layout which is designed around technology, processing of physical
materials, and production efficiency. Banks are examples of layouts
designed around customers. Hospitals are examples of layouts that
concentrate and focus more on technology or physical materials
processing and production efficiency.
(c) A Grouping Technology Layout groups dissimilar machines into
work centers (or cells) to work on products that have similar shapes
and processing requirements.
(d) A Product Layout is one in which equipment or work processes are
arranged according to the progressive steps by which the product is
made. The products or services tend to flow along direct linear paths
without backtracking or sidetracking in the product flow route.
(e) A Process Layout is one in which similar equipment or functions are
grouped together, such as all lathes in one area, all drilling machines
in another area and so on. A part being worked on then travels,
according to the established sequence of operations, from area to
area, where the proper machines are located for each operation.
Hospitals make use of this type of layout.
4. Answer : (d)
Reason : Conveyors are an example of fixed path materials handling equipment.
A fixed path materials handling equipment moves in a fixed path.
Hence option (d) is the correct answer.
Options (a), (b), (c) and (e) are all examples of variable path materials
handling equipment.
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5. Answer : (d)
Reason : (a) This a wrong answer. Delphi method is an interactive learning
process that involves a group of experts responding to a
questionnaire. The results obtained are compiled to formulate a new
questionnaire, which is again submitted to the group. This method
uses qualitative model to forecast the demand.
(b) This is the wrong answer. In Nominal group technology, a panel
of experts working together in a meeting arrives at a consensus
through discussion and ranking of ideas. This technique also uses
qualitative model.
(c) This is a wrong answer. Historical analogy makes analogies to the
past in a judgmental manner by tying what is being forecasted to
similar item. This is important in planning for new products. This
method also comes under qualitative models.
(d) This is the correct answer. Exponential smoothing allows for
varying weighting of old demands, i.e., recent data points are
weighted more, with weighting declining exponentially as data
becomes older. This method follows a quantitative model.
(e) This a wrong answer. Executive committee consensus is a method
where a committee comprised of executives from various
organizational departments develops a forecast by using the
observations and findings of staff analysis. This method uses
qualitative model to forecast the demand.
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6. Answer : (a)
Reason : (a) This is the right answer. Organizations generally globalize their
operations for either market seeking or resource seeking reasons.
That is, organizations will establish their units where they can
derive comparative advantages. When a country or countries have
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significant advantages in factor cost or quality of manufactured
product, these countries will be the sites of production and exports
will flow to other parts of the world. Global organizations
generally prefer to locate their production sites in those countries
where they can access abundant natural resources or low labor cost
resources, in order to serve their customers in the industrialized
countries better. For instance, companies prefer countries in the
middle east or Venezuela for processing oil, Latin America for
processing tropical fruits, and Asian countries for low-labor-cost
services such as electronics assembly, textile making and
information technology enabled services (ITES).
(b) This is the wrong answer. By globalizing their activities,
organizations not only derive global experience, but also obtain the
benefits of economies of scale in their production and marketing
activities. If there are economies of scale in production,
organizations can achieve a cost advantage through centralized
production and global competition. In such cases, cumulative
volume per model is greater if the model is sold in many national
markets, leading to a cost advantage for the global competitors.
Toyota and Sony are some of the organizations that have adopted
such policy to derive this benefit. Global organization can obtain
economies of scale in purchasing and marketing functions also.
(c) This is the wrong answer. Globalization can result in many
advantages for firms that have the ability to apply proprietary
technology in several national markets. Intel’s dominance in the
microprocessor markets for personal computers in the early 1990s is
the result of such an advantage. The ability is particularly important
for organizations manufacturing products like computers,
semiconductors, computer chips, aircrafts and turbines wherein
investments in research are large relative to the sales of individual
local products. In these industries, minor advances in technology
are so costly that firms require global sales to recoup them.
(d) This is the wrong answer. Although the sources of global advantage
are different, they often occur in combination, and there can be
interactions among them. But in the case of the electronics
assembly, textile and IT enabled services, it is the comparative
advantage in terms of low wage rate, cheap skilled man power, low
rents and overall low operating cost is the reason that these
companies are opening their offshore plants or offices in Asian
countries.
