operation management workbook for students
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Operations Management
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2nd Edition
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WORKBOOK
Icfai Center for Management Research Road # 3, Banjara Hills, Hyderabad 500 034
Icfai, March 2007. All rights reserved.
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No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means – electronic, mechanical, photocopying or otherwise – without prior permission in writing from Icfai.
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Operations Management (2nd Edition) – Workbook
ISBN 81-314-1126-5 Ref. No. OM WB – 03 2K7 35 For any clarification regarding this book, students may please write to Icfai giving the above reference, and page number. While every possible care has been taken in preparing this book, Icfai welcomes suggestions from students for improvement in future editions.
Contents Part A Multiple Choice Questions
3-67
Part B Paper I
139-148
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Paper I – Model Test 1
149-159
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Paper I – Model Test 2 Paper I – Model Test 1 – Answers and Explanations
163-172
Paper I – Model Test 2 – Answers and Explanations
173-184
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Paper II
187-196
Paper II – Model Test 2
197-207
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Paper II – Model Test 1
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Paper II – Model Test 1 – Answers and Explanations
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Paper II – Model Test 2 – Answers and Explanations
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Multiple Choice – Answers and Explanations
211-221 222-231
Detailed Contents
Operations Management Decisions The Historical Evolution of Operations Management Computers and Advanced Operations Technology
2. OPERATIONS STRATEGY
3. FORECASTING DEMAND
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Forecasting in Operations Forecast Components Demand Forecasting Process Forecasting Methods Selecting a Forecasting Method
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Operations Strategy as a Competitive Weapon Elements of Operations Strategy Developing an Operations Strategy Financial and Economic Analysis in Operations
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1. OPERATIONS MANAGEMENT – AN OVERVIEW
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Part One: Introduction to Operations Management
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Measures of Forecasting Accuracy
Monitoring and Controlling Forecasts
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Part Two: Design of Facilities and Jobs
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4. ALLOCATING RESOURCES TO STRATEGIC ALTERNATIVES
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Allocation Decisions in Operations Strategy Linear Programming in Operations Management Formulation of Linear Programming Problems Solution of Linear Programming Problems The Transportation Problem in Linear Programming
5. DESIGN OF PRODUCTION PROCESSES Process Planning and Design Major Factors Affecting Process Design Decisions Types of Process Designs Process Planning Aids Selecting the Type of Process Design iv
FACILITY LOCATION AND LAYOUT
7. JOB DESIGN
8. WORK MEASUREMENT
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Job Design Fundamentals Considerations in Job Design Work Environment Uses of Job Design
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Importance of Location Factors Affecting the Location Decisions General Steps in Location Selection and Location Decision Process Location Evaluation Methods Locating Service Facilities Facility Layout Basic Layout Formats Developing a Process Layout Developing a Product Layout Developing a Cellular Manufacturing Layout Japanese Approaches and Trends in Manufacturing Layouts Service Facility Layouts
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6.
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Uses of Setting Work Standards Work Measurement Techniques
Part Three: Operations Planning and Control
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9. AGGREGATE PLANNING AND CAPACITY PLANNING
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Overview of Planning Activities The Aggregate Planning Process Strategies for Developing Aggregate Plans Aggregate Planning Techniques Master Production Schedule Implementing Aggregate Plans and Master Schedules Capacity Planning
10. FUNDAMENTALS OF INVENTORY CONTROL Purpose of Inventories Inventory Costs Inventory Systems Economic Order Quantity Model Inventory Classifications Models
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11. PURCHASE MANAGEMENT
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Importance of Purchasing Organizing Purchasing Responsibilities of a Purchasing Manager Purchasing Process Duties of Buyers Make-or-Buy Decisions Ethics in Buying
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Necessity of Materials Management Functions of Materials Management Materials Management Technology Materials Management Techniques
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12. MATERIALS MANAGEMENT
13. MATERIALS REQUIREMENT PLANNING
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Fundamentals of Materials Requirement Planning Components of an MRP System Advantages and Disadvantages of an MRP System Problems in Implementing MRP Systems Manufacturing Resource Planning (MRP II)
14. OPERATIONS SCHEDULING
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Purpose of Scheduling Scheduling Methods Scheduling Activities Scheduling by Type of Operations Scheduling Personnel in Service Operations Scheduling Techniques
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15. ENTERPRISE RESOURCE PLANNING
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Evolution of ERP Business Process Reengineering Business Modeling for ERP ERP Implementation ERP and Competitive Advantage
16. SUPPLY CHAIN MANAGEMENT Business Drivers in Supply Chain Performance Principles of Supply Chain Management Forces Shaping Supply Chain Management Supply Chain Management Framework Customer Focus in Supply Chain Management Electronic Supply Chain Management vi
17. JUST-IN-TIME (JIT) MANUFACTURING SYSTEM
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The Concept of the JIT System Advantages of JIT Systems Characteristics of JIT Systems
18. PRODUCTIVITY AND QUALITY MANAGEMENT
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Productivity The Strategic Role of Quality Role of Inspection in Quality Control The Cost of Quality Statistical Concepts in Quality Control Computers in Quality Control Concept of TQM
19. FACILITIES AND MAINTENANCE MANAGEMENT
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Facilities Management Necessity of Maintenance Management Types of Maintenance Economics of Maintenance Evaluation of Preventive Maintenance Policies Maintenance Planning Modern Approaches to Preventive Maintenance Recent Trends in Maintenance
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20. PROJECT MANAGEMENT
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Necessity of Project Management Network Modeling Project Planning Methods Project Crashing
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Part Four: Technology and Globalization in Operations Management
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21. TRENDS IN OPERATIONS TECHNOLOGY
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Automation Overview of Manufacturing Activities Artificial Intelligence (AI) Electronic Data Interchange (EDI)
22. GLOBALIZATION AND OPERATIONS MANAGEMENT Significance of Globalization Sources of Global Competitive Advantage Difficulties in Managing Globalization Changes in Operations Strategy Necessary due to Globalization Managing Globalization Operations in Global Business Strategy vii
Part A – Multiple Choice Questions: Relevant Chapters Chapters
Title
Chapter 1
Operations Management – An Overview
Chapter 2
Operations Strategy
17-40
Chapter 3
Forecasting Demand
41-86
Chapter 4
Allocating Resources to Strategic Alternatives
Chapter 5
Design of Production Processes
Chapter 6
Facility Location and Layout
Chapter 7
Job Design
Chapter 8
Work Measurement
Chapter 9
Aggregate Planning and Capacity Planning
Chapter 10
Fundamentals of Inventory Control
244-278
Chapter 11
Purchase Management
279-300
Chapter 12
Materials Management
Chapter 13
Materials Requirement Planning
334-360
Chapter 14
Operations Scheduling
361-408
Chapter 15
Enterprise Resource Planning
409-425
Chapter 16
Supply Chain Management
426-443
Chapter 17
Just-In-Time (JIT) Manufacturing System
444-460
Chapter 18
Productivity and Quality Management
461-493
Chapter 19
Facilities and Maintenance Management
494-529
Chapter 20
Project Management
530-557
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217-243
301-333
Trends in Operations Technology
558-582
Globalization and Operations Management
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Chapter 22
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Chapter 21
Multiple Choice Questions
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Part A: Multiple Choice Questions
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This section consists of multiple-choice questions that test the student’s understanding of the basic concepts discussed in the textbook. Answering these questions will help students quickly recollect the theories they’ve learnt and apply them to real-life business situations.
Part A: Multiple Choice Questions
a. b. c. d. 3.
a. b. c. d.
The computerization of operations began when the first computer was installed in General Electric Appliance Park in 1954. What was the basic objective of computer applications then? Reducing manpower Reducing clerical costs Enhancing worker safety Increasing production
Operations management involves the functions of planning, organizing, controlling etc, in production systems. The activity of encouraging employees through praise, recognition and other intangibles is part of which function?
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d.
Division of labor or specialization is an outcome of ____________. Industrial revolution World War II Scientific management Computerization of production systems
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Which company first adopted the concept of scientific management in the assembly line production system? General electric Ford motors General motors Westinghouse
a. b. c.
Which of the following decision do not fall within the basic scope of operations management? Analyzing the firm’s financial position Designing a new assembly line Determining the location of a new distribution center Improving product quality
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6.
8.
a. b. c. d.
The decision of an operations manager about what products to make and when is part of which function? Organizing Directing Planning Coordinating
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a. b.
On the basis of Hawthorne studies, Elton Mayo and his team concluded that ________had a major impact on employee productivity. Physical work conditions Importance and recognition given to employees Job content Fear of losing job
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1.
Controlling Motivating Coordinating Organizing
5.
Decisions on production and process design, facility location and layout etc, are part of which decision category?
a. b. c. d.
Strategic decisions Tactical decisions Operational decisions All of the above
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a. b. c. d.
9.
a. b. c. d.
The decisions that operations managers take can be broadly classified into various categories. What is the usual time-frame for tactical decisions? Seven years or more One or two years Two to four months A couple of weeks
10. Operations Management deals with which of the following? a. Design of products b. Design of services c. Acquisition of resources d. All of the above 11. Operations Management involves the activities of planning, organizing, controlling, directing, and coordinating in production systems. These systems convert resource inputs into products or services. Centralization and/or decentralization of operations fall under which of the following activities?
Operations Management a. b. c. d.
a. b. c. d.
i, ii, iii iii, iii, iv i, iii, iv i, ii, iii, iv
a. b. c. d.
i & ii ii & iii i & iii i, ii & iii
18. Product design is one of the factors that an operations manager must consider while designing a production system. Product design can be based on a customized or a standard production design system. What does a customized product design system primarily focus on? a. Quality and on-time delivery b. Reducing costs c. Costs and quality d. Mass production
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13. Operations Research uses mathematical techniques to solve complex problems. When was the concept of operations research first introduced? a. In the early 1940s during World War II b. In the late 1920s during Hawthorne studies c. In 1911 for the moving assembly line production by Ford d. In the 1880s at Midvale Steel Works
17. Which of the following are among the key objectives of an operations manager? i. Maximizing customer satisfaction ii. Minimizing inventory iii. Maximizing resource utilization
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12. The term ‘Production Management’ was replaced by a more general term ‘Operations Management’ in the 1970s. What led to the enlargement of the field and use of the new term? i. Inclusion of purchasing function ii. Inclusion of dispatch and other related activities iii. Inclusion of services related concepts and procedures iv. Inclusion of manufacturing technologies
Rise in quality of products Reduction in labor costs Higher maintenance costs Greater efficiency of the production process
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Planning Organizing Directing Controlling
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a. b. c. d.
Frederick Taylor Henry Ford Elton Mayo Adam Smith
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14. Who was involved in the Hawthorne experiments at the Western Electric plant?
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15. Which of the following technologies helps perform tasks that are repetitive or hazardous for a human being to perform? a. CAD b. FMS c. Expert systems d. Moving assembly line 16. Computerization has significantly improved the production process. Which of the following is not an advantage of computerization in the production process?
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19. Which of the following is not categorized among indirect costs? a. Administrative costs b. Maintenance costs c. Labor costs d. Rentals 20. Who generally develops corporate objectives that are unique to each organization? a. Frontline managers b. Top-level managers c. Middle level managers d. Production supervisors 21. What factors must managers consider while formulating corporate objectives? a. Market conditions b. Political environment c. Economic environment d. All of the above
Part A 22. Rainbow Electronics manufactures a limited number of models of television sets. What kind of product design system does the company have?
a.
Designing the production system
b.
Product/service design and development
c.
a. b. c. d.
Technology development
d.
Allocation of alternatives
a. b. c. d.
i & ii ii & iii i & iii iii & iv
strategic
27. Which among the following products are generally customized as per user requirements? i. Industrial boilers ii. Turbines iii. Televisions iv. Ceiling fans a. b. c. d.
i and ii ii and iii iii and iv iv and i
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Technical feasibility Marketing feasibility Economic feasibility Production feasibility
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28. Which stage of the product life cycle is characterized by exponential growth of sales volume? a. Introduction stage b. Growth stage c. Maturity stage d. Decline stage
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23. Feasibility studies are part of the new product development process. The feasibility test generally focuses on which of the following aspects?
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Customized production design Standardized product design Stock-to-order Assemble-to-order
selection
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Subsidiary units Strategic business units Franchise centers Sister concerns
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a. b. c. d.
