Operations Management (MB241) : October 2006

Operations Management (MB241) : October 2006

Section A : Basic Concepts (30 Marks)
• This section consists of questions with serial number 1 - 30.
• Answer all questions.
• Each question carries one mark.
• Maximum time for answering Section A is 30 Minutes.
1.
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 in the right-hand side of each of the constraints should be non-negative
(c)
Each of the decision variables of the problem should be non-negative
(d)
The algorithm detects whether the problem is infeasible, is unbounded or has multiple optima
(
e)
The algorithm is not suitable when there are more than two decision variables.
< Answer >
2.
Which of the following issues falls under the purview of Tactical Decisions?
(a)
Problems of product and process design
(b)
Deciding on priority of jobs
(c)
Capacity determination
(d)
Decision of working overtime or putting on a second shift
(
e)
Facility location and layout.
< Answer >
3.
Which of the following factors does not affect the degree of Backward Integration?
(a)
Costs associated with producing components versus buying them
(b)
Investments necessary to produce components in-house
(c)
The capability of existing technology to produce components
(d)
Ability of the organization to market its products
(
e)
Availability of funds to support the integration.
< Answer >
4.
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 >
5.
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
(
e)
Internal materials handling.
< Answer >
6.
While servicing a car, the mechanics change the lubricant, rotate the tyres, tune up the engine, replace the key components or overhaul certain systems (if necessary), clean the windows and apply a sticker on the front windscreen that indicates the date of next service. All these activities are aimed at avoiding failure or unsafe operation of the automobile, and hence come under the scope of
(a)
Preventive Maintenance
(b)
Remedial Maintenance
(c)
Centralized Maintenance
(d)
Decentralized Maintenance
(
e)
Contract Maintenance.
< Answer >
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7.
The doctor in charge of the surgical department wants the purchase manager to procure some surgical scissors as early as possible. For this purpose, he has submitted a document containing a clear specification of required materials, quantity required and probable date of requirement. This document is referred to as
(a)
Purchase order
(b)
Purchase requisition
(c)
Request for proposal
(d)
Request for quotation
(
e)
Request for comments.
< Answer >
8.
“Today’s competitive environment is the result of the convergence of forces on all members of supply chain”. Which of the following is false in relation to Demand Chain?
(a)
The focus is mostly on the end-user
(b)
The players in today’s emerging Demand Chains are the same as 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)
Consumers always buy from retailers.
< Answer >
9.
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 >
10.
Washing machine company Sunidhi Ltd. is planning to set the production target for the month of October. Actual and forecasted demand for last four months is as follows:
(in units)
Month
June
July
Aug
Sept
Forecast
40
35
45
65
Actual
30
38
37
52
The mean square error (MSE) of the above data is
(a)
80.5
(b)
85.5
(c)
87.5
(d)
95.5
(
e)
97.5.
< Answer >
11.
Which of the following actions enhance(s) equipment maintenance in JIT manufacturing systems?
I. Organizations should design their equipment as simply as possible, reduce the variety of machines, and standardize 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 >
12.
Which of the following is not true about Product Flexibility?
(a)
It refers to the ability of the production system to quickly shift from producing one product to another
(b)
It is useful for production of custom designed products in small lots
(c)
Special-purpose equipment are usually required to produce different products in small lots
(d)
Employees with multiple skills are usually required for this type of setup
(
e)
Employees have to be trained and cross-trained to do different types of jobs.
< Answer >
13.
Which of the following statements is false with regard to facility location?
(a)
Developing a formal, generic location model is very difficult as a number of diverse factors affect the location decision
(b)
The problem of location becomes more complicated when the company produces more than one product or provides several services
(c)
Break-even analysis is one of the useful tools for selecting a location
(d)
Each and every location will have a different cost structure and sales volume
(
e)
The lowest cost location is the maximum profit location always.
< Answer >
14.
Which of the following Work Measurement Techniques is less costly and particularly useful to observe lengthy work cycles in a new Workshop?
(a)
Time Study
(b)
Standard Data
(c)
Predetermined Motion Times
(d)
Work Sampling
(
e)
Historical Analysis.
< Answer >
15.
To accommodate imbalance between actual production output and actual market demand, operations managers modify the Master Production Schedule using which of the following methods?
I. By deferring routine maintenance and allotting the saved labor for manufacturing purposes.
II. By sharing the responsibilities with a subcontractor.
III. By altering the prices of products to influence the demand level.
(a)
Only (I) above
(b)
Both (I) and (II) above
(c)
Both (II) and (III) above
(d)
Both (I) and (III) above
(
e)
All (I), (II) and (III) above.
< Answer >
16.
Market proximity is most important for which of the following industries?
(a)
Paper industry
(b)
Textile industry
(c)
Petrochemical industry
(d)
Hospitality industry
(
e)
FMCG industry.
< Answer >
17.
Variable-sequence robots are most useful for which of the following production systems?
(a)
Product focused
(b)
Process focused
(c)
Flow-shop
(d)
Assembly line
(
e)
Line flow.