(e) This is the wrong answer. It is also wrong, as there is no application
of proprietary technology and economies of scale working in
combination in this case. It is only the comparative advantage that
is attracting these companies to Asian countries.
7. 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 nonnegative.
If not, it should be converted to a non-negative value in
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.
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(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.
8. Answer : (c)
Reason : Critical ratio method is a job sequencing technique that is used to verify
whether a job is on schedule or not. The method operates on the basis of
a critical ratio. The critical ratio (CR) for any job operation is the ratio
between the actual time that is remaining to complete the job and the
scheduled time remaining to complete the job.
(a) This is the wrong answer. An activity with CR equal to one means
the activity is on schedule.
(b) This is the wrong answer. An activity with CR less than one means
the activity is behind schedule.
(c) This is the right answer. An activity with CR more than one means
the activity is ahead of the schedule.
(d) This is the wrong answer. An activity with CR less than one means
the activity is behind schedule.
(e) This is the wrong answer. An activity with CR less than one means
the activity is behind schedule.
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9. Answer : (b)
Reason : (a) This is true for PERT. PERT provides a graphical display of
projects that help the users understand the relationships among the
activities. It makes the task of scheduling very simple by making
use of simple mathematics to schedule the activity.
(b) This is not true for PERT. PERT cannot handle situations in which
two or more projects have to be planned together to share the
available resources.
(c) This is true for PERT. The PERT network always begins with a
single node and ends with a single node, with at least a single
continuous path between the two nodes.
(d) This is true for PERT. The slack time for an activity is the time by
which that activity can be delayed without delaying the total
project. This is the difference of either the latest start time and
earliest start time or the latest finish time and the earliest finish
time.
(e) This is true for PERT. The slack time for activities on critical path
is zero. This means that these activities are critical for the project
and cannot be delayed. Any delay in these activities will delay the
overall completion time.
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10. Answer : (c)
Reason : An MRP system is used to manage dependent demand inventories and
schedule production activities. However, the time required for
planning and implementing an MRP system is generally very long,
because of the complexities involved.
Hence, from above discussion we can infer that option (c) is not an
advantage of an MRP system.
Options (a), (b), (d) and (e) are all advantages of an MRP system.
< TOP >
11. Answer : (b)
Reason : Conformance is the quality dimension which refers to the degree to
which a product is manufactured to the agreed specification. Hence
option (b) is the correct answer.
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12. Answer : (b)
Reason : The details of the components that are to be produced are sent to the
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purchase department while routing sheets or routing files are developed
for each item to be made internally. The routing sheet is a hard copy of
the information explaining the procedure to produce a product. The
routing file is an electronic copy of the routing sheet. In a route
collection system, the stockpicker gathers the quantity of an item
required to satisfy a group of customer orders to be shipped in the same
truck or rail car.
13. Answer : (e)
Reason : Routing information describes the sequence of operations in the
production process and the work centers that perform the work. It can
also include information on tooling, skills required by an employee to
perform the tasks, list of operations to be performed by a worker etc.
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14. Answer : (b)
Reason : Reservation System is used to meet customer demand successfully by
scheduling facilities and multiple resources together. e.g., a hotel can
schedule all its resources like room, bed, food, and other facilities to
serve the customer, when he/she reserves a room in it.
(a) Appointment System controls or alters customer arrival timings so that
the services of the service provider can be utilized to the maximum
possible extent. In this system, customers are allocated a time to meet
the service provider, which is referred to as the appointment time. The
objective of this system is to minimize the time spent by customers
while waiting for the service.
(c) Strategic Product Pricing is a scheduling approach for smoothening
demand requirements for service facilities.
(d) ERP system consists of techniques and concepts employed for the
integrated management of business, from the viewpoint of the effective
use of management resources, to improve the efficiency of an enterprise,
with the goal of integrating information across the company.
(e) JIT System is based on the concept of continuous improvement of an
organization and the elimination of waste from all its areas. It is an
integrated set of activities designed to achieve high-volume production,
using minimal inventories of raw and semi-finished materials and
finished goods.
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15. 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.
(a) 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.
(b) In Centralized maintenance, there is one single large maintenance
department that takes care of all maintenance activities.