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24. Large organizations are often divided into separate operating divisions that operate as autonomous business units with independent control. What are such units called?
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25. Nucor, a steel producer, competes successfully with larger integrated steel producers by processing steel scrap rather than producing steel from iron ore. What advantage does the company gain through this kind of production process? a. b. c. d.
Production flexibility Better quality Lower costs Batch process facility
26. Selecting product design, production system, and inventory policy for finished goods fall under which component of operations strategy?
29. Pick the statement that pertains to the relationship between the role of operations department and the product life cycle. a. The role of operations department increases as the product moves up the lifecycle b. The role of operations department decreases as the product moves up the lifecycle c. There is no change in the role of operations department across the lifecycle d. The role of operations department increases or decreases as the product moves up the lifecycle 30. What is the basic use of a prototype during the new product development process? a. A prototype is used to test the technical and economical feasibility b. A prototype helps test the product performance under standard conditions c. A prototype is developed as part of test marketing d. None of the above 5
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Project A B C
Initial investment
Expected annual income from the project Rs.2,00,000 Rs.2,50,000 Rs.1,50,000
Rs.10,00,000 Rs.12,00,000 Rs.8,00,000
36. Calculate the payback period for Project A a. b. c. d.
5 years 4 years 3 years 6 years
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33. How is strategic planning different from operations planning? a. Strategic planning is concerned with longterm planning while operational planning involves short-term day-to-day planning b. Strategic planning is concerned with shortterm day-to-day planning while operational planning involves long-term planning c. Operational planning involves selection of target markets and distribution channels d. Both strategic planning and operational planning are long-term in nature
(Questions 36 to 39) The given data below shows the initial investment of three projects and their payback periods. Use this data to answer the following four questions.
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32. Developing an operations strategy is an important function of an operations manager. The operations strategy should basically be in accordance with which of the following? a. Organization strategy b. Marketing strategy c. Competitor strategy d. Both a and c
a. b. c. d.
itself as a financial supermarket. Which type of competitive advantage strategy does the bank seek to focus on? Quality Product variety Convenience Low cost
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31. Availability of raw materials and nearness to markets are some of the factors that are considered while making decisions regarding plant location. Which component of operations strategy deals with decisions such as plant location? a. Allocation of resources to strategic alternatives b. Technology selection and process development c. Product design and development d. Facility planning
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34. Which of the following is not a characteristic of operations strategy? a. It should be fixed so as to support a product through its entire lifecycle b. It should accommodate future changes in market demand c. It should focus on having short-term operational superiority over competitors d. It should be consistent with strategies in other functional areas such as marketing, finance and human resources 35. HDFC Bank offers deposits, loans, insurance products, mutual funds, trading in stocks, etc, under one roof and positions
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37. What is the payback period for Project B? a. b. c. d.
5.0 years 4.8 years 3.8 years 4.5 years
38. a. b. c. d.
Calculate the payback period for Project C. 5.0 years 4.8 years 5.3 years 4.5 years
39. Based on the results for product A, B and C, which is the best investment in terms of faster returns? a. Project A b. Project B c. Project C d. Either project A or C 40. Allocation of resources to strategic alternatives is a component of operations strategy. What is the main objective of this component? a. To minimize efficiency b. Optimize the use of resources for best strategic use
Part A
i. The price of the commodity ii. The prices of the available complimentary goods iii. The customer tastes and preferences iv. Price of substitutes a. b. c. d.
i and ii ii and iii i, ii, and iii i, ii, iii, and iv
42. _________is the ability of an organization to adjust quickly to true changes in the base level of demand. Stability Responsiveness Repetitiveness Controlling
b.
Forecast error
c.
Forecast variance
d.
Forecast noise
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Standard deviation
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43. The numerical difference between forecast demand and actual demand is called ___________. a.
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44. A forecast made by using exponential smoothing was found to be over-optimistic to the most recent trends in demand. Which of the following is the most suitable corrective action possible to make the forecast more realistic? Increase the value of α Decrease the value of α Shift to some other forecasting method Ensure that α remains constant
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a. b. c. d.
45. If the demand for a product is stable and is representative of the future, what should be the value of α used to forecast the demand for the product?
a. b.
Low High
46. Organizations generally use forecasts to develop which following plans? a. Financial plans b. Facilities plans c. Marketing plans d. All of the above
demand of the
47. Which of the following methods is judgmental and subjective in nature and based on the estimates and opinions of individuals? a. Time series methods b. Delphi method c. Exponential smoothing d. Regression analysis
48. Which of the following statements is not true about demand? a. Dependent demand is forecasted b. If a manufacturer produces tires, the demand for the tires is a dependent demand c. MRP systems help determine demand for items with dependent demand d. Exponential smoothing is used to determine independent demand
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a. b. c. d.
Medium Can take any value
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41. Demand for a commodity is most likely to depend upon which of the following?
c. d.
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Ensure capacity expansion Maintain proximity to resources
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c. d.
49. Which of the following statements about demand forecasting is not true? a. b. c.
d.
Forecasts are more accurate for shorter time horizons Regression analysis produces more accurate forecasts than moving average A 6-month moving average forecast is more accurate than a 3-month moving average forecast Forecasts are created using only quantitative data
50. Identify the statistical techniques that use historical data collected over a period of time to predict future demand. a. b. c. d.
Time-series methods Qualitative methods Nonparametric methods Causal methods 7
Operations Management
52. Which of the following measures provide information on the extent of forecast error in relative terms? a. b. c. d.
Mean absolute deviation Mean square error Mean forecast error Mean absolute percentage error
a. b. c. d.
Capacity planning New product development Spare parts inventory Capital funds
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54. Demand for a product is influenced by many factors. Which of the following is not a factor that influences product demand? a. Price of the product b. Price of the substitutes c. Income levels of the consumers d. Extent of accuracy of demand forecasts
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55. Which of the following is not a consequence of underestimation of demand? a. Increase in supply lead time b. Increase in loss of orders c. Increase in customer switching d. Increased locking up of working capital as inventory 56. Which of the following demand estimates are very detailed and used to plan and schedule production operations? a. Short-term demand b. Medium-term demand c. Long-term demand d. All of the above
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58. Forecasting demand has a direct impact on which of the following two functions of management. a. Planning and organizing b. Directing and control c. Organizing and staffing d. Planning and controlling
59. In Delphi method, independent opinions and predictions are made by a panel of experts and summarized by a competent mediator. The success of this method is not dependent on which of the following? a. The presence of a socially dominant individual b. The geographical distance between the experts c. Tendency towards groupthink d. Competency of coordinator
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53. Which of the following decisions undertaken by operations managers does not generally require long-range forecast?
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Cost and accuracy Data availability Projected time span Plant capacity
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57. Raw materials demand forecast is derived from which of the following type of forecast? a. Short-term demand forecast b. Aggregate product demand forecast c. Labor demand forecast d. All of the above
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51. Which of the following is not considered by operations managers before selecting a method for forecasting the future demand?
60. The demand for generator sets for twelve consecutive months from January to December is given as 78, 80, 85, 82, 84, 85, 87, 88, 86, 89, 86, 87. Calculate the approximate demand for January of the next year using the simple moving averages method. Assume the time period to be a six month moving average. a. 82 b. 83 c. 86 d. 87 61. The sum of weights used in weighted moving average method should be equal to _________. a. 1 b. 10 c. 100 d. Zero 62. How are weights in the weighted moving average method calculated?
Part A
64. Which of the following is not a benefit that an operations manager gains when using the exponential smoothing method? a. Easy availability of standard software packages b. Less computational requirements c. Larger data storage space d. Greater accuracy in forecasts
68. In the equation Y = a + bX, what is ‘a’ termed as? a. b. c. d.
Value of the dependent variable Value of the independent variable Slope of the line Y intercept or constant value
69. What is the relation between the slope of the line and the trend line in regression analysis? a.
If the slope is positive, then the trend line increases positively If the slope is positive, then the trend line decreases negatively There is no relationship between the slope and the trend line If the slope is negative, then the trend line increases positively
b. c.
d.
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65. Maximum weightage is given in the exponential smoothing method for demand values in which of the following time periods? a. Latest time period b. Earliest time period c. Average of latest and oldest time periods d. Sum of latest and oldest time periods
Only i Only ii i and ii i, ii, and iii
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63. Which of the following forecasting methods are used when the demand for a product is influenced by seasonal tendencies? a. Delphi method b. Simple moving average method c. Exponential smoothing d. All of the above
a. b. c. d.
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Simple moving average method Future forecast Trial & error Exponential smoothing
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a. b. c. d.
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WMAt
∑C A
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66. What is the formula for calculating the weighted moving average? =
t
t
t =1
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b.
WMAt+1 =
∑C A t =1
t
t
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c.
d.
WMAt+1 = WMAt-1 =
∑C A t =1
t
t
n -1
∑C A t =1
t
t
67. Why is the constant α used in exponential smoothing method? i. To show effects of past demand ii. To smooth out the effects of any noise iii. To predict future trends in demand
70. If the sales of a refrigerator model rose from 15000 units to 20000 units between two consecutive time periods due to 5% increase in advertising expenditure. What is the value of the slope? a. b. c. d.
33.33 6.67 3.33 250
71. Short-range decisions vary from purchasing, job scheduling, and project assignment to machine scheduling. Which of the following forecasting methods can be used for such decisions? a. b. c. d.
Exponential smoothing Linear regression analysis Multiple regression analysis Delphi method
72. Identify the forecasting method that can be used when data collection proves very expensive. a. Moving averages method b. Delphi method 9
Operations Management c. d.
a. b. c. d.
Qualitative methods Time series methods Causal methods None of the above
74. Identify the relationship between cost of forecasting and accuracy of forecasting. a. b. c. d.
Cost is directly proportional to extent of accuracy Cost is indirectly proportional to extent of accuracy Accuracy is independent of costs Cost is inversely proportional to extent of accuracy
(Questions 75 to 79) Use the data given in the table below to answer the following five questions related to forecast errors. Actual Demand 510
510
510
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500
540 550
515 550
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520
545
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75. Calculate the Mean Absolute Deviation (MAD). a. 5 b. 6 c. 30 d. 20 76. The Mean Square Error (MSE) for the given data is ______________. a. 250 b. 100 c. 50 d. 75 77. Calculate the mean forecast error. a. 2 b. 10 10
79. a. b. c. d.
Calculate the Tracking Signal (TS). 1.67 2.67 3.67 4.67
80. For forecasting purposes, firms need to take into consideration various factors or components. Which of the following is associated with average sales over a given period of time? a. Trend component b. Seasonal component c. Cyclical component d. Base demand
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Demand Forecast
78. Mean Absolute Percentage Error (MAPE) for the given data is __________. a. 5.72 b. 3.14 c. 1.14 d. 2.56
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73. Which of the following forecasting methods give 100% accurate forecasts?
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Regression analysis Exponential smoothing
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c. d.
81. The demand for luxury products may be linked with the business cycle, as sales usually increase during the boom phase and slow-down during recession. What component of forecasting is described here? a. b. c. d.
Trend component Seasonal component Cyclical component Base demand
82. When LG increased the advertising budget by 40%, the sales of its televisions doubled. On this basis, LG prepared an aggressive demand forecast for the next year. What component of demand did LG consider as part of its forecast? a. b. c. d.
Cyclical component Promotional component Trend component Irregular component
83. Which of the following is an example of the trend component of forecast?
Part A
d.
c. d.
88. Constrained optimization models consist of three major components. Which of the following is not a component of these models? a. b. c. d.
Decision variables Nature of demand Objective functions Constraints
89. Linear programming is a mathematical constrained optimization model used to maximize or minimize the linear functions of a large number of variables, subject to certain constraints. Linear programming cannot help obtain solutions for which of the following?
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84. Identify the correct sequence of steps taken as part of the demand forecasting process. a. Identify influencing factors – understand objectives – identify customer segments – select forecasting technique b. Identify influencing factors – identify customer segments – understand objectives – select forecasting technique c. Identify customer segments – understand objectives – identify influencing factors – select forecasting technique d. Understand objectives – identify influencing factors – identify customer segments – select forecasting technique
b.
Feasible solutions are reduced to manageable numbers Provides optimal solution for the whole organization Enables decision-makers to perform whatif analysis Provides optimal solutions that are always practical
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a.