< Answer >
18.
A Korean MNC manufactures micro-wave cookers. The demand for their product in last five months (in 2006) was as follows:
Month
May
June
July
Aug
Sep
Demand (in units)
7000
7500
8200
8500
7900
4-month moving averages for the demand of the product at the beginning of September and October (in 2006) would be respectively
(a)
7567, 8067
(b)
7820, 7820
(c)
7567, 8025
(d)
7800, 8025
(
e)
8067, 8200.
< Answer >
3
19.
Which of the following planning activities is/are supplementary to the Master Production Schedule (MPS)?
I. Materials requirement planning.
II. Capacity requirement planning.
III. Man-power requirement planning.
(a)
Only (II) above
(b)
Both (I) and (II) above
(c)
Both (II) and (III) above
(d)
Both (I) and (III) above
(
e)
All (I), (II) and (III) above.
< Answer >
20.
In 1927, a research team from the Harvard Business School under the supervision of Elton Mayo, undertook a study at western Electric’s Hawthorne plant in Chicago. Hawthorne studies are related to
(a)
The hierarchical structure in an organization
(b)
The automation in a manufacturing unit
(c)
The management functions in planning and control
(d)
The behavior of workers in their job environment
(
e)
The materials management in a process industry.
< Answer >
21.
Following is the network diagram of a small project:
Time estimates for each of the activities are as follows:
(Time in weeks)
(A-B)
(B-C)
(B-D)
(C-E)
(D-E)
(E-F)
2
4
5
4
5
7
The duration (in terms of weeks) of this project is
(a)
16
(b)
17
(c)
18
(d)
19
(
e)
20.
< Answer >
22.
Under Aggregate Planning, the strategy of varying the utilization of the workforce results in
(a)
Hiring costs
(b)
Lay-off costs
(c)
Overtime costs
(d)
Materials handling costs
(
e)
Stockout costs.
< Answer >
23.
Which of the following components of Supply Chain Management ensures effectiveness of the firm in establishing a two-way flow of understanding between the company and its suppliers?
(a)
Human resource management
(b)
Quality and performance management
(c)
Order to delivery processes
(d)
Business relationship management
(
e)
Operations planning.
< Answer >
4
24.
The shipping date of “fx-480” range of scientific calculators of Casio company is 31st October, 2006. The type of scheduling to be used by the company is
(a)
Forward scheduling using latest available time
(b)
Forward scheduling using earliest available time
(c)
Backward scheduling using latest available time
(d)
Backward scheduling using earliest available time
(
e)
Backward scheduling using shortest processing time.
< Answer >
25.
The major component(s) of constrained optimization models is/are
I. Decision variables.
II. Objective functions.
III. Constraints.
(a)
Only (I) above
(b)
Only (II) above
(c)
Both (I) and (II) above
(d)
Both (II) and (III) above
(e)
All (I), (II) and (III) above.
< Answer >
26.
The selection of facility location is influenced by a number of factors. Which of the following belong to the factors affecting the facility location decisions?
I. Site Cost.
II. Availability of raw materials.
III. Recreational facilities.
IV. Market proximity.
(a)
(I), (II) and (III) above
(b)
(I), (II) and (IV) above
(c)
(I), (III) and (IV) above
(d)
(II), (III) and (IV) above
(e)
All (I), (II), (III) and (IV) above.
< Answer >
27.
A stationer sells pens and note books. His profit per pen is Rs. 5 and profit per notebook is Rs. 8. Then the objective function is
(a)
Minimize Z = 8 x1 +5 x2
(b)
Minimize Z = 5x1 + 8 x2
(c)
Maximize Z = 8 x1+ 5 x2
(d)
Maximize Z = 5 x1 + 8 x2
(
e)
Minimize Z = 5 x1– 8 x2.
< Answer >
28.
Venkatesh manufactures Uninterrupted Power Supply (UPS) systems for which he procures batteries from Sahaja Enterprises. The Mean Time Between Failures (MTBF) is 60 hours and Mean Time To Repair (MTTR) is 2 hours for the batteries. The system availability is
(a)
92.43%
(b)
94.27%
(c)
96.77%
(d)
97.56%
(
e)
98.62%.
< Answer >
29.
For a company, estimated sales were 500 units whereas actual sales were 400 units. The value of smoothing constant is 0.2. The estimated sales for the next subsequent period are
(a)
450 units
(b)
480 units
(c)
510 units
(d)
540 units
(
e)
570 units.
< Answer >
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6
30.
The theoretical minimum number of workstations (Nt) required, if sum of task times (T) is 100 seconds and cycle time (C) is 20 seconds, is
(a)
2
(b)
3
(c)
4
(d)
5
(
e)
6.
< Answer >
END OF SECTION A
Section B : Problems/Caselets (50 Marks)
• This section consists of questions with serial number 1 – 6.
• Answer all questions.
• Marks are indicated against each question.
• Detailed workings/explanations should form part of your answer.
• Do not spend more than 110 - 120 minutes on Section B.
1.