(d) Remedial Maintenance includes activities that restore facilities and
equipment to an acceptable working condition after a breakdown or
malfunction has occurred or the normal operations hindered.
(e) 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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16. Answer : (c)
Reason : The concept of JIT Purchasing system was developed by the Japanese
with the objective of reducing purchase quantities to the maximum
possible extent. This concept results in products being purchased in very
small quantities and arriving exactly in time for use in production. The
basic idea is to reduce the size of purchase quantities and to time them
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as closely to their need in production as possible. This method
eliminates raw materials inventory and the various costs associated with
storing and moving it as the incoming materials go directly to
production. In this system, the buyer relies more on performance
specifications than on production design, and the supplier is encouraged
to be more innovative.
Hence, from above discussion, we can infer that option (c) is not a
feature of JIT Purchasing.
Option (a) is a feature of JIT Purchasing because in this type of system,
there is usually a single source of supply for a given part in nearby
geographical area with a long-term contract.
Option (b) is a feature of JIT Purchasing because in this type of system,
purchasing is carried out in small lots, with frequent deliveries.
Option (d) is a feature of JIT Purchasing because in this type of system,
there is less formal paperwork.
Option (e) is a feature of JIT Purchasing because in this type of system,
no percentage of rejects from a supplier is acceptable.
17. Answer : (d)
Reason : (a) This is the wrong answer. A product’s conformance to design
specifications is process oriented. It reflects how well the product
and its individual components meet the established standards. The
degree of product conformance to specifications is measured in
terms of defect rates.
(b) This is the wrong answer. Durability relates to the expected
operations life of a product. For some products, the entire product
needs to be replaced when one part is damaged e.g. when a
filament of a bulb burns out, the entire bulb needs to be replaced.
While in other products the specific component can be replaced to
bring it back to normal working condition.
(c) This is the wrong answer. Serviceability is concerned with how
readily a product can be repaired and the speed, competence and
courtesy associated with that repair.
(d) This is the right answer. Reliability refers to the probability of a
product’s failure within a specific time. Reliability is usually
measured as the mean time between failures (MTBF) or the failure
rate per unit time. Reliability is very important in high value
products such as airplanes, computers, etc.
(e) This is the wrong answer. Aesthetics value of a product is
influenced by individual preferences, and is usually used by
companies to cater to a niche market.
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18. Answer : (c)
Reason : (a) This is a wrong answer. Inventory level is the amount of material
actually on hand in inventory that is ready for use.
(b) This is a wrong answer. Inventory cycle involves the activities of
sensing a need for ordering materials, placing an order,
determining lead-time for getting the material delivered, receiving
the material, and using the material. This process is continuously
repeated for a material and is thus cyclical.
(c) This is the right answer. Lead time is the length of time required
to replenish the inventory for a material from the time that need for
additional material is sensed until the new order for the material is
in inventory and ready for use.
(d) This is a wrong answer. DDLT is the number of units of a material
demanded during the inventory replenishment process.
(e) This is a wrong answer. Demand rate is the number of units
demanded by customers or production department per unit of time.
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19. Answer : (c) < TOP >
13
Reason : 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. It is usually applied when a
moderate number of parts have to be manufactured, each in
moderate volumes and not high volumes.
Hence, from above discussion, we can infer that option (c) is not a
feature of Flexible Manufacturing System (FMS).
Option (a) is a feature of FMS because it is the definition of FMS.
Option (b) is a feature of FMS because it is generally used to produce a
variety of parts that have similar processing requirements.
Option (d) is a feature of FMS because it offers many advantages such
as reduced direct labour, shorter response time, consistent quality of
products and better control over the manufacturing process.
Option (e) is a feature of FMS because it requires huge capital
investments in equipment and planning and control systems.
20. Answer : (c)
Reason : 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. In
an ideal CIM system, computer technology is applied to all the
operational and information-processing functions of the company, from
customer orders through design and production to product shipment and
customer service. The scope of the computer system includes all
activities that are concerned with manufacturing. Therefore, we can
say that CIM represents the highest level of automation in
manufacturing.
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. It does not represent the highest level of
automation in manufacturing.
Option (b) 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. It does not represent the highest level
of automation in manufacturing.
Option (d) 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. It does not represent the
highest level of automation in manufacturing.