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The demand for gold has reduced as the price of gold has increased The promotional expenditure of Airtel’s GSM service was hiked based on demand forecast The demand for camera mobile phones in India has increased steeply since 2001 The demand for wrist watches has been fluctuating for quite some time
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85. Which of the following demand forecasting techniques is divided into static and adaptive methods? a. Qualitative methods b. Time series methods c. Causal methods d. All of the above
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86. Trend and seasonal components play an important role in demand forecasting. In which of the following forecasting methods are estimates of trend and seasonal components assumed to not vary from year to year? a. Exponential smoothing b. Static forecasting method c. Regression analysis d. Simple moving average 87. Constrained optimization models are useful techniques enabling operations managers to compute the amount of resources to be allocated to each strategic alternative. Which of the following is not a benefit of using a constrained optimization model?
a. b. c. d.
Profitability Cost effectiveness Motivation Productivity
90. Identify the term that describes the solution satisfying all the restrictions of a linear programming problem. a. b. c. d.
Initial solution Basic solution Feasible solution Final solution
91. In linear programming, a statement such as the ‘number of labor hours available is 600’ is identified as a ___________. a. b. c. d.
Constraint Slack variable Objective function Decision variable
92. Identify the mathematical technique used to determine the optimal utilization of resources in an organization. 11
Operations Management Exponential smoothing Regression analysis Linear programming Decision tree analysis
a. b. c. d.
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98. What is the appropriate production combination for the two models to gain maximum profits? a. x = 300, y = 300 b. x = 600, y = 0 c. x = 250, y = 100 d. x = 200, y = 200 99. While constructing a linear programming problem, certain assumptions are made. Which of these is not such an assumption? a. Proportionality b. Optimality c. Divisibility d. Additivity
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(Questions 94 to 98) Atul Tele-Products manufactures two telephone models using two different raw material grades. One (x) is of superior quality and the other (y) inferior (second grade). The profit per unit for the model using superior quality raw material is Rs.200 and that of the other is Rs150. The maximum demand for both telephones is 600 units. Production should not exceed demand and total machine time available for both types of telephones together is 650 hours. Besides, one superior quality telephone can be produced in two hours while one unit of inferior quality telephone can be produced every hour. Answer the following five questions using the information given above.
97. If the number of superior quality telephones produced in a month is 200 and inferior quality telephones is 200, then what is the maximum profit (in rupees) that the company gets? a. Rs. 75000 b. Rs. 70000 c. Rs. 76500 d. Rs. 78500
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93. When arriving at production plan decisions by using linear programming, which of the following is not considered a constraint? a. Market b. Capacity c. Destination requirements d. Inventory space
2x + y ≤ 600 x + 2y ≤ 600 x + y ≤ 650 x + y ≤ 600
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a. b. c. d.
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94. If Atul Tele-Products wants to maximize profits, what should be the objective function? a. Maximize Z = 2x + 4y b. Maximize Z = 200x + 150y c. Maximize Z = 600x + 650y d. Maximize Z = 2x + y What is the constraint on machine hours? 2x + y ≤ 650 x + 2y ≤ 650 2x + y ≤ 600 x + 2y ≤ 600
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95. a. b. c. d.
96. What is the constraint on demand?
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100. If the objective function is a maximizing function, which of the following can be considered for it? a. Profits b. Inventory c. Advertising expenditure d. Production costs (Questions 101 to 104) The diagram represents the solution for a linear programming problem where ABCS is the feasible region. Use the diagram to answer the following four questions.
Part A Y
D 120
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100
80 A
S
60
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40 20
O (0,0)
20
40
60
x + y = 40 2x +3y = 120 3x + 2y = 120 x + y = 60
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a. b. c. d.
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102. Identify the corner points of the feasible region from the above diagram.
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(0,0), (80,0), (60,0), (40,0) (40,0), (80,0), (60,80), (60,0) (40,0), (80,0), (80,60), (60,0) (0,60), (40,0), (80,0), (80,60)
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a. b. c. d.
103. What is the equation of the line passing through (80,0)? x = 80 y = 80 x + y = 80 x - y = 80
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a. b. c. d.
104. Find the minimum value of the objective function where minimize Z = 20x + 35y. a. b. c. d.
2100 1600 800 3700
100
80
120
X
105. Which of the following statements is not characteristic of linear programming? a. The linear programming problem should have a well-defined single objective to achieve b. The objective function and constraints of the linear programming problem must be linear functions c. Decision variables of the linear programming problem should be continuous in nature d. The resources considered in the linear programming problem should have unlimited supply
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101. Identify the constraint represented by the line passing through the coordinates (40, 0) and (0,60).
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C
B
106. Identify the correct sequence of steps to formulate a linear programming problem. i. Identify the objective function ii. Identify decision variables iii. Identify constraints a. b. c. d.
ii, i, and iii i, ii, and iii iii, ii, and i ii, iii, and i
107. Where does the optimum solution lie on the graph in the graphical method of solving a linear programming problem? 13
Operations Management
114. Onio Designs provides industrial designing services to various automobile companies in India. This is an example of ___________. a. Job shop production b. Batch manufacturing c. Standardized service d. Customized service
115. In the emerging business scenario, it has become essential for operations managers to manage the structure of their organizations, not merely their operations. What does the term ‘structure’ include? a. Number of plants and their individual capacities b. Choices in equipment and process technology c. Production control and workforce management d. All of the above
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109. The sequence of steps in moving from one basic solution to another in a simplex method is known as ____________. a. Integration b. Iteration c. Allocation d. Summation
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108. In the simplex method of solving a linear programming problem, the ‘lesser than or equal to’ inequality is converted into equality by ___________ to the left hand side of the inequality. a. Adding a slack variable b. Subtracting a slack variable c. Adding a function d. Subtracting a function
113. The concept of linear programming does not consider any synergetic effects among decision variables while calculating their total value for the objective function or the constraints they are associated with. This is part of which assumption of linear programming? a. Proportionality b. Additivity c. Divisibility d. Certainty
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On the X axis On the Y axis In the feasible region Outside the feasible region
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a. b. c. d.
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110. Identify the typical objective function of a transportation problem. a. To minimize the sum of all quantities transported b. To minimize the sum of all production costs c. To minimize the sum of all transportation costs d. All of the above
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111. Which among the following is not a method used in developing an initial feasible solution for a transportation problem? a. North-West corner method b. Least cost method c. Vogel’s approximation method d. Stepping stone method 112. Of all the methods used to determine the initial feasible solution in transportation problems, which is said to be most effective? a. North-West corner method b. Lest cost method c. Vogel’s approximation method d. Both a & b
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116. Keeping other things constant, when the price of a commodity decreases, the demand for the commodity __________. a. Does not change b. Increases continuously c. Increases to a certain level d. Decreases 117. To attain its objective of profit maximization, L&T decided to acquire a mine in Australia thereby owning sources of raw material supplies. What is this process of expanding ownership called? a. Horizontal integration b. Forward integration c. Backward integration d. Diagonal integration
Part A
a. b. c. d.
i and ii i and iii ii, iii, and iv i, ii, and iii
a. b. c. d.
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124. ABC Corp. to match the diversity in customer orders wants to produce products in small batches. Which type of process design would be economically feasible for ABC? Assembly line Continuous processing Discrete unit processing Job shop process
125. Which of the following forms the basis for designing factory buildings and facility layouts? a. b. c. d.
Operations strategy Production planning Process planning Product design
126. When Hindustan Smelters Ltd. decided to manufacture lead ingots, the management decided to develop a process plan for the same. Which of the following factors should the operations manager at Hindustan Smelters Ltd. keep in mind when developing a process plan?
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120. Organizations must be flexible to increase or maintain their market share. The ability of the production system to shift quickly from producing one product to another is called _____________. a. Product flexibility b. Demand flexibility c. Volume flexibility d. Customer flexibility
Lower unit costs Lower initial investments Ease of planning Reduced worker training
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119. What are the basic objectives of process planning and design? i. To produce products with desired quality ii. To produce products at the right time iii. To produce products in required quantities iv. To produce products below competitor prices
a. b. c. d.
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118. The factor that is not considered by operations managers while making their decisions on backward integration. a. Level of training for distributor employees b. Capabilities to consume and market the products c. Anticipate changes in net return on assets d. Availability of funds
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121. In an assembly chart, the process of inspection is generally represented by a __________. a. Square b. Circle c. Triangle d. Pentagon
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122. Which of the following is not an advantage of process-focused production? a. Small work-in-process inventory b. Less manufacturing cycle time c. Low initial investment d. Better product mix available to meet customer demand 123. Which of the following is not an advantage of the product focused production system?
a. b. c. d.
Nature of demand Degree of vertical integration Employee skill level requirements Quality level and degree of customer contact
127. Demand for Pepsi cola is seasonal. It has a very high demand during summer and minimal demand during winter season. Which of the following assumptions is false with respect to the seasonality of demand of Pepsi cola? a. b. c. d.
As demand is seasonal Pepsi cola should not be produced in winter season Pepsi cola should be produced throughout the year but with varying outputs Finished goods inventory must be stocked to meet high demand during summer All the above statements are false. 15
Operations Management
c.
It helps in pooling the R&D and design efforts
d.
It helps in achieving economies of scale
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134. What are the characteristics of process focused systems? i.
Operations are grouped according to the type of processes ii. Production is performed on products on a start and stop basis iii. Products move from department to department in batches iv. Products are produced irrespective of diversity in customer orders a. b. c. d.
i and ii iii and iv i, ii, and iii ii, iii, and iv
135. Coding of parts in a manufacturing plant is done to ensure the identification of each part and its characteristics. What is the difficulty in adopting this approach?
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130. Assume that Eastside, a readymade garment retailer, acquired a textile mill to produce different fabrics. What kind of integration strategy has the retailer adopted? a. Forward integration b. Backward integration c. Horizontal integration d. Lateral integration
Product-focused systems Process-focused systems Group technology All of the above
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129. Identify which of the following is not an advantage of vertical integration. a. It reduces the over-dependency on the purchasing function b. It helps decentralize the overheads
a. b. c. d.
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128. Which of the following is not a factor affecting backward integration? a. Cost of producing components versus cost of buying them b. Investments necessary to produce components in-house c. Anticipated changes in net return on assets, if production of components is undertaken d. Ability of the organization to market its products
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131. There are various types of process designs that are generally used by organizations. In which type of process design, products or services tend to flow along linear paths without backtracking or sidetracking? a. Product-focused systems b. Process-focused systems c. Group technology d. All the above 132. Steel and Chemical industries generally implement which type of process design? a. b. c. d.
Discreet unit manufacturing Process manufacturing Job shop process Both a & c
133. Which of the following process design systems entail high initial investment? 16
a.
b. c.
d.
It provides a clear picture of the steps involved in producing the part It results in standardization of part design It leads to grouping of the parts into families It requires high employee skills
136. Which of the following is not an advantage of cellular manufacturing? a. b. c. d.
Lesser machine changeover time Lower cost of training Reduction in material handling costs Increase in the in-process inventory
137. Which of the following types of charts indicate operations by circles and inspections by squares? a. b. c. d.
Assembly charts Gantt charts Flow charts None of the above
138. Which type of production systems has high diversity in product design and small batch size?
Part A
140. In what way is a typical product-focused system distinct when compared to a process focused system? a. Lower fixed costs and higher variable costs b. Higher fixed costs and lower variable costs c. Higher fixed costs and higher variable costs d. Lower fixed costs and lower variable costs
144. What do you understand by the term ‘facility layout’? a. A list of facilities provided by the organization to the consumers b. The physical distribution of various departments for ease in production c. The location of employees inside the organization d. Layout of safety equipment in an organization
145. Layouts are differentiated by the types of workflow they entail. Workflow in turn is dictated by the nature of the product. Which of the following statements is true about product layout? a. Equipment is dedicated to the manufacture of a narrow product line b. Equipment is flexible to produce a wide range of products c. Material handling cost increases significantly d. It is used for manufacturing customized products
i and iv ii, iii, iv i, ii, iii ii and iv
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141. Which of the following reasons persuade companies to set up facilities in export promotion zones, technology parks and industrial estates? i. Tax holidays and exemption from importexport barriers ii. Availability of infrastructure iii. Low loan interest rates iv. Low cost of manpower
Healthcare industry Call center
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139. Which of the following is not true about a product-focused system? a. Presence of initial fixed costs b. Presence of low variable costs c. The total cost of production increases as the output volume increases d. Low variations in products
c. d.