On the basis of the following demand information, you are required to calculate the trend-adjusted forecast for October.
Month
April
May
June
July
August
September
Demand in Units
40
52
46
52
59
64
The following additional information is also provided:
Initial estimate = 45, α = 0.23.
Initial trend = 0, β = 0.18.
(12 marks)
< Answer >
2.
Jindagee Engineering Works manufactures automotive gears. The organization cannot adopt a varying workforce strategy because of the nature of the job, which requires skilled workers. Since training and hiring/layoff costs would be significant, the organization decided to follow a varying inventory strategy to meet the fluctuating demand requirements.
For the data provided, you are required to
a. Develop an aggregate plan for a period of six months (from Apr to Sep) on the basis of the following information.
b. Determine the total inventory holding cost and shortage cost that would be incurred by the organization at the end of the planning period.
c. Find out in which month(s) the company would not be able to meet the forecasted demand.
Expected monthly demand and number of working days are given below.
Month
April
May
June
July
Aug
Sep
Demand (in units)
4000
4300
4100
4500
4200
4100
Number of working days
25
26
22
23
24
23
Beginning Inventory: 800 units
Number of workers: 24
Productivity per worker: 7 units per day
Shortage cost = Rs.15 per unit
Inventory holding cost = Rs. 6 per unit.
(6 + 3 + 3 = 12 marks)
< Answer >
3.
Thushara Engineering Works Ltd. manufactures and assembles Zenex compressors.
The following is the bill of materials file for the main assembly Zenex. The number beside each unit indicates the quantity required to make one higher level item.
< Answer >
You are required to identify the number of lower units to make 1500 units of Zenex.
(6 marks)
4.
Pressure Vessels Limited has developed an environmentally friendly product for which it expects significant demand in the near future. But the existing facility cannot meet the forecasted demand. So the company conducts a survey of four different locations. The company identifies some critical factors for evaluating the suitability of the locations. The table given below lists the factors considered, the corresponding weightages assigned to them, and the grade for each location. Identify the best location for establishing a new facility.
Location rating
S.No.
Factor
Factor Rating
A
B
C
D
1.
Transportation cost
6
8
5
5
7
2.
Labor availability
5
4
6
6
5
3.
Supplier availability
8
7
4
6
6
4.
Climatic conditions
3
5
7
6
8
5.
Government incentives
7
6
5
7
5
6.
Labor cost
4
6
8
5
6
7.
Cost of real estate
7
5
7
8
5
(6 marks)
< Answer >
Caselet
Read the caselet carefully and answer the following questions:
5.
What are the various changes that General Motors has brought about in its operations, to become a truly global automaker?
(8 marks)
< Answer >
6.
What do you think are the advantages and disadvantages of General Motors’ strategy of Plant Standardization that it is pursuing in its newest factories, located in Argentina, Poland, and China?
(6 marks)
< Answer >
International Operations at General Motors
For years, General Motors (GM) dabbled with the idea of becoming a truly global business. While the firm exported its cars to several other countries and had a few plants outside the U.S., it remained predominantly a North American enterprise. Just a few years ago, for example, 80% of the firm’s vehicles were made in North America. Cars made elsewhere were often retreads of older GM models no longer in demand in its domestic market. GM’s older South American plants, for example, were still churning out Chevy Chevettes well into the 1990s.
All that has changed dramatically in recent years, since GM made a bold and public commitment to becoming a global automaker. New products are being designed and manufactured in other countries, and GM is striving aggressively to reach a goal of having 50% of its capacity outside of North America. At the center of this effort is an innovative approach to designing and manufacturing its automobiles in the four corners of the world.
General Motors is essentially emulating its Japanese rival, Toyota. Through a series of partnerships and alliances, GM has gained important insights into the payoffs that Toyota has achieved through its strategies of plant standardization and lean manufacturing. At Toyota, a change in a car being made in Japan can easily be replicated throughout other Toyota plants around the world, and Toyota is the acknowledged master and pioneer in rapid design, exceptional quality, supply-
7
8
chain management, and productivity.
In contrast, U.S. automakers have traditionally designed each automobile factory as a unique and autonomous facility. While this sometimes makes a given plant especially productive–because it was designed for one specific purpose–it also constrains flexibility and makes it more difficult to transfer new technologies and methods between factories.
GM is now using Toyota’s strategy in its newest factories, located in Argentina, Poland, and China. The plants look so much alike that a visiting GM executive might forget which country she or he is in. This strategy allows GM to launch global products, such as a new "world car," more easily. Equally as important, if one factory develops a glitch or problem, it might easily be solved by simply calling one of the others. Similarly, if a manager at one factory discovers a new way of achieving a productivity gain, this information can be easily passed on and implemented in the other factories.
GM’s new factories have been designed with flexibility and efficiency in mind. Each factory can be easily expanded should demand warrant higher production. Each is constructed in a large U shape so that suppliers can deliver component parts and accessories directly to the assembly lines, cutting down on warehouse costs and improving productivity.