Option (e) is incorrect. Automatic Identification System (AIS) is a
system that uses barcodes and other optical characters to represent data.
These codes can be read by using scanners. It does not represent the
highest level of automation in manufacturing.
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21. 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.
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14
Option (a) is true because Kanban system 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 a single-card system makes use of the
conveyance card only.
Option (e) is true because the dual-card system makes use of two
separate cards viz., conveyance card and vendor authorization card.
22. Answer : (e)
Reason : Bill of Materials File consists of 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. The BOM file shows the hierarchical
levels or phases of production that a product goes through in the process
of production. Therefore, the file is also referred to as the Product
Structure File or Indented Parts List, because the items appear
according to the order in the product structure hierarchy.
Hence, from above discussion, we can infer that option (e) is correct.
Option (a) is incorrect. Assembly Chart provides an overall macro view
of the movement of components and sub-assemblies in the process of
producing a finished product.
Option (b) is incorrect. Process Chart is similar to Assembly Chart,
except that it includes extra information like description of the various
steps involved, their frequency of occurrence, the time for each step, the
distance traveled and so on.
Option (c) is incorrect. Gantt Chart is a simple bar chart used
specifically to schedule operations.
Option (d) is incorrect. Inventory Records File is a computerized file
with a complete record of each material held in inventory. It contains all
the information on inventory levels – levels at the beginning of the
planning horizon and the details of the expected arrivals of inventory
during the period.
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23. 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
correct.
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.
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24. Answer : (e)
Reason : The rule of Shortest Processing Time is based on the concept that cost
reduction is possible by maximizing the flow of completed jobs. It is
especially used when the priority rule of Truncated Shortest Processing
Time cannot be applied if no activity has waited for a longer duration
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15
than the designated truncation time.
Hence, from above discussion, we can infer that option (e) is correct.
Option (a) 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. So, it is not applicable here.
Option (b) is incorrect. In Earliest Due Date rule, the job with the
earliest due date is run first. So, it is not applicable here.
Option (c) is incorrect. In Slack Time Remaining method, managers
calculate the slack time of each job and jobs with the shortest slack time
are processed first. So, it is not applicable here.
Option (d) is incorrect. Longest Processing Time rule gives first priority
to jobs that take the longest amount of processing time. So, it is not
applicable here.
25. Answer : (d)
Reason : In Cellular Manufacturing, total production area is divided into cells,
each cell consisting of a group of dissimilar machines which work on
products that have similar shapes and processing requirements. The
layout used in this type of manufacturing is similar to a product layout
in that the cells are dedicated to a limited range of products.
All the other options i.e., (a), (b), (c) and (e) are true for Cellular
Manufacturing.
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26. Answer : (c)
Reason : An Expert System is designed to provide users the expertise of
professionals in a particular field. It is useful in developing alternatives,
and identifying either the best decision or a set of good decision
alternatives.
(a) Transaction Processing System processes data generated from the
occurrence of business transactions. Examples of such transactions
are sales, purchases, deposits, payments etc. that occur on a day-today
basis.
(b) Executive Information System combines features of Management
Information System and Decision Support System. It gives top
management immediate and easy access to information about a
firm’s Critical Success Factors (CSF), in accomplishing the
organization’s strategic objectives.
(d) Robotics is an automation technology. It is based on two related
technologies: Numerical Control and Teleoperator. Numerical
Control (NC) is a method of controlling machine tool axes by means
of numbers that have been coded on punched paper tape or other
media. Teleoperator is a mechanical manipulator that is controlled
by a human from a remote location.
(e) 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.
< TOP >
27. Answer : (c)
Reason : Controlling consists of the following activities:
1. Encouraging pride in performing as expected.
2. Comparing costs to budget.
3. Comparing actual labor hours to standards.
4. Inspecting the quality levels.
5. Comparing inventory levels to targets.
< TOP >
28. Answer : (d)
Reason : 4-month moving average for the demand of product at the beginning of
June (2005)
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16
= 4
1
× (sum of first four months demand)
= 4
1
× (7000 + 7500 + 8200 + 8500)
= 4
31200
= 7800
4-month moving average for the demand of product at the beginning of
July (2005)
= 4
1
× (sum of last four months demand)
= 4
1
× (7500 + 8200 + 8500 + 7900)
= 4
32100
= 8025.