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Job shop production systems Cellular manufacturing systems Batch production systems Product focused systems
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a. b. c. d.
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142. Which of the following is a major factor in selection of a location for an aluminum factory? a. Proximity to final consumer b. Proximity to input sources c. Proximity to sea port d. All of the above 143. For which of the following industries is proximity to markets a must? a. Telecom industry b. Textile industry
146. Which of the following involves the use of layout planning tools like templates and two-dimensional cut-outs of equipment drawn to scale? a. Graphic and schematic analysis b. Load distance model c. Computer models d. CRAFT model 147. Cotton yarn manufacturing units are generally concentrated in select areas of the country as yarn production requires certain ideal levels of humidity. What factor influences selection of plant location in this case? a. Site cost b. Conducive politico-economic situation c. Suitability of climate d. Availability of amenities 148. Which of the following is not a primary objective of facility location and layout decisions? 17
Operations Management
150. Which of the following types of layout is used when the product manufactured is bulky, heavy or fragile? a. Product layout b. Process layout c. Fixed position layout d. Group technology layout
155. In which of the following situations is there no need for selecting a facility location? a. When a business has just started b. When expansion of the existing plant is possible c. When a business wants to establish new branches/plants d. When government regulations mandate that the business has to shift its location
156. Firms conduct facility location analysis where they evaluate different locations and finally choose an optimum location to start operations. Arrange the following activities related to facility location planning in a logical sequence. i. Design layout ii. Select location iii. Search for a location iv. Revise layout a. b. c. d.
i, ii, iii, iv ii, iii, i, iv iii, ii, i, iv iv, iii, ii, i
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151. Which of the following techniques is not associated with taking suitable location decisions? a. Cost-profit-volume analysis b. Factor analysis c. Linear programming d. CRAFT analysis
Fixed position layout Hybrid layout
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149. Which of the following is not an advantage of selecting an ‘optimum location’ for a plant? a. Reduction of transportation costs of raw material and finished goods b. Competitive advantage due to proximity to market c. Low labor-cost d. Cost of technology
c. d.
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b. c. d.
To set up a plant of the right size and right design To serve the customer better To optimize production cost To use best available technology
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152. Which of the following organizations selects a particular location from a marketoriented approach? a. A retailer b. A manufacturer c. A software development center d. A content development center
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153. Which of the following is not a type of facility layout? a. Process layout b. Product layout c. Employee layout d. Hybrid layout 154. ‘It is also called the cellular manufacturing layout.’ Identify the layout from the following. a. Process layout b. Grouping technology layout
18
157. Rahul wanted to set up a small scale printing press to print books for individuals interested in publishing their work for a small audience. Which is the right location for Rahul to establish a printing press to cater to this kind of market? a. Near paper mills b. In a town/city c. In a village where cost of labor is cheap d. Near the manufacturer of printing machines 158. There are many factors affecting the selection of a facility location. Which of the following factors would deter a firm from setting up operations in a particular location? a. Low labor costs b. High transportation costs c. Availability of public utility services d. Benefit of tax holidays
Part A
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163. Companies can follow certain guidelines when trying to analyze possible locations and identify an optimal one since it is expensive and time-consuming. What is the correct sequence of guidelines a company can follow when evaluating locations? a. Define location objectives – relate objectives to criteria – Identify relevant decision criteria – evaluate alternative locations – select the best location b. Identify relevant decision criteria – define location objectives – relate objectives to criteria – evaluate alternative locations – select the best location c. Define location objectives – identify relevant decision criteria – relate objectives to the criteria – evaluate alternative locations – select the best location d. Define location objectives – identify relevant decision criteria – evaluate alternative locations – relate objectives to criteria – select the best location
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161. Many auto-ancillary units have set up facilities close to facilities of auto majors like Hyundai and Ford near Chennai. Which of the following factors would have primarily led to this decision? a. Site cost b. Proximity to markets c. Need for safety requirements d. Availability of services like electricity, drainage, and waste disposal
Low interest loans Availability of prime real estate
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160. Process layouts are also known as ______. a. Functional layouts b. Fixed position layout c. Flow-shop layouts d. Straight-line layouts
c. d.
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159. The basic raw material for a cement manufacturing unit is limestone and the major consumers are the government, real estate and individual consumers. Which is the best possible location to build a cement plant? a. Close to sea port b. Close to cities where consumption is high c. Close to the raw material source d. Within special economic zones or export processing zones
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162. Which of the following is not considered a benefit derived by companies setting up operations in special export zones (SEZ)? a. Good infrastructure support b. Tax holidays
164. Though there is no standard procedure, certain guidelines can be used for making a location decision. The first guideline is to define location objectives. Whose views and requirements are not considered when defining them?
Cost Volume Relationships of Two Locations
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TC2 TC1
Cost
FC1 FC2
V0 Volume of sales 19
Operations Management a. b. c. d.
165. Which of the following is similar for the two locations? a. b. c. d.
Revenue Fixed cost Variable cost Total cost
166. If fixed cost at a location is Rs.500,000, variable cost per unit Rs.30, and price per unit Rs.50. Calculate the number of units a firm should produce to break even? 20,000 10,000 25,000 15,000
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(Questions 167 to 169) The table below gives details about fixed costs and variable costs for three different locations. Answer the following three questions using information given in the table. Fixed cost /Yr Variable cost / Unit Chandigarh Rs. 4,00,000 300 Gurgaon Rs. 4,50,000 285 Delhi Rs. 5,00,000 275
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Location
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167. Which of the following locations would have the highest total cost per year if annual output of a firm located there is 1000 units? a. b. c. d.
Chandigarh Gurgaon Delhi Both Delhi and Gurgaon
168. Which of the following locations would have the highest annual profit if the annual production is 1000 units and selling price per unit is Rs.1000? 20
170. Which of the following is not an advantage of a good layout? a. It reduces material handling costs b. It reduces congestion in the plant c. It reduces space utilization d. It increases machine utilization 171. Under which type of layout are similar machines and equipment grouped to carry out the production process. a. Process layout b. Product layout c. Fixed position layout d. Hybrid layout
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a. b. c. d.
169. Which plant location would you select if you were the authority to make the final decision? a. Chandigarh b. Gurgaon c. Delhi d. Any of the above
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(Questions 165 & 166) The above figure presents cost-volume-profit analysis. Based on the figure, answer the following two questions.
Chandigarh Gurgaon Delhi Both Chandigarh and Gurgaon
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Owners and promoters Employees Customers Competitors
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a. b. c. d.
172. What type of machine is used in a process layout? a. Specially designed machines b. General purpose machines c. Machines that help manufacture standardized products d. All of the above 173. Which of the following is an advantage of process layouts? a. Increased production time b. Increased work-in-progress c. Increased accumulation of work d. Increased utilization of men and material 174. Which type of layout is designed to produce standardized products? a. Process layout b. Product layout c. Fixed position layout d. Hybrid layout
Part A
Used for studying workflow in an assembly line Evaluates thousands of alternative layouts in a short period Analyses and minimizes material movements costs in a plant Two dimensional drawings are used to determine the best layout
q. r. s. a. b. c. d.
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p.
i/p, ii/q, iii/r, iv/s i/q, ii/p, iii/r, iv/s i/r, ii/q, iii/p, iv/s i/q, ii/r, iii/p, iv/s
181. Different types of layout of service facilities exist based on degrees of customer contact. In which of the following layouts is internal work of employees given secondary importance?
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177. Managers can use various models like mathematical models, computer models, and physical models to develop a process layout. Which among the following helps find the best process layout by evaluating thousands of alternative layouts very quickly? a. Graphic and schematic analysis b. CRAFT model c. Load distance model d. Line balancing
CRAFT model Load distance model Line balancing Graphic & schematic analysis
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176. In a fabrication and assembly plant, fabrication is done on __________ layout while assembly is done on ______________ layout. a. Product, process b. Process, product c. Product, fixed position d. Fixed position, product
i. ii. iii. iv.
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175. Which of the following manufacturing processes requires using a fixed position layout? a. Petroleum distillation b. Beer manufacturing c. Ship-building d. Cement manufacturing
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178. Different types of products are manufactured using a process layout. As workflow differs from product to product, managers focus on minimizing the movement of materials as it can hike material movement costs. Which of the following models aims at minimizing these costs? a. Graphic and schematic analysis b. CRAFT model c. Load distance model d. Line balancing 179. In which of the following countries were compact production layouts developed due to space constraints? a. USA b. Japan c. India d. China 180. Match the following models used to develop layouts with their respective features.
a.
b. c. d.
Layouts focusing on customer receiving and servicing Layouts focusing on technology Layouts focusing on physical materials processing Layouts focusing on production efficiency
182. Which of the following service providers uses both customer focus layouts and process focus layouts as part of its service facility layout? a. b. c. d.
Banks Hospitals Restaurants Call center
183. The following table gives the volume of quantities to be shipped to four markets. The X and Y coordinate values of the location that would help minimize transportation costs are also given. Use the center of gravity method to identify coordinates for the optimal location to set up a warehouse to service the four markets with minimal transportation costs. 21
Operations Management
4 12 10 5
4 6 14 13
VOLUME (‘000) 60 90 110 100
10.75, 9.06 10.05, 8.11 9.06. 10.75 8.11, 10.06
184. Which of the following is not a location evaluation method? a. Point rate method b. Center of gravity method c. Analytic Delphi method d. Historical analogy method
They consider non linear cost relationships They can be generalized to all organizations
187. ________ is the basis for job analysis, job description and job specification. a. Job rotation b. Job design c. Job enrichment d. Job enlargement
188. ________ describes the tasks, duties and responsibilities of a job. a. Job analysis b. Job enrichment c. Job description d. Empowerment
189. ___________ investigates job content, the physical conditions in which the job is carried out, and qualifications necessary to carry out job responsibilities. a. Job description b. Job analysis c. Job profile d. Job specification
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185. Analytic Delphi Method helps managers take complex multi-location decisions. Give the correct sequence of steps to be taken as part of such location decisions. a. Form panels - Identify trends and opportunities - Determine directions and strategic goals of the organization Develop alternatives Prioritize alternatives b. Identify trends and opportunities Determine directions and strategic goals of the organization - Form panels - Develop alternatives - Prioritize alternatives c. Identify trends and opportunities - Form panels - Determine directions and strategic goals of organization - Prioritize alternatives - Develop alternatives d. Form panels - Determine directions and strategic goals of the organization Prioritize alternatives - Develop alternatives - Identify trends and opportunities
c. d.
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a. b. c. d.
X
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Distribution Center A B C D
186. Linear Decision Rules (LDRs) are a set of equations for calculating the optimal workforce, aggregate output rate and inventory level for each time period in a planning horizon. Which of the following is not true about LDRs? a. They provide optimum solutions for the problems b. They eliminate trial and error computations
22
190. What does an effective job design ensure? a. Employees are paid above expectations b. Jobs are consistent with organizational goals c. Proper measurement of work done by each employee d. All the above 191. The Job Characteristics Model developed by Richard Hackman and Greg Oldham includes five characteristics. They are skill variety, task identity, task significance, autonomy and feedback. Match the following terms with their respective description. i. Skill variety ii. Task significance iii. Autonomy iv. Feedback p. q.
Influence of job on individuals inside & outside the organization Flexibility, independence, and discretion in the job
Part A
i/q, ii/p, iii/s, iv/r i/p, ii/q, iii/r, iv/s i/r, ii/q, iii/p, iv/s i/r, ii/p, iii/q, iv/s
192. Which of the following is not consequence of a good job design? a. Improved efficiency b. Improved productivity c. Increase in worker inputs d. Increase in motivation
a
i, ii, iv i, iii, iv i, ii, iii ii, iii, iv
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a. b. c. d.
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It gives the detailed set of activities to be performed on the job It describes the physical conditions in which the job is done and qualifications for the job. It describes the duties and responsibilities of a job. All of the above
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194. What do you understand by the term job content? a.
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c.
d.