But while the plants are as similar to one another as possible, GM also found it necessary to make adjustments in each to meet unique conditions in each country. In China, for example, managing the plant’s just-in-time inventory system will present unique challenges, for suppliers will be delivering many parts on carts and bicycles due to that country’s poor road system. Despite such minor accommodations to local conditions, GM nonetheless believes that its standardized plants will cut its production costs substantially and allow it to succeed in the world’s emerging markets.
END OF SECTION B
Section C : Applied Theory (20 Marks)
• This section consists of questions with serial number 7 - 8.
• Answer all questions.
• Marks are indicated against each question.
• Do not spend more than 25 -30 minutes on section C.
7.
“Quality is no longer a competitive advantage; it is an essential ingredient to be imbibed into either product or service, without which companies cannot survive”. In the context of the above, explain the different quality functions.
(12 marks)
< Answer >
8.
“If equipment is not maintained properly, maintenance costs incurred on the personnel and equipment can be substantial”. In this context explain the economies of maintenance.
(8 marks)
< Answer >
END OF SECTION C
END OF QUESTION PAPER
Suggested Answers Operations Management (MB241) : October 2006
Section A : Basic Concepts
1.
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 intersecting point to determine whether the objective function value improves by moving along atleast one of the edges.
(b) This is true about simplex method. The value of the constraint in the right-hand side of each of the constraints should be non-negative. If not, it should be converted to a non-negative value 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.
(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.
< TOP >
2.
Answer : (d)
Reason : Tactical decisions of operations managers generally have a time frame of one or two years. They operate within the constraints of strategic decisions, and generally focus on issues like identification of manpower requirement – how many workers are needed and when they are needed – decision of working overtime or putting on a second shift – determination of appropriate inventory levels for various materials – reordering level and order quantity – vendor identification, and so on.
Hence, from above discussion, we can infer that option (d) is correct.
Options (a), (c) and (e) are incorrect because they fall under the purview of Strategic Decision.
Option (b) is incorrect because it falls under the purview of Operational Decision.
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3.
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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4.
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.
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5.
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.
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6.
Answer : (a)
Reason : Preventive Maintenance includes maintenance activities performed to keep the equipment in working condition before it breaks down. It includes regular inspection of equipment and facilities to assess their working condition and take corrective action, whenever necessary. The corrective actions generally include tasks like machine adjustments, lubrication, cleaning, replacement of parts and painting.
Hence, from above discussion, we can infer that option (a) is correct.
Option (b) is incorrect. Remedial Maintenance includes activities that restore facilities and equipment to an acceptable working condition after a breakdown or malfunction has occurred or the normal operations hindered. So, it is not applicable here.
Option (c) is incorrect. In Centralized Maintenance, there is one large maintenance department for the whole company. So, it is not applicable here.
Option (d) is incorrect. In Decentralized Maintenance, there are small maintenance departments for each part of the company. Such departments may be justified if each part of the company needs a different special skill, special equipment, or very rapid response. So, it is not applicable here.
Option (e) is incorrect. Contract Maintenance involves giving maintenance work to outsiders on a contract basis. Occasionally, highly specialized or seasonal maintenance work may be contracted. So, it is not applicable here.
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7.
Answer : (b)
Reason : Purchase requisition is a document containing a clear specification of required materials, quantity required and probable date of requirement.
Hence, from above discussion, we can infer that option (b) is correct.
Option (a) is incorrect. Purchase order is a legal document that authorizes the supplier to produce the goods. Hence, it is not applicable here.
Option (c) is incorrect. Request for proposal is a request for bids that indicates the specifications for a software project or other system needs. Hence, it is not applicable here.
Option (d) is incorrect. Quotation is a document given by the suppliers, in which they quote the price per unit of material, the delivery schedule, the mode of transportation and special conditions of the supplier, if any. Hence, it is not applicable here.
Option (e) is incorrect. Request for Comments (RFC) is a set of technical and organizational notes about the Internet (originally the ARPANET), beginning in 1969. Hence, it is not applicable here.
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8.
Answer : (e)
Reason : Demand Chain focuses on the end-user. This focus on the end-user is fueling a paradigm shift from supply to demand, causing companies to reexamine their roles in the supply chain.
A common misconception about demand chain thinking is that consumers always buy from retailers. Though consumers often buy from retailers, they are also searching for new ways to obtain products and services. Increasingly, they are showing a willingness to buy from any entity in the supply channel that will give them value pricing, quality products and efficient delivery systems.
Hence, from above discussion, we can infer that option (e) is false in relation to Demand Chain.
Option (a) is true because the focus is mostly on the end-user.
Option (b) is true because the players in today’s emerging Demand Chains are the same as those in traditional supply chains.
Option (c) is true because responsibilities are assumed by the Demand Chain as a whole.
Option (d) is true because in a Demand Chain, products don’t necessarily originate from manufacturers.
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9.
Answer : (a)
Reason : The circle symbol in a process chart represents Operation activity. Hence option (a) is the correct answer.
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10.