29. Answer : (d)
Reason : Let the coefficient of smoothing be α.
Forecast for month of April (2005) is 43.6.
∴α × 40.0 + (1 – α) 52.0 = 43.6
or α = (40.0 52.0)
(43.6 52.0)
−
−
= 12
8.4
−
−
= 0.7
∴for July (2005), the forecast = α × 52.0 + (1 – α) × 47.8
= 0.7 × 52 + 0.3 × 47.8
= 50.74 ≈ 50.7.
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30. 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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17
Part B : Problems/Caselet
1. a. Cycle time = Production Time per day / Required Output per day
= 480 / 50
= 9.6 minutes.
Theoretical minimum number of workstations required, Nt = Sum of task times / Cycle time
= 49 / 9.6
= 5.1
≈ 6.
The precedence diagram is given below.
Task (s) Number of following tasks
1 7
2 6
3 5
4 4
5 3
6 or, 7 1
8 0
We will use ‘Most Following Tasks’ assignment rule. Where a tie exists, we will assign tasks in order of longest
task time.
The assignment of various tasks to the required workstations is shown below.
c. Efficiency of the assembly line = Sum of task times / (Actual number of workstations x Cycle time)
= 49 / (8 x 9.6)
= 63.8 %.
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18
2. Here, minimum time on machine A = 10 minutes.
Maximum times on machines B and C are 10 minutes and 8 minutes respectively.
Since the minimum time on machine A is equal to and less than the maximum times on machines B and C
respectively, the problem can be proceeded further.
Now, we assume two fictitious machines E and F, whose processing times are given below.
Jobs E = A1 + A2 + A3 F = A2 + A3 + A4
1 29 24
2 21 20
3 32 27
4 37 25
a. The optimum processing sequence is as under:
3 4 1 2
b. The calculation of total elapsed time is shown below.
Jobs A B C D
3 0-17 17-25 25-32 32-44
4 17-36 36-46 46-54 54-61
1 36-51 51-60 60-65 65-75
2 51-61 61-66 66-72 75-84
Therefore, the total elapsed time is 84 minutes.
< TOP >
3. a. To calculate x , we compute the mean of each sample. To calculate R, we subtract the lowest value in the
sample from the highest value in the sample.
Sample x R
1 601 24
2 602 10
3 582 22
4 602 32
5 604 24
Total 2991 112
Average x = 598.2 R = 22.4
Control limits for R-chart:
UCL = D4 R = 2.282 (22.4) = 51.12.
LCL = D3 R = 0 (22.4) = 0.
Control limits for x -chart:
UCL = x + A2 R = 598.2 + 0.729 (22.4) = 614.53.
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LCL = x – A2 R = 598.2 – 0.729 (22.4) = 581.87.
b. Let us first see whether the variability is still in control based on the new data. The range is 53 (623 – 570), which
is outside the upper control limit for the R-chart. Even though the sample mean, 594.75, is within the control limits
for the process average, process variability is not in control. A search for assignable causes must be conducted.
< TOP >
4. The factors which influence the selection of a location are broadly classified as market related factors such as
proximity to market, tangible or cost factors such as transportation availability, and intangible or qualitative factors
such as environmental aspects.
The various factors that have to be considered in making the location decision for Imaginative Toys are as follows:
i. Market proximity:
Locating a unit close to the market helps an organization to minimize transportation costs and also to serve the
customers in a better way. It becomes very easy for the organization to provide just-in-time delivery, to respond
to changes in demand and to react to field or service problems as the plant or facility gets closer to the consumer.
e.g., transportation costs would be lower for a plant located in Mexico compared to a plant located in Europe.
ii. Availability of Labour and Skills:
The availability of labour and skills is one of the important factors in production. e.g., in Mexico skilled labour
would not be easily available. However, the labour would be very cheap. In that case, the operations that require
skilled labour could be performed in the United States and the parts could be shipped across the border to
Mexico for assembly and packaging. The situation would be just reverse in Europe. Skilled labour would be
easily available, but it would come at a higher price.
iii. Availability of transport:
There should be proper transport facilities for transit of raw materials and finished products between Europe and
U.S.A. and between Mexico and U.S.A.