195. Job content is the key to job design as it influences other aspects of human resource management. Job content helps clarify which of the following aspects? i. ii. iii. iv
196. Job specialization at work has many advantages for the organization. Which of the following is not an advantage resulting from this? a. Ease in recruiting new workers because fewer skills are required b. Lower production time and higher productivity levels c. Lower flexibility in job rotation d. Larger scope for mechanization or automation of processes 197. Which of the following is an advantage of work specialization for a manager? a. Lower work satisfaction b. Ease of supervision and training workers c. Reduced scope for improvement because of limited perspective of workers d. Hidden costs of worker dissatisfaction resulting from absenteeism and high employee turnover
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193. The job design developed should be feasible for employees as well as the organization. Feasibility is required in which of the following areas? i. Technical feasibility ii. Economic feasibility iii. Political feasibility iv. Behavioral feasibility
i and ii iii and iv i, ii, and iii i, ii, iii, iv
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a. b. c. d.
a. b. c. d.
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Skill sets and abilities needed for the job Extent of information given to employees on their performance
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Qualifications Skill sets Nature of training programs Level of motivation
198. Which of the following types of compensation is a basic need and is not a tool used for employee motivation? i. Fixed salary ii. Promotion iii. Health insurance iv. Bonus a. b. c. d.
Only i ii, iii and iv i, iii and iv i, ii, iii, iv
199. Which of the following is a form of monetary benefit given to employees in an organization? a. Rewards b. Titles c. Promotions d. Low interest loans 200. Identify the correct sequence of activities to be performed by the human resource manager. 23
Operations Management i. Job analysis ii. Job description iii. Job design
b.
d.
206. Which of the following is not an allowance considered under the time study technique of work measurement?
a. b. c. d.
Contingency allowance Interference allowance Dearness allowance Relaxation allowance
(Questions 207 & 208) A time study of a production worker in a component manufacturing plant produced the following results: Cycle time = 3.75 minutes; worker performance rating = 90 percent. Answer the following two questions using this information.
i and ii i and iii i, ii and iv i, ii, and iii
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a. b. c. d.
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202. Which of the following are benefits of setting work standards? i. It helps improve machine utilization by reducing idle time ii. It helps compare efficiency of different work methods iii. It helps a manager delegate work to all employees iv. It provides benchmarks for evaluating workers’ performance
c.
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201. The different techniques used in work measurement are time study, historical analysis, standard data, work sampling, and predetermined motion time data systems. Each has a different way of measuring time. How is it done in time study? a. Using standard table b. Using past record c. Using stop watch d. Using formula
The average of observations made always represents time required to perform each elemental task Workers behave differently than usual while conducting a time study Observations are recorded repeatedly across several workers to arrive at the standard time Normal time is the product of average cycle time and worker rating
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a.
i, ii, iii ii, iii, i i, iii, ii iii, i, ii
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a. b. c. d.
205. Which of the following statements gives an incorrect description of a feature of time study?
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203. Which of the following work measurement methods does not use historical or stored data but uses several random observations in the work environment? a. Standard data technique b. Predetermined motion time study c. Work sampling d. Historical analysis
204. Which of the following is not a technique used for setting work standards? a. Time study b. Work sampling c. Delphi method d. Predetermined motion time systems
24
207. Calculate the normal time for the job. a. b. c. d.
3.75 minutes 3.375 minutes 3.455 minutes 3.565 minutes
208. If allowances are 12 per cent of the job time, calculate the standard time required for the job. a. b. c. d.
3.375 minutes 3.775 minutes 3.835 minutes 3.965 minutes
209. Identify the technique of setting work standards that uses recorded standard time data for each of the basic motions associated with performing a task and summing them up to determine the time required to perform the whole task.
Part A
i and ii ii and iii iii and iv iv and i
215. Work standards techniques generally find use in which of the following operations? a. Operations planning b. Operations scheduling c. Operations control d. All of the above 216. Three of the most widely used predetermined motion-time data systems are MTM, MOST and work factors. Expand MOST. a. Maynard Operations Sequence Technique b. Myer’s Operations Sequence Technique c. Motion Operations Sequence Technique d. Maynard Operations Scheduling Technique
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211. ___________ is a technique of analyzing work by making several observations, usually at random, to see the relative frequency with which various elemental activities take place. a. Time study b. Standard data c. Historical analysis d. Work sampling
a. b. c. d.
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210. Which of the following statements correctly describes the difference between Standard Data Technique and Predetermined Motion Time Study in work measurement? a. PMTS has to be measured by taking observations while Standard Data provides standard times for common movements b. Standard data provides time for basic movements while PMTS provides time for job-specific motions c. PMTS provides time for basic motions while Standard Data provides time for jobspecific motions d. PMTS has to be measured by looking at the standard table while Standard Data technique uses observations
214. Which of the following are drawbacks of using employee self-timing, a technique of work measurement? i. Low costs ii. Low accuracy iii. Does not take allowance into consideration iv. Less time consuming
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Time study Pre-determined Motion Time Study Standard data Historical analysis
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212. One of the primary applications of work sampling is to find the percentage of time an employee or equipment was occupied, or left idle. What is the name given to this application of work sampling? a. Ratio delay b. Performance measurement c. Time standards d. Employee self-timing 213. Which of the following primary applications of work sampling are used to identify the standard time for completion of a task? a. Ratio delay b. Performance measurement c. Time standards d. None of the above
217. Which of the following is not a pure planning strategy used for developing aggregate plans? a. b. c. d.
Varying utilization of the workforce Varying workforce size in response to output requirements Varying size of inventory Varying the compensation method
218. __________ translates the aggregate plan into a detailed plan that specifies the exact timing for production of each unit. a. b. c. d.
Master production schedule Total production schedule Primary production schedule Alternative production schedule
219. Which of the following is not an aggregate planning technique? 25
Operations Management
a. b. c. d.
Heuristic approach Computer search Linear decision rules Linear programming
221. Which of the following is not a pure planning strategy used as part of aggregate planning? a. b. c. d.
Back-order strategy Maintaining fixed plant capacity Sub-contracting Varying workforce utilization
222. Which of the following is not a function under capacity requirement planning?
U
223. Operations planning activities can be longrange, medium-range or short-range. Aggregate planning typically fall under which category? Long range Medium range Short range Both a & b
BS
a. b. c. d.
Sept
Demand
2600
2700
2800
2750
Working Days
26
25
25
26
In addition, the following information is given: Opening stock of inventory = 500 units, Inventory holding cost = Rs.20/unit/month, Worker productivity = 4 units/day, Worker strength = 25, Shortage cost (due to lost sales) = Rs.10/unit Answer the following four questions based on the above given information
225. What is the change in inventory on hand after meeting demand for Product X for the month of June? a. b. c. d.
300 units 200 units 100 units 0 units
226. Assume that opening stock for the month of July is 500 units. What is the inventory carrying cost for that month? a. b. c. d.
Rs.6000 Rs.3000 Rs.4000 Rs.2000
227. Calculate August? a. b. c. d.
the
closing
inventory
for
300 units 200 units 0 units 100 units
228. What is the shortage cost (due to lost sales) in the month of September if the opening inventory for the month is zero units?
a. b. c. d.
a. b. c. d.
Fo rI
224. A production plan does not contain information about which of the following? Production process Inventory requirements Suppliers Customers
(Questions 225 to 228) The aggregate demand for product X for the next four months is given in the following table: 26
Aug
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se
c. d.
Identifying material requirement Defining how resources can be best employed to meet market demand Allocating production among plants Determining monthly production schedules
O
a. b.
Jul
20 09
220. Which model is based on historical aggregate planning data available with an organization?
Jun
of
Time series analysis Graphical method Linear programming Heuristic methods
Cl as s
a. b. c. d.
Rs.3000 Rs.2500 Rs.2000 Rs.1500
229. What is the basic use of the computer simulation method, a type of optimal model used in aggregate planning?
Part A
230. A Master Production Schedule (MPS) is based on which of the following? a. b. c. d.
Amount of inventory needed for the end product Estimation of overall demand for the end product Confirmed customer orders for the end product All of the above
231. Identify the false statement from the following about Master Production Schedule and Master Schedule Formation.
c.
se
d.
Fo rI
BS
U
(Questions 232 & 233) The demand forecast for metal rollers used in manufacturing printing machines for the next three months is 60, 55, 65. The number of orders booked at the start of the MPS planning period is 55, 60, 65 respectively. Given, Inventory on hand = 75, Lead time = 1 month, Production lot size = 100 units. Answer the following two questions. 232. What is the projected inventory at the end of the second month? a. b. c. d.
234. What is meant by ‘rolling through time,’ associated with implementing aggregate plans and master schedules? a. Development of initial aggregate plans b. Revising and updating aggregate plans c. Development of the initial master production schedule d. Revising and updating master production schedule
235. It is important to determine adequate production capacity to meet forecast demand levels and to determine whether or not sub-contracting and/or overtime has to be used. This activity is associated with which of the following? a. Capacity planning b. Aggregate planning c. Scheduling d. Demand forecasting
nl y
b.
MPS of make-to-order organizations deals only with final products MPS for assemble-to-order organizations concentrates on scheduling major components assembled to make a product after orders are received Back orders are common in make-to-stock organizations There is no finished goods inventory in make-to-order production
O
a.
90 units 55 units 75 units 80 units
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d.
a. b. c. d.
of
c.
To develop a master production schedule To identify variables for developing the plan To evaluate the performance of a specific plan All of the above
Cl as s
a. b.
55 units 60 units 65 units 70 units
233. What would be the projected inventory at the end of the third month if orders for the month increase to 80 from 65?
236. Which of the following is not associated with capacity planning? a. Identifying available and required capacity b. Evaluation and summing up of capacities c. Identifying the right layout design for the desired capacity d. Identifying gaps in capacity and plugging them with sub-contracting, overtime, etc.
237. Identify the correct sequence of steps associated with capacity planning. i. Identify current capacity ii. Forecast future capacity iii. Identify and evaluate sources to meet capacity requirements iv. Select the most appropriate alternative a. b. c. d.
i, ii, iii, iv i, iii, ii, iv iii, i, ii, iv iii, ii, i, iv
238. The capacity utilization rate measures capacity level at which a production process is operating. Identify the correct formula for capacity utilization rate. 27
Operations Management
Capacity utilizatio n rate =
c.
Capacity utilization rate =
d.
Capacity utilizatio n rate =
Capacity used Capacity used Capacity avaialable
× 100
× 100
Available time × Utilization Capacity avaialable Capacity available Available time × Utilizatio n
× 100
×100
239. Which of the following cannot be a reason for decrease in per unit cost when volume of production increases? a. b. c. d.
Decrease in fixed costs Adoption of efficient processes Adoption of automation Increased complexity in operations
240. When the scale of production is increased after a certain point, economies of scale can become diseconomies of scale. What can be the possible reasons for diseconomies of scale?
U
Services cannot be produced in anticipation of demand Services cannot be stored A service firm with a single office can efficiently serve customers in another geographical area Production and consumption of a service go together
BS
b. c.
se
241. Which of the following statements does not correctly represent the characteristics of services? a.
Fo rI
d.
242. The two major sources of inputs that influence master production schedule are forecasts and customer orders. Identify the correct combination from the following. i. Make-to-stock environment : Takes inputs from forecasts in deciding the MPS ii. Make-to-order environment : Takes inputs from customer demand in deciding the MPS
28
a. b. c. d.
Only iii Only i Both iii & iv Both i & ii
243. Operations planning activities can be longrange, medium range or short range in nature. Process planning typically falls under which category? a. Long-range planning b. Medium-range planning c. Short-range planning d. Both b & c 244. Carrying costs represent cost incurred while inventories are stored in warehouses or stores. Which of the following is not associated with carrying costs? a. Insurance costs b. Maintenance costs c. Cost of obsolescence d. Material receiving costs
nl y
Complexities in operations High cost of modification & replacement Distribution and storage costs All of the above
O
a. b. c. d.
iii. Make-to-stock environment : Takes inputs from customer demand in deciding the MPS iv. Make-to-order environment : Takes inputs from forecasts in deciding the MPS
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b.
Capacity available
of
Capacity utilizatio n rate =
Cl as s
a.