Answer: (b)
Reason : Mean Square Error (MSE) =n2ttt11(AF)n=−Σ. 42ttt=11=(A-F)4Σ
(in units)
Month
Forecast (Ft)
Actual (At)
At - Ft
(At – Ft)2
June
40
30
-10
100
July
35
38
3
9
Aug
45
37
-8
64
Sep
65
52
-13
169
Total
342
MSE = 1/4 × 342 = 85.5.
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11.
Answer : (d)
Reason : Important principles and actions that enhance equipment maintenance in JIT manufacturing systems are:
• Organizations should design their equipment as simply as possible, reduce the variety of machines, and standardize replacement parts.
• Organizations should collect information about the frequency and causes of equipment failure and use this knowledge to allocate maintenance resources efficiently.
• Organizations can rebuild equipment by replacing all worn parts at once, rather than replacing them one by one.
• Organizations should carefully plan their purchases so that all parts are available when needed.
Hence, from above discussion, we can infer that option (d) is correct.
Option (a) is incorrect. Both actions (I) and (II) are applicable and not only (I).
Option (b) is incorrect. Both actions (I) and (II) are applicable and not only (II).
Option (c) is incorrect as organizations can rebuild equipment by replacing all worn parts at once, rather than replacing them one by one.
Option (e) is incorrect. Action (III) is not applicable.
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12.
Answer : (c)
Reason : Product Flexibility refers to the ability of the production system to quickly shift from producing one product to another. Some business strategies call for production of custom designed products in small lots. To produce different products in small lots, general-purpose equipment are usually required.
Hence, from above discussion, we can infer that option (c) is not true regarding Product Flexibility.
Option (a) is true because Product Flexibility refers to the ability of the production system to quickly shift from producing one product to another.
Option (b) is true because Product Flexibility is useful for production of custom designed products in small lots.
Option (d) is true because employees with multiple skills are usually required in Product Flexibility.
Option (e) is true because employees have to be trained and cross-trained to do different types of jobs in Product Flexibility.
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13.
Answer : (e)
Reason : The lowest cost location may not be the maximum profit location always. This always depends on the price and volume of sales in a particular location. A higher cost location may also result in a greater profit.
Hence, from above discussion, we can infer that option (e) is false regarding facility location.
Option (a) is true because developing a formal, generic location model is very difficult as a number of diverse factors affect the location decision.
Option (b) is true because the problem of location becomes more complicated when the company produces more than one product or provides several services.
Option (c) is true because break-even analysis is one of the useful tools for selecting a location.
Option (d) is true because each and every location has a different cost structure and sales volume.
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14.
Answer: (d)
Reason :
(a) Time Study involves a process of timing a worker as the job is done, summing up the times for the necessary elements of the job, incorporating a time allowance for personal and rest breaks, and estimating the total time that is required to perform the job.
(b) Standard Data is a technique in which standards for any new common tasks are determined based on the standards previously set for old common tasks. A database of work element durations with information obtained through previous studies is used as standard data.
(c) 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.
(d) Work Sampling is a technique of analyzing work by taking a number of observations, usually, at random, to see the relative frequency with which various elemental activities take place. This technique does not require extensive training to perform and can be performed simultaneously on several workers. Hence, it is less costly and particularly useful to observe lengthy work cycles.
(e) 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).
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15.
Answer: (e)
Reason : The Master Production Schedule specifies the type and volume of each product that is to be produced over the planning horizon. It is used to schedule the various stages of production, depending on the type of operation.
Master Production Scheduling is generally based on the results of demand forecasts. These results are not always accurate and the actual production output is not always the same as the actual market demand. To accommodate these imbalances, operations managers modify the Master Production Schedule using the following tactics:
1. By modifying the size or composition of the product or service temporarily.
2. By allowing the levels of inventory to increase when the demand for the product is low and to decrease when the demand is higher.
3. By deferring routine maintenance and allotting the saved labour for manufacturing purposes.
4. By sharing the responsibilities with a subcontractor.
5. By altering the prices of products to influence the demand level.
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16.
Answer: (d)
Reason : The market proximity is the prime consideration aspect for pure service providing organizations such as hotels, hospitals, retail stores and theatres as they must be located close to the market.
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13
17.
Answer: (b)
Reason : In Process Focused Design, similar equipment or functions are grouped together. It is usually used to produce small quantities (or batches) of different items on relatively general-purpose machinery. It has the flexibility to produce a wide spectrum of products in small batch sizes.
Variable-sequence robots are an extension to Fixed-sequence robots and are designed to provide an easy change in the sequence of tasks performed. So, they are useful in Process Focused production system.
Hence, from above discussion, we can infer that option (b) is correct.
Option (a) is incorrect. Product Focused Design is mostly used in production departments that are organized according to the type of product or service being produced. It is used to produce one or two products in very high volumes. Here, Fixed-sequence robots, which perform a sequence of operations according to a given set of procedures, are more appropriate.
Option (c) is incorrect. Flow-shop is another name for Product Focused Design, where Fixed-sequence robots are more appropriate.