iv. Availability of inputs:
A location near the main supplier will help reduce the costs and allow the staff to meet suppliers easily to
discuss quality, technical or delivery problems. This would not be a major factor to consider as obtaining the raw
materials used to manufacture the toys would not be a problem for any location.
v. Availability of services:
Electricity, water, gas, drainage, disposal of waste and communications are some of the important services that
need to be considered while selecting a location. This is an important factor to be considered especially in case
of Mexico, where these services may not be easily available.
vi. Suitability of land and climate:
Climatic conditions such as humidity, temperature and atmosphere, and the geology of the area should be
considered while deciding on a location, whether it be Europe or Mexico.
vii. Room for expansion:
While selecting a location, there should be adequate room for future expansion. e.g., this was not considered
for the Seattle plant.
viii. Site Cost:
The cost of the site should be affordable and within organization’s estimated budget.
ix. Political, Cultural and Economic Situation:
Political, cultural and local prejudices and economic difficulties affect the smooth functioning of a plant in the
future and hence they are very important while selecting a location. e.g., the Brussels location was attractive
because of the European Community’s projected single-market program, which was designed to bring free
movement of people, goods, capital, and services to the EC by January 1, 1993.
x. Regional Taxes, Special Grants and Import/Export Barriers:
Export promotion zones, technology parks and industrial estates recognized by local governments offer some
special grants like tax holidays, infrastructure, low-interest loans etc. These facilities are to be considered while
selecting a location. e.g., the improving trade relations and projected relaxation of tariffs and duties made
Nogales in Mexico an attractive alternative.
xi. Customer Demand
Thecustomer demand for the products has also to be taken into account as a high customer demand necessitates
having more plants for production and subsequently avail economies of scale through increased production.
< TOP >
20
5. The different steps that Imaginative Toys should follow in order to make the location decision are as under:
1. Define location objectives and associated constraints:
The multiple objectives of owners, employees, suppliers, customers and any others that impact the organization
have to be defined. Constraints on finances and raw material inputs have to be identified.
2. Identify relevant decision criteria:
One should select location on the basis of many economic and non-economic reasons. Economic reasons such as
labour and material costs, and non-economic reasons such as the environmental impact of the plant upon the
community, have to be defined and a database has to be created.
3. Relate the objectives to the criteria using appropriate models:
Using models such as break-even analysis, linear programming and qualitative factor analysis, the relevant
criteria should be evaluated. It is difficult to quantify intangible criteria. So, the judgements of responsible
managers are to be taken to augment the solutions proposed by the models.
4. Do field research to generate relevant data and use the models to evaluate the alternative locations:
Primary and secondary data should be collected, and different alternative locations should be evaluated based on
these data. This can be done by first evaluating those factors that can be quantified and then considering the less
tangible items.
5. Select the location that best satisfies the criteria:
Finally, a location should be selected that meets the organization’s objectives, best satisfies the criteria and
provides benefits to the community.
< TOP >
Part C: Applied Theory
6. The various stages that a typical ERP implementation program goes through are:
Identify the Needs for the ERP Package
The first stage involves the identification of the needs to be satisfied by adopting the ERP package. Once these needs
are identified, organizations can evaluate how ERP implementation can help satisfy these needs. The effective
management information systems and information flow between various business partners are examples of the needs
that an ERP system can satisfy.
Evaluating the "as-is" Situation of the Business
The next stage involves the identification of various processes involved in the working of the organization. Then, the
detailed processes in business transactions should be listed. Process mapping can be helpful in detailing the processes.
It provides information about the time taken to complete a process, the number of decision points, the number of
reporting points, flow of information, etc.
Decisions about the Desired 'Would-Be" Situations for the Business
Once the structure of the current processes is identified, the next stage involves the identification of desired attributes
for each of the processes. Performance standards are set for each process by using benchmarking techniques.
Benchmarking ensures that the desired operational and product attributes are comparable with the best business
practices in the industry.
Reengineering of Business Processes to Achieve the Desired Results
In order to achieve these desired standards in business processes, organizations need to reengineer their current
processes. The objectives of business process reengineering include reducing process cycle time, reducing the number
of decision points, optimizing the information flow between different functions and-departments, etc.