245. Organizations maintain buffer stocks to overcome which of the following conditions? a. Demand is greater than expected b. Supply is more than expected c. Demand is less than expected d. Supply matches demand 246. On what basis do organizations fix reorder level for raw material under the EOQ model? a. Recommendations of finance managers b. Estimated demand during lead-time c. Recommendations of suppliers d. Estimated sales for a financial year
247. Which of the following is not an assumption that underlines the EOQ model? a. The lead-time for material delivery is known with certainty and remains constant b. The total holding cost of inventory is proportional to the number of inventory items stored
Part A
249. Which of the following costs are considered by a firm as part of calculating inventory costs? i. Holding costs ii. Acquisition costs iii. Ordering costs iv. Stock out costs a. b. c. d.
i, ii and iii ii, iii and iv i, iii and iv i, ii, iii, iv
254. Which of the following are correct reasons for organizations to hold raw material inventories? i. Obtaining raw materials from suppliers exactly when needed for production schedules is not always possible ii. Products can be shown to customers iii. Quantity discounts can result from larger purchase quantities iv. Larger shipments can result in reduced incoming freight costs and material handling costs a. b. c. d.
i and ii ii and iii i, ii and iv i, iii, and iv
255. Which of the following is not an assumption of the EOQ model?
se
O
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250. What does the EOQ inventory model primarily attempt to minimize? a. The number of items ordered b. The number of orders placed c. Total inventory costs d. The safety stock
500 units 800 units 1000 units 200 units
20 09
248. Opportunity cost is associated with which basic category of inventory cost? a. Carrying costs b. Ordering costs c. Purchase costs d. Stock-out costs
a. b. c. d.
of
d.
The cost of ordering varies and is dependent on the quantity ordered The price of the inventory item is independent of order quantity
Cl as s
c.
BS
U
251. Which of the following is not a primary cost involved in maintaining inventories? a. Carrying cost b. Ordering cost c. Stock-out cost d. Purchase cost
Fo rI
252. Which of the following terms refers to the time lag between the point of order and receiving the material? a. Lead-time b. Slack time c. Reorder time d. Order time 253. In a level production plant, if opening inventory was 500 units, sales forecast was for 1300 units and closing inventory at the end of the period was 200 units, how many units were produced?
a.
b. c. d.
Demand for a product or its usage rate is constant over a period of time Supply rate is always greater than or equal to usage rate The lead-time for material delivery is known with certainty and it remains constant The purchase price per unit varies depending upon quantity ordered
256. Suppose a company consumes a particular product at an average of 50 units /week. It costs Rs.200 to order and Rs.0.50 per unit per week to hold the item in inventory. Compute the EOQ. a. 100 units b. 200 units c. 150 units d. 300 units 257. According to which inventory system inventory is continuously checked and a new order placed when the level of inventory reaches the reorder point? a. Q system b. P system 29
Operations Management
259. Semi-finished items stored temporarily and used to finish production are termed _________. a. Raw material inventory b. Work-in-progress inventory c. Finished products inventory d. None of the above
q. r. s. a. b. c. d.
These costs arise when inventory is damaged Loss of customer goodwill is a consequence of these costs Discounts are given by suppliers on these costs These costs are fixed and come down with increase in size of purchase i/r, ii/q, iii/p, iv/s i/p, ii/q, iii/r, iv/s i/r, ii/p, iii/q, iv/s i/r, ii/p, iii/s, iv/q
265. Which inventory model is also referred to as the reorder point system? a. P system b. Q system c. EOQ d. None of the above
nl y
260. Manufacturers maintain buffer stocks of _________to meet unprecedented increase in demand. a. Raw materials b. Work-in-progress c. Finished products d. None of the above
p.
20 09
258. Why do organizations maintain an inventory of finished goods? a. To avoid bottlenecks in the production process b. To avoid backlogs in customer order c. To smoothen production flow d. To reduce material handling costs
264. Match the following inventory costs with their related descriptions. i. Purchasing costs ii. Carrying costs iii. Ordering costs iv Stock-out costs
of
EOQ system Fixed order period system
Cl as s
c. d.
U
se
O
261. A firm decides on quantity of material ordered to maintain various inventory costs. Which of the following costs does not influence quantities ordered by the firm? a. Purchase cost b. Carrying cost c. Ordering cost d. Hiring cost
BS
262. Suppliers offer discounts to manufacturers based on which of the following type of costs? Purchase costs Carrying costs Ordering costs Stock-out costs
Fo rI
a. b. c. d.
263. Which of the following does not come under carrying costs? a. b. c. d.
30
Pilferage Spoilage Maintenance costs Material-receiving costs
266. What do you understand by the term ‘lead time’ associated with inventory management? a. Time required for depleting inventory once replenished b. Time required for replenishing inventory after placing an order c. Time required for inventory to reach the reorder point d. Time required for inventory to reach the safety stock limit 267. In the EOQ model, why is the reorder level set equal to the number of units estimated to be used during lead time? i. To ensure that inventory is just about zero when the time for replenishment comes ii. To maintain the lowest possible inventory costs iii. To increase carrying costs iv. To ensure that sufficient inventory is available before replenishment
Part A
269. Which of the following costs are not considered part of EOQ? a. Purchasing costs b. Carrying costs c. Ordering costs d. Stock-out costs
of
maintaining
274. The quantity at which an order is placed for inventory replenishment is _________. a. Safety stock b. Reorder level c. Buffer stock d. Cycle stock 275. Lead time is assumed to remain constant. This is a condition associated with which of the following inventory systems? a. Q-System b. P-System c. EOQ d. Fixed Order Quantity system
276. Organizations come up with many reasons for holding inventory at various stages of production. Which of the following is not a suitable reason for holding raw material inventory? a. Obtaining raw materials from suppliers when needed to maintain production schedules is not always possible b. Quantity discounts can result from larger purchase quantities c. Larger shipments can reduce incoming freight and material handling costs d. Producing and transporting in larger batches reduces material-handling and production costs
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O
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(Questions 270 to 273) A production facility uses a certain type of raw material in its production process for which details are given below. Annual Demand = 300000 units, Quantity per order = 75000 units, Fixed cost per order = Rs.2000, Holding cost per unit = Rs.5, Item cost per unit = Rs.10. Using the EOQ model, answer the following four questions.
cost
20 09
268. If the lead time for replenishing inventory in a production facility is 7 days and daily demand is 25 units, calculate the reorder point at which the firm should order inventory replenishment. a. 150 units b. 175 units c. 180 units d. 185 units
273. Calculate total inventory. a. Rs.458000 b. Rs.3158000 c. Rs.233000 d. Rs.933000
of
i and ii ii and iii iii and iv i and iv
Cl as s
a. b. c. d.
BS
U
270. Calculate total ordering costs incurred in a year. a. Rs.6000 b. Rs.8000 c. Rs.10000 d. Rs.12000
Fo rI
271. Calculate holding costs per order. a. Rs.37500 b. Rs.75000 c. Rs.150000 d. Rs.300000 272. Calculate total variable cost. a. Rs.300000 b. Rs.3000000 c. Rs.75000 d. Rs.750000
277. In which of the following types of classification of inventory are items classified based on annual consumption value? a. ABC b. VED c. FSND d. Both b & c 278. Which of the following is the basic objective of economic order quantity purchasing? a. Minimizing total inventory cost b. Minimizing transport cost 31
Operations Management
279. Which of the following factors should a purchase department consider while purchasing materials and supplies from a supplier? i. Low price ii. High quality iii. Good after sales service
d.
280. Value analysis is an organized effort to control cost of _____________. a. b. c. d.
Materials purchased Materials exported New product development Marketing efforts
a
Fo rI
283. Which of the following is not characteristic of traditional purchasing?
a. b. c. d.
Delivery schedule is left to the buyer Purchases are in large quantities Multiple sources of supply Standardized packaging for all types of components
284. For which of the following purchase activities of a bio-pharmaceutical company, the purchase manager is more of a facilitator than a decision-maker? 32
d.
order Purchase Purchase Purchase
nl y
se
U
Processing requisition for materials and supplies Locating suppliers or vendors Negotiating purchasing contracts All of the above
BS
b. c. d.
Purchase indent - Purchase Quotation Purchase indent - Quotation – order Quotation - Purchase indent – order Purchase order - Quotation – indent
287. The review of inputs to get the best kind of output at the least cost while designing a product is called ______.
282. What are the tasks of a purchase department in an organization? a.
a.
c.
O
Vendor development Selection of suppliers Contract negotiation Quality control
Vendor relations Procurement Creating goodwill for the company among vendors Public relations
286. Identify the logical sequence that best represents a simple purchase process.
b.
281. Which of the following is not a primary responsibility of the purchase department? a. b. c. d.
285. The purchase department is not responsible for which of the following activities in a production-centric firm? a. b. c.
i and ii i and iii ii and iii i, ii, and iii
Procurement requests Safety of procured material Contract execution Negotiation process
of
a. b. c. d.
a. b. c. d.
20 09
Minimizing storage cost Minimizing ordering costs
Cl as s
c. d.
a. b. c. d.
Cost reengineering Industrial engineering Value engineering Cost accounting
288. Which of the following does not influence vendor selection? a. b. c. d.
Cost Delivery and quality Service and reliability None of the above
289. If the material requirement in the various production facilities of India Metallics Company differs significantly, which type of purchasing system is most suitable for the company? a. b. c. d.
Centralized purchasing Decentralized purchasing A combination system Outsource the purchasing function
Part A 290. Which of the following is not an activity performed by the purchase manager? Vendor analysis and development Supplier selection Value analysis ABC analysis
296. Which of the following is not mentioned in a quotation?
a. b. c. d.
i and ii i and iii i and iv i, ii, iii, iv
O
Study the value of material Review product design Eliminate high-cost parts Negotiate with suppliers
BS
c.
Is it possible to run the system without the item? Can the item be substituted with a standard part? Can the vendor supply the material at the right time? How much does the item cost?
U
b.
se
293. From the list of questions given below, identify the one not considered under value analysis. a.
Fo rI
d.
294. Purchase indents __________. a. b. c. d.
are
also
called
Purchase requisitions Purchase quotations Purchase orders Purchase information
295. Who generally issues a purchase indent? a. b.
User department Purchase department
297. Which of the following authorizes suppliers to supply materials/goods? a. Purchase indent b. Quotation c. Purchase order d. All of the above
298. In a centralized purchase system, which department is responsible to the user department for proper delivery of components? a. Supplier b. Purchase department c. Top management d. Quality control department
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292. Which of the following is not part of value analysis? a. b. c. d.
Price per unit Delivery schedule Terms and conditions Name of the user department
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Yellow pages Newspapers Websites Business journals
a. b. c. d.
of
291. Identify various sources that help purchase managers obtain information about potential vendors/suppliers. i. ii. iii. iv.
Vendor Top management
Cl as s
a. b. c. d.
c. d.
299. India Rubber Ltd. requires on a continuous basis a certain rubber component for their product. When should the firm opt for buying the component rather than producing it in-house? a. When the quantity of the part required is huge b. When the fixed cost to make the product is less than buying costs c. When the total cost to make the product is less than buying costs d. When the quantity of the part required is small 300. Which of the following is not a reason for organizations to opt for in-house production? a. To gain control over all value chain activities b. To put excess plant capacity to productive use c. To ensure that the design of a product is kept secret d. To take advantage of knowledge and expertise of suppliers 33
Operations Management
Conveyance authorization card Production authorization card Vendor authorization card Dual-card Kanban system
U
BS
It classifies inventory items based on the size of resources required to control usage value The greater the usage value, the greater the resources to be allocated to control usage of an item The system considers availability of materials Extent of allocation of resources is based on value of the inventory
Fo rI
b.
c.
d.
305. The following table gives the unit cost and annual usage rates for different items. Classify items based on their rupee volume using ABC classification and identify them under A-classification. 34
50
2
510
40
3
10
600
4
11
500
0.50
1,000
0.25
1,500
a. b. c. d.
1&2 1&3 2&3 3&4
20 09
400
306. The departments involved in production control are purchasing, receiving, raw materials, and production department. Which of the following tasks does the raw material inventory department carry out? i. ii. iii. iv.
Repackaging and labeling incoming stock Storing and protecting raw materials Auditing existing raw materials Unpacking incoming materials
a. b. c. d.
i and ii ii and iv i, ii, and iii i, ii, and iv
nl y
O
se
Vendor analysis Production control Materials handling Inventory control
304. Which of the following is not a characteristic of the ABC inventory classification system? a.
1
6
303. Which of the following is not a function of materials management? a. b. c. d.
Annual usage
5
ABC VED FSND FIFO
302. A Kanban system uses different types of cards to initiate material transactions. Which of the following type of Kanban card authorizes a materials handling agent to move the tray to a specified destination? a. b. c. d.