Option (d) is incorrect. Assembly line is another name for Product Focused Design, where Fixed-sequence robots are more appropriate.
Option (e) is incorrect. Line flow is another name for Product Focused Design, where Fixed-sequence robots are more appropriate.
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18.
Answer : (d)
Reason : 4-month moving average for the demand of product at the beginning of September (2006)
= 41× (sum of first four months demand)
= 41× (7000 + 7500 + 8200 + 8500)
= 431200= 7800
4-month moving average for the demand of product at the beginning of October (2006)
= 41× (sum of last four months demand)
= 41× (7500 + 8200 + 8500 + 7900)
= 432100= 8025.
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19.
Answer: (b)
Reason : The master production scheduling process involves the planning of activities to determine whether or not an operation can achieve its production as stated in the MPS. Materials requirement planning (MRP) and capacity requirement planning (CRP) are the two supplementary planning activities involved in this process.
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20.
Answer: (d)
Reason : Until the 1920s, the developments in operations management only emphasized the roles of the hierarchical structure, specialization management functions of planning and control and not on human dimension. In 1927, a research team from Harvard, under the supervision of sociologist Elton Mayo, conducted a study at the Western Electric’s Hawthorne plant in Chicago. This study has initiated wide-ranging research into the behavior of workers in their job environment.
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21.
Answer: (d)
Reason : This project has two paths, their time estimates are as follows:
A – B – C – E – F : 2 + 4 + 4 + 7 = 17 weeks
A – B – D – E – F : 2 + 5 + 5 + 7 = 19 weeks
So, the maximum time estimate i.e., 19 weeks is the duration of the project.
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22.
Answer: (c)
Reason : (a&b) Very high Hiring costs and Lay-off costs are incurred when the strategy is to vary the workforce size in response to the output requirements.
(c) Overtime costs are incurred when the strategy is to vary the utilization of the workforce.
(d) Materials handling costs are incurred when the strategy is to vary the size of inventory.
(e) Stockout costs are incurred in case of a back-order strategy.
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23.
Answer: (d)
Reason :
(a) Human Resource Management component of Supply Chain Management(SCM) considers the activities undertaken by the firm to develop personnel with the skills, knowledge and attitudes that support the performance of the SCM system.
(b) Quality and Performance Management component of Supply Chain Management (SCM) considers the activities undertaken by the company and the suppliers to ensure that purchased materials and services meet agreed-upon requirements.
(c) Order to Delivery Process component of Supply Chain Management(SCM) explores how effectively the firm directs the flow of products and services from suppliers to the company.
(d) Business Relationship Management ensures effectiveness of the firm in establishing a two-way flow of understanding between the company and its suppliers.
(e) Operations Planning component of Supply Chain Management (SCM) pertains to the process by which the company specifies the objectives, tasks, resources and measurements needed to guide SCM operations.
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24.
Answer: (c)
Reason : Forward scheduling determines the start and finish times for waiting jobs by assigning them to the earliest available time slots at the work center. It does not use latest available time.
Backward scheduling schedules the orders according to their due dates, by calculating backward from the finished product to material procurement. It determines the start and finish times for waiting jobs by assigning them to the latest available time slot that helps to complete the job just when it is due for completion. It does not use earliest available time or shortest processing time.
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25.
Answer: (e)
Reason : Constrained optimization models consist of three major components:
Decision variables, Objective functions, Constraints.
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26.
Answer: (b)
Reason : Recreational facilities is not a factor. I, II and IV are the factors affecting locational decisions.
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27.
Answer: (d)
Reason : The objective function is Maximize Z = 5 x1 + 8 x2.
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28.
Answer: (c)
Reason : MTBFSystemAvailabilityMTBFMTTR=+
=600.9677602=+
=96.77%.
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29.
Answer: (b)
Reason : Fnext = α Dpresent+ (1 – α) Fpresent
= 0.2 × 400+ (1 – 0.2)500
= 80 + 400 = 480 units.
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30.
Answer: (d)
Reason : Theoretical minimum number of work stations = timeCycletimestaskofSum
= 520100=.