Evaluation of Available ERP Packages
Once the conceptual process of designing the business processes is over, the available ERP packages are evaluated to
identify the package that will provide a comprehensive solution to the given organization's requirements.
For selection of a package, the following points should be given consideration:
• Global presence.
• Local presence.
21
• Investment in R&D.
• Target Market.
• Price.
• Modularity.
• Ease and cost of implementation.
• Installation of requisite hardware and networks.
Implementation of ERP packages
ERP implementation is a long process that demands the involvement of the entire organization. The steps involved in
the implementation of an ERP package are listed below:
• Formation of implementation teams.
• Preparation of implementation plan.
• Mapping of business processes onto the package.
• Gap analysis.
• Customization.
• Uploading of data from existing systems.
• Test runs.
• User training.
• Parallel run.
• Migration to the new system.
• User documentation.
• System monitoring and fine-tuning.
< TOP >
7. Enablers are responsible for the overall performance of the SCM. The SCM enablers are a group of carefully
conceived and defined behaviors and approaches that allow, encourage and reinforce a firm's commitment to high
performance SCM practices.) The six SCM enablers are described in detail below.
Alignment
Alignment here refers to the matching of corporate and business unit goals. It also includes consistency in processes,
actions and decisions across the business units to support the supply chain management processes. It is a key
organizational behavior within the supply chain management system. As the organizations function with the help of
the coordinated efforts of different processes, it is of critical importance to have well-coordinated cross-functional
and inter-company activities. This ensures that stakeholders and business processes work towards consciously
determined and mutually recognized goals and objectives. Good alignment is achieved through effective planning and
execution in conjunction with cross-functional interaction, effective information systems, and organization-wide and
continuous communication systems. For better alignment, the company leadership should strive to set goals,
objectives and strategies that support successful supplier relationships. For example, if the management rewards the
purchasing department for obtaining products at low prices from suppliers, then it might hamper the development of
long-term relationships or partnerships with suppliers. Similarly, if an organization does not have faith in its
suppliers, it will be reflected in the functioning of the SCM system.
Customer-supplier focus
The basic objective of the customer-supplier focus is to prepare an organization's processes in such a way that they
are able to understand and react to customer requirements fast. For organizations like Boeing, which largely depends
on the suppliers for their requirements, the health and well-being of the suppliers is critical to provide value to the
customers.
In order to improve suppliers' satisfaction, organizations should have clear and mutually understood and
acknowledged rules of relationship. Organizations should show commitment for the long-term profitability and
success of their suppliers. This commitment would require suppliers' involvement in new product development and
improvements in the current products or services.
Design
Design is the aspect of products, processes, systems and services that ensures their successful application. Design is
the comprehensive process that after considering feedback from customers and suppliers defines the overall
22
requirements both external and internal to the organization. Design helps organizations develop products, services
and business processes that satisfy the requirements of both customers and suppliers.
Measurement
Measurement refers to the quantification of information about inputs, outputs, and performance dimensions of
products, processes and services. Measurement is the tool used by organizations to evaluate the performance of
different business processes and supplier activities. Measurement provides vital information regarding key operating
outcomes such as on-time delivery performance, quality, responsiveness to engineering and technical support, etc. of
the firm's suppliers. The measurements can provide results only when the organization takes corrective action to
improve the areas where the measurements indicate below-par performance.
Participation/involvement
Stakeholders must be involved in the decision-making process in order to ensure the success of products, processes,
systems, and services.
Utilization of available resources in terms of the talents and energies of employees and external stakeholders
improves organizational efficiency and performance. Feedback and involvement of suppliers and customers in the
organizational planning and decision-making process enhances the effectiveness of the decision-making process.
Involvement and sharing of information between different departments of the organization improves the supplier
evaluation process.
Periodic review
Evaluation of the performance of the processes, programs and systems, on a periodic basis, supports continuous
improvement.
Continuous improvement is based on the periodic review of all the business processes. These periodic reviews bring
to notice deviations from the desired performance, and performance bottlenecks. Once they are identified,
organizations can devise plans to improve the processes. Periodic review is not restricted to self-contained processes
like the purchase order process but is undertaken for complete SCM processes like the order-to-delivery process.