Cost per unit (Rs)
Cl as s
a. b. c. d.
Type of item
of
301. Materials managers should pay more attention to items whose usage value or consumption value is high and less attention to items whose usage value is low. Which inventory classification model seeks to alter the expenses associated with controlling materials according to their usage value?
307. The shipping department is associated with the materials handling function. Which of the following tasks are carried out by this department? i. Staging or organizing orders to be shipped ii. Weighing, labeling, and packing orders to be shipped iii. Physically checking orders to make sure their content is consistent with the order iv. Storing raw materials safely a. b. c. d.
i and iii ii and iii i and ii i, ii, and iii
308. On what principle is ABC analysis based upon?
Part A
309. An inventory records file does not contain __________. a. Characteristics of products b. Information on inventory levels c. Additional information like inventory item number and description d. Supplementary information for planning purposes including vendor names, vendor addresses, lead times and purchase quantities
314. Which of the following is not a proper approach to be followed by materials managers? a. Stock large volumes of materials to avoid shortage b. Maintain optimum levels of inventory to avoid shortage c. Supply materials to the required workstation quickly to enable smooth production d. Procure materials, receive and store safely for use in operations
315. Spykar Plastics recorded sales of Rs.60 lakhs for the year 2004-05. The profit recorded is 20% of sales, while material costs amount to 50% of sales. If the firm saves Rs. three lakh in material costs, calculate change in profit?
O
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310. Production control is one of the functions of materials management. Which of the following is not a function of the production department associated with production control function? a. Monitoring flow of raw materials b. Determining and adjusting inventory storage capacity c. Locating and receiving raw materials d. Identifying material flow bottlenecks
i and ii i, ii, and iii i, ii, and iv i, ii, iii, iv
20 09
d.
a. b. c. d.
of
c.
An item is critical if its usage is high There are usually a few critical items and several items that are less critical The safety stock (in terms of volume) should be higher for A items than for C items An item is critical if its unit price is high
Cl as s
a. b.
BS
U
se
311. Which of the following tasks are not performed by the receiving department under the production control function of materials management? a. Unpacking incoming orders b. Processing requisitions for material c. Inspecting the quality of incoming material d. Preparing receiving reports
Fo rI
312. The detailed study of complete material flow process in a firm is termed ________. a. Operations management b. Inventory management c. Materials management d. Purchase management 313. How does shortage in materials affect a firm’s functioning? i. It breaks the flow of operations ii. It delays delivery iii. It increases operational efficiency iv. It increases operational expenses
a. b. c. d.
20% increase 25% increase 20% decrease 25% decrease
316. Which of the following is not an objective of materials management? a. b. c. d.
To maintain low inventory turnover To maintain cordial relations with suppliers and supplying firms To help increase effective utilization of the firm’s capital To keep searching for new products and materials that can help the firm run efficiently
317. Materials management comprises production control, inventory control and materials handling. Which of the following departments is not associated with production control function? a. b. c. d.
Purchase department Raw material inventory department Finished goods inventory department Production department 35
Operations Management
a. b. c. d.
Traffic Physical distribution Logistics None of the above
20 09
323. The materials management function is also referred to as a combination of three subfunctions: traffic, physical distribution and logistics. Movement of finished goods falls under which of these sub-functions of materials management?
324. Which of the following category of robots, based on the nature of their operations, can change their sequence of tasks to suit the operational process? a. b. c. d.
Playback robot NC robot Variable-sequence robot Intelligent robot
se
O
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320. A raw material inventory department helps production control by arranging for raw materials to be readily used in the production process. Which of the following is not a task of raw material inventory department? a. Storing raw materials b. Maintaining stocks of material at various stages of production c. Labeling raw materials to make them ready for use d. Arranging for replenishment of stocks in liaison with purchase department
d.
To move materials to the required location in a timely and cost-effective way without affecting the primary objective of production control and inventory control All of the above
of
319. What does a typical materials receiving report contain? a. Quantity of material b. Price of material c. Technical specifications d. Information on inventory levels
c.
Cl as s
318. Purchasing can be done through centralized as well as decentralized systems. Which of the following is not a characteristic seen when large firms adopt centralized purchasing? a. Huge/voluminous purchases b. Consistency in buying policies c. Non-uniformity in maintaining records d. Higher purchasing power
Fo rI
BS
U
321. Materials management comprises production control, inventory control and materials handling. Which department is not associated with inventory control function? a. Purchase department b. Raw materials inventory department c. Production department d. Finished goods inventory department 322. What is the basic objective of materials handling function under materials management? a. To maintain stock of materials in various stages of production and in desired quantities b. To direct and regulate movement of goods through the entire manufacturing cycle from the process of purchasing materials to making the finished product
36
325. What does the concept of just-in-time purchasing highlight?
a. b. c. d.
Maintain bulky inventory Maintain safety stock in case of adversity Maintain minimum inventory till the next replenishment None of the above
326. JIT purchasing has many advantages over traditional purchasing. Which among these is not an advantage? a. b. c. d.
Reduction in carrying costs Improved quality Increased responsiveness Reduced flexibility
327. Which company developed the Kanban System? a. b. c. d.
General Motors Toyota Motor Company Ford Motor Company Suzuki Motor Corporation
Part A
Quantity used per year
Cost per unit
1
2000
20
d.
2
4500
10
3
1500
35
4
3000
20
5
2500
O
se U
BS 40000 35000 45000 42500
Fo rI
Dual-card Kanban system
334. The primary objective of which of the following approaches in operations management is to identify the net requirement of components needed to manage the production process and meet customer expectations?
nl y 25
330. What is the least usage value of a material that requires lowest allocation of resources? a. b. c. d.
Conveyance authorization card Production authorization card Vendor authorization card
Cl as s
Material type
Type 2 Type 4 Type 3 Type 5
Type 4 Type 3 Type 1 Type 2
333. A Kanban system uses different types of cards to initiate material transactions. Which of the following type of Kanban card authorizes the production department to commence the production process? a. b. c.
329. Use ABC analysis to identify the type of material that has the most usage value. a. b. c. d.
a. b. c. d.
20 09
(Questions 329 to 332) Assume that JKL Industries uses 5 types of materials in its production process. The quantity of each type of material used per year and the cost per unit is given in the table below. Use this data to answer the following four questions.
332. Which material falls under the C category of ABC analysis?
of
328. Which of the following Kanban cards authorizes a materials handling agent to move the tray to a specified destination? a. Vendor authorization card b. Product authorization card c. Conveyance authorization card d. Both a & b
a. b. c. d.
Capacity planning Materials requirement planning Master production schedule Inventory management
335. An MRP system translates the demand for products into raw material and component requirements. What type of information is required for successful operation of an MRP system? i.
Available inventory at the beginning of the planning time period
ii. Information on production capacity that helps anticipate and correct resource shortage iii. Number of customer orders pending
331. Which type of material can be classified under ‘A’ category?
iv. Demand forecasts that specify the quantity of products required
a. b. c. d.
a. b. c. d.
Type 1 and 2 Type 5 Type 2 and 3 Type 2
i, ii, and iii i, iii, and iv ii, iii, and iv i, ii, iii, iv
37
Operations Management
iv. It shows the hierarchical levels or phases a product goes through during production i and ii i, ii, and iii i and iii i, ii, iii, iv
338. Which of the following is not an advantage of MRP system?
O
Ability to price competitively Better customer service Longer idle time Reduced set-up and tear-down costs
se
a. b. c. d.
Fo rI
BS
U
339. What basic information does a master production schedule contain? a. Required quantities and delivery dates of final products b. Required quantities and delivery dates of all sub-assemblies c. Inventory on hand for each final product d. Scheduled receipts for each final product 340. What is the primary objective of an MRP system?
38
d.
ii and iv
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341. The MRP system helps an operations manager find the net requirement of a component. Which of the following have to be considered by the manager to achieve this? a. Material inventory on hand b. Finished goods inventory on hand c. Scheduled receipts from the vendors d. Scheduled order releases for production 342. Improving operating efficiency is one of the objectives of MRP. What does this signify? i.
Better control over inventory of raw material and components ii. Quick response to production requirements iii. Speed-up or delay of material supply to production centers as per requirements iv. Speed-up or slow-down of the distribution of finished goods from warehouses
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a. b. c. d.
i and iii
of
337. Which of the following statements about Bill of Materials (BoM) is incorrect? i. It lists all the sub-assemblies and intermediates that go into a parent assembly ii. It contains information about whether a particular item was produced internally or purchased from external sources iii. It specifies the purchase or production lead-time to acquire an item
c.
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336. Which of the following is not an advantage of an MRP system? a. Improved customer service b. Greater investment in inventory c. Improved operating efficiency d. Faster response to market changes
i. ii. iii. iv.
Manage demand-dependent inventories Manage demand-independent inventories Schedule production activities Initiate purchase activities
a. b.
i and ii iii and iv
a. b. c. d.
Only i Only i and ii i, ii, and iii i, ii, iii and iv
(Questions 343 to 348) Given below is the bill of materials which specifies the quantities of different items required to product one unit of end product alpha. Assume that items F, G, H are purchased from external sources and the remaining (B, C, D, E and I) are produced inhouse. The given lead times are in hours. Answer the following six questions using this information. 343. Find the quantities of F & G respectively, which are required to produce 5 units of B. a. 20 and 30 b. 30 and 20 c. 45 and 30 d. 30 and 45 344. What is the total time required to produce B? a. 6 hours b. 5 hours c. 7 hours d. 4 hours
Part A
B (4) LT = 1
C (1) LT = 2
D (4) LT = 4
H (2) LT =3
I (2) LT = 3
of
E (3) LT = 2
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Alpha LT = 2
F (2) LT = 1
G (3) LT =2
45 and 45 35 and 35 48 and 48 38 and 38
O
a. b. c. d.
U
BS
6 hours 7 hours 8 hours 9 hours
se
346. What is the total time required to produce D? a. b. c. d.
347. Find the quantity of G required to produce 10 units of product alpha. 360 units 120 units 240 units 600 units
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a. b. c. d.
348. What will be the total time required to produce product alpha? a. b. c. d.
9 hours 11 hours 13 hours 21 hours
G (3) LT = 2
349. Processing is one of the components of the MRP system. Here the inputs are processed and outputs are generated. Which of the following is not a step involved in MRP information processing? a. Explosion b. Netting c. Offsetting d. Order release
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345. Find the quantities of G & H respectively, which are required to produce 8 units of D.
Cl as s
H (3) LT = 2
350. The first step in MRP information processing is explosion. Explosion uses information from which of the following sources to generate the sequence of activities in producing the end product? i. Master production schedule ii. Inventory records file iii. Bill of materials iv. All of the above a. b. c. d.
i and ii i and iii ii and iii Only iv
351. Developing a materials requirement plan for each item in the bill of materials file for each time bracket is carried out in which step of MRP information processing? 39
Operations Management
a. b. c. d.
Explosion Netting Offsetting Both a & b
353. The planned order releases for the finished product or component becomes the gross product requirement for items at the ___________ level in the product structure chart. a. b. c. d.
Next lower Next higher Lowest level Highest level
356. Identify the factors that help in effective implementation of the MRP system. i. Greater accuracy in all operations ii. Commitment from top management iii. Continuous collection of information regarding the materials used iv. Training and educating the personnel a. b. c. d.
i, ii, iii i, iii, iv i, ii, iv i, ii, iii, iv
357. Which of the following factors can lead to the failure of MRP system? a. Highly trained and involved workforce b. Obsolete data c. Consistent lead times for purchase of items d. Both b & c
O
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354. The components of an MRP system can be divided into inputs, processing and outputs. Match the following outputs of MRP system with their respective descriptions.
Low in-process material inventory Better response to market demand Reduced set-up and tear-down costs Longer implementation time
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352. Planned order releases are determined in which of the following steps of MRP information processing?
a. b. c. d.
of
Explosion Netting Offsetting Consolidation of material requirements
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a. b. c. d.
Performance reports Exception reports Suspension reports Planning reports
p.
Generated to cancel an order due to changes in MPS Contain information about material requirements Contain information about errors and deviations from planned objectives Helps identify a problem and verify whether the system can achieve planned objectives
U
BS
q.
se
i. ii. iii. iv.