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Section B : Problems/Caselet
1. At = αDt + (1-α) (At-1 + Tt-1)
A1 = 0.23 × 40 + (1-0.23)(45+0) = 9.2 + 34.65 = 43.85
Tt = β(At –At-1) + (1 – β)(Tt-1)
T1 = 0.18(43.85 – 45) + (1– 0.18)(0)
= – 0.207
A2 = 0.23 × 52 + (1– 0.23)(43.85 – 0.207)
= 11.96 + 33.61 = 45.57
T2 = 0.18(45.57 – 43.85) + (1– 0.18) (–0.207)
= 0.139 ≈ 0.14
A3 = 0.23 × 46 + (1– 0.23) (45.57 + 0.14)
= 10.58 + 35.20 = 45.78
T3 = 0.18(45.78 – 45.57) + (1 – 0.18) (0.14)
= 0.038 + 0.115= 0.153
A4 = 0.23 × 52 + (1 – 0.23) (45.78 + 0.153)
= 11.96 + 35.37 = 47.33
T4 = 0.18 (47.33 – 45.78) + (1 – 0.18) (0.153)
= 0.279 + 0.125 = 0.404
A5 = 0.23 × 59 + (1 – 0.23) (47.33+ 0.404)
= 13.57 + 36.755 = 50.325
T5 = 0.18 (50.325 – 47.33) + (1 – 0.18) (0.404)
= 0.539 + 0.331
= 0.87
A6 = 0.23 × 64 + (1 – 0.23) (50.325 + 0.87)
= 14.72 + 39.42 = 54.14
T6 = 0.18 (54.14–50.325) + (1 – 0.18) (0.87)
= 0.687 + 0.713 = 1.4
Trend adjusted forecast Ft:
F2 = A1 + T1
F3 = A2 + T2
F4 = A3 + T3
F5 = A4 + T4
F6 = A5 + T5
Month
Demand (Dt) (in units)
Smoothed value (At)(in units)
Trend (Tt)
Trend adjusted forecast values (Ft) (in units)
April
40
43.85
– 0.207
–
May
52
45.57
0.14
43.64
June
46
45.78
0.153
45.71
July
52
47.33
0.404
45.933
August
59
50.325
0.87
47.734
September
64
54.14
1.4
51.195
16
October
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2. a.
Particulars
April
May
June
July
Aug
Sep
Inventory on hand
800
1000
1068
664
28
0
Working days
25
26
22
23
24
23
Productivity per worker
7
7
7
7
7
7
Actual production
4200
4368
3696
3864
4032
3864
Demand forecast
4000
4300
4100
4500
4200
4100
Closing inventory
1000
1068
664
28
–
–
Inventory carrying cost
6000
6408
3984
168
–
–
Shortage in units
–
–
–
–
140
236
Shortage cost
–
–
–
–
2100
3540
The above table shows the aggregate plan for a period of six months.
The procedure followed for the various calculations is given below:
Actual production = Working days × Number of workers × Productivity per day
Closing inventory = (Inventory on hand + actual production ) – Demand forecast
Shortage in units = Demand forecast – (Opening Inventory + Actual Production)
b. The total inventory holding at the end of six months period
= 6,000 + 6,408 + 3,984 + 168 = Rs. 16,560
Shortage cost = Units short × Shortage cost per unit
The total shortage cost that would be incurred at the end of the six months = 2,100 + 3,540 = Rs. 5,640.
c. The company would not be able to meet the demand during the months of August and Septemeber.
Note: It has been assumed that the previous month shortage can be met by the current month production.
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3. The chart showing the requirement of units for producing 1500 units of Zenex.
S.No.
Item
Number of units required in units
1
Z
1500 (as given in the problem)
2
A
Z × 6 = 1500 × 6 = 9000
3
B
Z × 3 = 1500 × 3 = 4500
4
C
Z × 4 = 1500 × 4 = 6000
5
D
A × 4 = 4500 × 4 = 18,000
6
E
A × 3 = 18000 × 3 = 54,000
7
F
E × 2 = 54,000 × 2 = 1,08,000
8
G
B × 2 = 4500 × 2 = 9,000
9
H
B × 4 = 4500 × 4 = 18,000
10
I
B × 5 = 4500 × 5 = 22,500
11
J
H × 3 = 18,000 × 3 = 54,000
12
K
C × 2 = 6000 × 2 = 12,000
13
L
C × 3 = 6000 × 3 = 18,000
The above chart is prepared so that each unit of Z requires 6 units of A, 3 units of B and 4 units of C.
Each unit of A requires 4 units of D and 3 units of E which inturn requires 2 units of F.
Each unit of B requires 2 units of G, 5 units of I and 4 units of H which inturn requires 3 units of J.
Each unit of C requires 2 units of K and 3 units of L.
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4.
Location rating
Weighted score
S.No.
Factor
Factor Rating
A
B
C
D
A
B
C
D
1.
Transportation cost
6
8
5
5
7
48
30
30
42
2.
Labor availability
5
4
6
6
5
20
30
30
25
17
18
3.
Supplier availability
8
7
4
6
6
56
32
48
48
4.
Climatic conditions
3
5
7
6
8
15
21
18
24
5.
Government incentives
7
6
5
7
5
42
35
49
35
6.
Labor cost
4
6
8
5
6
24
32
20
24
7.
Cost of real estate
7
5
7
8
5
35
49
56
35
Total score
240
229
251
233
Based on total score, it is location C, which is advisable as it has the highest weighted score.
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5. The various changes that General Motors has brought about in its operations, to become a truly global automaker, are as follows:
(i) Design and manufacture of new products in countries outside North America.
(ii) Use of innovation in design and manufacture of its automobiles, throughout the globe.
(iii) Endeavour to have 50% of its capacity outside North America.
(iv) Formulation of new partnerships and alliances.
(v) Emulation of Toyota’s strategies of plant standardization and lean manufacturing, especially in countries like Argentina, Poland, and China.
(vi) Flexible plant design for easy future expansion.
