UNIVERSITY OF COLOMBO, SRI LANKA

FACULTY OF MANAGEMENT AND FINANCE

Postgradoate & Mid-career Dev€lopment Unit

Master ofBusiness Administration (Semestcr II -First-halD Examination - August, 2008

MBA 538 - Operations Maoagement)

Three (03) Hours

Answer five (05) questions in all sel€cting at Least tlvo questions from each Part

Answers to PART- i and PART - ii should be written in two separate answer books andhanded over to the supervisor separately.

Comment on this statement providing

(6 marks)

ii. Make-to-stock and make-to-order are two product strategies lollowed bymanufacturers. What are the market conditions satisfied under these Productstrategies?

(7 marksl

"Operations Management decisions are not limited to operational decisions, but theyinclude strategic as well.as tactical decisions". Explain this statement.

(7 marks)

(Total 20 Marks)

Q l .

i. "Product is a bundle of goods and services"examples to strengthen your answer,

l ,

Q2.

i. Explain how the following factors affect process selectiona. Product qualitYb. product varietyc. production volume

nl .

(5 marks)

Dilferentiate strategic capacity planning and rnedium term capacity planning(5 marks)

XYZ Machining Company has decided to modernize its product;on facility because of

increased competition. Three altemative production technologies are beingconsidered lor this purpose namely: Cellular Manufacturing (CM), NumericalControlled machines (NC) and a Flexible Manufacturing System (FMS).Costs for th.ee altematives are given in the following Table.

CM NC FMSAnnual f ixed cost (Rs.) s80,000 1.110.000 2,500,000Vafiable cost per unit (Rs,) t .890 1,750 1,680

a. Based on the annual cost, at what volume of annual production would thecompany be indifferent betweeni. CM and NC production technologies.ii. NC and FMS prcduction t€chnologies.

(6 marks)

b. I fannual production volume is 15.000you rccommend to the company?

units. r hich production technology \rould

(4 marks)

(Total 20 Msrks)

Q3.

i. Fixed order quantity model and fixed period model are two major models used ininventory control. Briefly explain these two models and discuss in which situalionsthey are used.

(6 marks)

ii. What are the purposes of safety stock? How will the use of safety stock affect theEOQ?

(4 marks)

A maintenance department of a manufacturing plant needs to plan inventori€s forfrequenlly used maintenance part, a bearing. Cuffently, Rc_order point and the orderquantity of the part are being considered by the department. Average demand perweek is 15 units ofbearings and average lead time is 5 weeks.

l l I .

The plant operates under a policy of carrying 50 percent of expected demand during

lead tirne as safety stock across all items in the same class as this bearing orderingcost is Rs. 1000 per order and holding cost is Rs 25 per year per item. Determine:

a. Re-order level

l l .

, l l .

b. Economic Order Quantity.

(5 marks)

(5 marks)(Tolal 20 Marks)

(2marks)

(2marks)

(2marks)

Q4.

Briefly explain how following tools can b€ used fo. quality improvement

a. Parelo analysis

b. Fishbone (cause and eff'ect) diagram

c. Scatter plot

"Final quality ofa product is determined by both 'Quality ofDesign' and 'Quality ofConformance". Explain this statement.

(7 marks)

Explain how work study is used to improve productiviry.(Tmarks)

(Total 20 Marks)

PART ii

Qs.i. Describe the Delphi method offorecasting.

(,1marks)

ii. List the steps involved in choosing a lorecasting method to a demand paltern in your

oaganrzatlon.(5 marks)

iii. Historical demand ofa product ofa company for the last 9 years is given below:

Year 2 3 4 5 6 7 8 9

D€mand

(units)

50 54 55 ) f 60 56 62

Assuming a linear trendline.

line pattem for the above data, find the equation of the

(6 marks)

b . Using the equation found in (a), forecast the demand ior yearl0 and y"u'f n1urL9

What would be the forecast for the year l0 and I l, if simple 3 year period moving

average melhod i\ used: Stale al l )our assumPlions(3 marks)

Q6.

(Total 20 Marks)

i. Explain the benefits ofMaterial Requirement Planning (MRP) syslem

(5 marks)

ii. What are thc inputs and outputs ofMRP system?

(4 marKs)

iii, Product P is made oftwo units ofQ and three units ofR sub-assembly Q is made of

one unit of S and two units ofT. Other sub-assernbly R is made of two units of S and four

units ofU. Lead time of P,Q,R,S,T and U are as follows:

P= 0l week, Q= 02 weeks, R- 03 wecks, S= Ozweeks,T= 0lweek, and U= O3weeks'

a. Draw the bill ofmaterial (product tree stmcture)(4 marKs)

b. lf, 100 units of P are needed in theloth week, develop a planning scheduleshowing when each item should be ordered and in what quantity Curr€ntinventoiies are as followst P:20 units, Q = 40 units, R = 30 units' S = 50 units, T= 100 units, U= 900 units.

(TMarks)

(Total20 Marks)

Q7.

"Transportation decisions should not be purely made bascd on transportation costalone". validate the statement with your argument.

(4 mar[5)

Discuss how you can minimize freight cost in transportation.

(4 mark\)

A firm has an annual demand of 1,095,000 water pumps of one variety. Averagecost ofthe pump is $90. A safety stock of 25% ofthe demand during delivery lead-time is maintained by the firm, Inventory holding cost per year for the pump hasbeen estimated as 12%. The logistic manager ofthe firm has four altematives tc,sign a contract to manage the transpoiation next year.

The following table shows the capacity of each transportation altematives, annualtransportation cost, lead-time and transit times.

Alternative

Altemative A

Altemative B

Altemative C

Alternative D

Capacity /Number ofPumps

u,:oo1,750

1,000

4,000

Annual TransportCost / $

20,000

1?,000

r2,000

15,500

Lead-Time Transit Time /t v d y . u a j .

5 4

(a) Calculate the cost components and tabulate the rcsults.

(b)' Select the best alternativc to be signed with contractor. (Assume 365 daysfor a year.

(12 Marks)

(Total20 Marks)