(vii) Use of U-shape layout to enable delivery of component parts and accessories directly to the assembly lines, cutting down on warehouse costs, time and distance of travel and improving productivity.
(viii) Making minor adjustments in each plant to meet unique conditions in each country.
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6. The advantages of General Motors’ strategy of Plant Standardization are as follows:
i. Mass Production.
ii. Economies of Scale.
iii. Easy interchange of spare parts.
iv. Easy interchange of ideas and information.
v. Easy problem solving.
vi. Quick transfer of technology from one plant to another.
vii. Simplified training because of standardized training modules.
viii. Familiar working conditions across the globe.
The disadvantages of General Motors’ strategy of Plant Standardization may be as follows:
i. May not be very much productive or effective for a specific purpose.
ii. May not be able to cater to some very specific needs of a particular customer.
iii. Less of innovation and low possibility of new ideas.
iv. May be difficult to implement in all places because of lack of necessary resources.
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Section C: Applied Theory
7. More and more companies today are recognizing the value of using quality as an offensive, strategic weapon. A company can compete on eight different quality functions: (1) Performance, (2) Features, (3) Reliability, (4) Conformance, (5) Durability, (6) Serviceability, (7) Aesthetics (8) Perceived quality.
1. Performance
Performance indicates the ability of a product’s primary operating characteristics. Consumers judge the quality of the product based on its performance, after comparing it with the competitor’s products or the prevailing market standards. For example, performance characteristics for a car would typically include pickup, fuel efficiency, etc.
2. Features
The number of features a product has in addition to the basic features also influences customers’ perception of quality. Besides, features allow companies to satisfy different requirements based on individuals’ preferences and choices. As a result, customer’s perception of quality is also dependent on the number of product models and/or variations available. Additional features also help in enhancing the appeal of the product.
3. Reliability
As a technical term, ‘reliability’ refers to the probability of a product’s failure within a specified time period.
Reliability is usually measured as the mean time between failures (MTBF) or the failure rate per unit of time or any other measure of usage. Reliability is very important in case of high value products such as airplanes, computers, etc.
4. Conformance
A product’s conformance reflects how well the product and its individual components meet the established standards. Product’s conformance to specifications can be identified by analyzing their defect rates during production, and the number of customer complaints after their sale.
5. Durability
Durability of a product indicates the operational life of a product or in other words how long the product can be used without replacement. For some products, the entire product needs to be replaced when one component is damaged (for instance when the filament of a bulb burns out, the entire bulb needs to be replaced). While for other products (e.g. cars), the consumer has to evaluate the trade-off between replacing the product versus spending more money on repairs for the existing ones.
6. Serviceability
Serviceability is concerned with how readily a product can be serviced back into operational mode, and the speed, competence and courtesy associated with that service. This dimension of quality is sometimes overlooked at the design stage. The speed of repair improves the availability (amount of time the item is in use) of the product and reduces the repair costs.
7. Aesthetics
The aesthetics value of a product or service is influenced by individual preferences. While one group of customers may regard a product as aesthetic, another group may feel it is not tastefully designed. So companies can use this quality dimension to cater to a niche market.
8. Perceived quality
Perceived quality is directly related to the reputation of the firm that manufactures the product. Total information about the various quality aspects of a product is usually not available, especially when it is a new product. So, customers rely heavily on the reputation of the organization and the past performance of its products when attaching a value to its new products.
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8. Economics of maintenance
If equipment is not maintained properly, maintenance costs incurred on the personnel and equipment can be substantial. Therefore, proper planning is crucial to minimize maintenance costs. Too little preventive maintenance can be risky; on the other hand, too much preventive maintenance is not economical. All firms incur preventive and remedial maintenance costs; the decision before an organization is how much to spend on preventive maintenance. Firms require some level of preventive maintenance, as it is essential for the smooth functioning of production process. Firms also incur some remedial maintenance costs, as some failures cannot be avoided. Product-focused organizations and highly automated production units emphasize preventive maintenance to avoid frequent equipment breakdowns, as the failure of a component of equipment results in the entire production system or a major part of it remaining idle. On the other hand, process-focused organizations lay greater emphasis on efficient remedial maintenance. The objective is to reduce production interruptions due to equipment maintenance. They generally possess in-process inventories to cover for the production loss due to breakdowns.
The decision on the appropriate mix of remedial and preventive maintenance is dependent on several factors. The decision regarding the trade-off has implications on the overall performance of the organization. Organizations can reduce the frequency of equipment breakdowns by laying emphasis on preventive maintenance, improving the capabilities of maintenance personnel through appropriate training, and so on. Hence, the operations manager has to make a trade-off between the amount of effort to be put into preventive maintenance and the amount to be put into remedial maintenance. The objective of an operations manager is to reduce the total maintenance cost, which is the sum of preventive and remedial maintenance costs. As we can see from the figure, the point ‘m’ indicates the levels of
19
20
preventive and remedial maintenance costs, where the total cost of maintenance is the lowest. As the preventive maintenance cost increases, the repair and replacement costs decrease.
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