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r.
s.
a. b. c. d.
i/p, ii/q, iii/r, iv/s i/s, ii/q, iii/r, iv/p i/s, ii/r, iii/p, iv/q i/s, ii/r, iii/q, iv/p
355. Which of the following is not an advantage of MRP system? 40
358. Smith & Smith is a specialty machine manufacturing company that manufactures customized machinery for customers. As part of this manufacturing approach the company stores the required components and sub-assemblies and only the final assembly of the machine is made as per the customer specifications. Which of the following types is discussed in this case? a. Assemble-to-stock b. Manufacture-to-order c. Assemble-to-order d. Fabricate-to-order 359. An MRP system takes the input information, processes the information and gives the output in the form of structured reports. In which step of information processing in the MRP system, end product is disassembled into components required for its production to determine production process or purchase activity for each such component? a. Explosion b. Netting c. Offsetting d. None of these
Part A
Workstation 1
9 8
7
6
1
2
4
Workstation 2
6 5
7
3
2
6
7
a. b. c. d.
c. d.
366. Repetitive operations normally involve mass production of a product or a service. Which of the following is not a characteristic of repetitive operations? a. b.
c.
d.
A-B-C-D-E-F-G E-F-G-C-A-B-D E-F-G-D-C-B-A E-D-B-A-F-C-G
Mass production of a product Need to control flow of materials and application of labor resources to minimize idle time Focus on synchronizing customer demand with production activity There are large variations in the production process and the equipment is designed for a broad range of applications
367. In which of the following type of laborintensive scheduling approach, are employees given the freedom of choosing their start time, but have to work for eight hours each day?
se
O
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362. Which of the following scheduling methods is more suitable for an industry where jobs are processed in multiple stages of production? a. Line balancing b. Sequencing rules c. CRAFT d. Linear programming
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b.
Production activities are scheduled by their due dates Service delivery schedules are known in advance Work-in-process inventory level is high Jobs are assigned according to the latest available time
of
361. Jobs A – G involve processing on workstation 1 and 2. The time required at each workstation for each job is given in the table below. Use Johnson’s rule to sequence these jobs. Jobs A B C D E F G
a.
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360. An MRP system takes some inputs, processes them and gives certain outputs. Which of the following is not considered an input? a. Master production schedule b. Planning report c. Bill of materials d. Inventory records file
U
363. In which type of scheduling method, are orders scheduled according to their due dates? Forward Backward Routing Hybrid
Fo rI
BS
a. b. c. d.
a. b. c. d.
Flextime approach Flextour approach Compressed work week Staggered times approach
368. Which of the following is not an application of Gantt charts? a. b. c.
Help sequence jobs in a way that idle time is minimized Depict work load levels for equipment, workstations or departments Track job progress as they go through various departments Help adapt to changes in scheduling requirement
364. Which of the following is not a disadvantage of varying workforce strategy?
d.
a. b. c. d.
369. Which of the following statements about queuing analysis is incorrect?
Increased hiring and layoff costs Increased training costs Increased overtime costs Adverse effect on employees’ morale
365. Which of the following is not true of backward scheduling?
a. b.
Study of waiting lines and queuing systems Helps balance the costs of waiting time with the costs of providing additional service facilities 41
Operations Management
370. The critical ratio method is a job sequencing technique that an operations manager can use to verify whether a job is being performed on schedule. In this technique, ________ the critical ratio, _______ the priority. a. Lower, lower b. Higher, higher c. Lower, higher d. Higher, lower (Questions 371 & 372) Jagson Ltd. has started three jobs and engaged three teams to execute each job. Today is day 20. The due dates and scheduled time remaining for each job are given in the table below. Answer the following two questions. Due Date
Work Days Remaining
1
25
7
2
32
14
3
27
5
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1.400, 0.714, 0.857 2.8, 1.840, 1.428 0.714, 0.857, 1.400 0.714, 1.400, 0.857
O
371. Calculate the critical ratios for job 1, 2 & 3 respectively? a. b. c. d.
BS
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Job 1 Job 2 Job 3 Both job 1 and 3
a. b. c. d.
Minimizing customer waiting time Minimizing completion time Maximizing flow time Maximizing resource allocation
375. In which scheduling activity is the capacity limitation of each work center to be considered while assigning jobs? a. Loading b. Sequencing c. Expediting d. Routing 376. In which of the following personnel scheduling approaches are employees given an option of choosing their work timings, provided they complete a specified number of hours a week? a. Flextime approach b. Flextour approach c. Compressed work week d. Staggered times
Job X Route Sheet
Job Y Route Sheet
Routing Machine Processing Routing Machine Processing Sequence Time Sequence Time (Hours) (Hours) 1 1 3 1 2 2 2 3 Total
42
374. Which of the following is not an effective criterion for scheduling?
(Questions 377 to 382) Use the following table to answer the following six questions. The table shows two jobs on two machines and their respective routing sequences. Both jobs should be completed in 9 hours.
372. Which job should get highest priority? a. b. c. d.
Routing Loading Scheduling Critical ratio
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Job
a. b. c. d.
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d.
373. Operations managers generally use several techniques to schedule jobs in various departments. Which of the following is one of them?
of
It helps maximize the number of service workstations required A queue will result if customer arrival rate is greater than service delivery rate
Cl as s
c.
2
2
1
2 7
2 Total
1
3
2
1 6
Part A
1
2
M1
X1
X1
M2
Y1
Y1
3
X2
4
5
6
7
8
Y2
Y2
Y2
X3
X3
X2
X2
Y3
Y3
9
b. Time
1
2
3
4
5
M1
X1
X1
X1
Y2
Y2
M2
Y1
Y1
Y3
X2
X2
6
X2
7
8
X3
X3
9
Y3
c. Time
1
2
3
4
5
6
7
M1
X1
X1
X1
Y2
Y2
Y2
X3
M2
Y1
Y1
X2
X2
X2
Y3
8
9
Y3
381. What is the latest start time for Job X in backward scheduling? a. 1 hour b. 2 hours c. 3 hours d. 4 hours 382. What is the latest start time for Job Y in backward scheduling? a. 1 hours
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Time
b.
2 hours
c.
3 hours
d.
d. Time
1
M1
2
3
M2
X1
X1
X1
Y1
Y1
4
5
6
Y2
Y2
Y2
X2
X2
7
8
X3
X3
9
Y3
1
2
4 X1 Y1
5 Y2
Y1
3 X1 Y1
2 X1
3 X1
4 X1
5 Y2
Time M1
1
Y1
Time M1
1
2 X1
9 X3 Y3
6 Y2
7 Y2
X2
X2
8 X3
9 X3 Y3
4 X1
5 Y2
6 Y2
7 Y2
8 X3
9 X3
M2
3 X1
8 X3 Y3
BS
c.
Y1
U
M2
7 Y2 X2
se
b.
6 Y2 X2
O
Time M1 M2
Y1
Y1
X2
X2
X2
Y3
Y3
3 X1
4 X1
5 Y2
6 Y2
7
8 X3
9 X3
Y1
Y1
X2
X2
d.
1
2
Fo rI
Time M1 M2
Y1
4 hours
383. Which scheduling activity describes the ‘specification of work flow’ in operations scheduling? a. Routing b. Loading c. Dispatching d. All of the above
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378. Which of the following gives the correct representation of backward scheduling for Jobs X and Y? a.
9 hours 8 hours 7 hours 6 hours
of
a.
a. b. c. d.
Cl as s
377. Which of the following gives the correct representation of forward scheduling for Jobs X and Y?
Y3
379. Using forward scheduling what is the earliest finish time of Job X? a. 9 hours b. 8 hours c. 7 hours d. 6 hours
380. What is the earliest finish time of Job Y in forward scheduling?
384. Assigning specific jobs to each work center for the planning period is called ___________. a. Routing b. Loading c. Dispatching d. None of the above 385. Which of the following dispatching rules do firms use when they want to maximize the number of completed jobs and reduce the number of jobs in waiting? a. Longest processing time b. Shortest processing time c. First in, first serve d. Slack time remaining (Questions 386 to 396) Sriram Welders undertakes customized welding and fabrication works for different customers across the country. Jobs A, B, C, D and E are to be taken up at the beginning of the week. Processing times and due dates for these jobs are given in the following table. Use this data to answer the following eleven questions. 43
Operations Management Processing Times (days)
A B C D E
4 5 4 2 3
Due date (Days hence) 4 8 6 5 7
386. What is the order in which jobs are taken for processing using the earliest due date rule?
387. What is the average time of a job using the earliest due date rule? 4.2 days 4.4 days 5.4 days 3.2 days
se U
9 days 7 days 13 days 11 days
O
388. The shortest processing time among all jobs is for job D. What is the total delay for job D if the longest processing time rule is used? a. b. c. d.
BS
389. What is the average delay using the longest processing time rule? 5.8 days 6.8 days 5.3 days 6.3 days
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a. b. c. d.
390. What is the delay for the last job processed using the first in-first serve rule? a. b. c. d.
9 days 10 days 11 days 12 days
391. What is the average delay when the first in-first serve rule is used? 44
393. What is the time delay for the last job processed using the slack time remaining (STR) rule? a. 8 days b. 9 days c. 10 days d. 11 days 394. What is the average delay if the STR rule is used to dispatch jobs? a. 5.3 days b. 5.0 days c. 4.8 days d. 4.6 days
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a. b. c. d.
392. Using the slack time remaining (STR) rule, the job with the shortest slack time is dispatched first. Which of the following jobs have the shortest slack time? a. A b. B c. C d. D
of
C–D–E–A–B B–A–C–D–E A–D–C–E–B A–B–C–D–E
5.2 days 5.4 days 5.6 days 5.8 days
Cl as s
a. b. c. d.
a. b. c. d.
20 09
Job (In order of arrival)
395. What is the average time if the shortest processing time rule is used? a. 4.2 days b. 4.4 days c. 4.6 days d. 4.8 days 396. Which dispatching rule would you suggest to Sriram Welders if the objective is to reduce the average delay in the work? a. Earliest due date b. First in, first serve c. Shortest processing time d. Slack time remaining 397. The scheduling of operations is different for different types of operations. In which of the following operations is flow of material given utmost importance? a. Job operations b. Repetitive operations c. Labor-intensive operations d. All of the above
Part A
1
X
A
Y Z
2
3
4
5
B
6
7 8
C
C
A
B
C
A
398. Identify the number of weeks required to complete job A. a. 2 weeks b. 4 weeks c. 7 weeks d. 5 weeks
403. Which of the following is not a benefit associated with queuing analysis? a. To minimize waiting costs b. To determine optimum number of work/service stations c. To balance waiting costs with the costs of providing additional service stations d. To minimize processing time of jobs
O
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399. From the Gantt chart select the machine most utilized. a. Machine X b. Machine Y c. Machine Z d. Machines Y & Z
402. Which of the following situations leads to the formation of a queue in a service organization? a. Rate of arrival of customers is less than rate at which service is rendered b. Rate of arrival of customers is equal to the rate at which service is rendered c. Rate of arrival of customers is greater than the rate at which service is rendered d. Both b and c
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Work Center
d.
Gi = Ai1+Ai2+Ai3+…+Aim-1 Hi= Ai2+Ai3+Ai4+…+Aim Gi = Ai1+Ai2+Ai3+…+Aim-1 Hi= Ai2+Ai3+Ai4+…+Aim-1
of
Week Number
c.
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(Questions 398 & 399) Given below is a Workload Gantt chart where X, Y, Z represents three machines. A, B, and C represent jobs to be performed on these machines during a particular week. Answer the following two questions.
BS
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400. Operations managers generally use several techniques to schedule jobs in various departments. How does the sequencing of jobs using Johnson’s job sequencing rules help a firm? a. It minimizes processing time b. It maximizes operating efficiency c. It reduces processing costs d. All of the above
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401. Under Johnson’s sequencing rule, a problem of m machines and n jobs can be simplified into two fictitious machines and n jobs. Using this criterion, identify the correct mathematical representation of simplifying m machines into two machines. a. Gi = Ai1+Ai2+Ai3+…+Aim Hi= Ai2+Ai3+Ai4+…+Aim b. Gi = Ai1+Ai2+Ai3+…+Aim Hi= Ai2+Ai3+Ai4+…+Aim-1
404. Critical ratio method is a sequencing technique used by the operations managers in scheduling work. Identify the correct formula for calculating the critical ratio. a. Total time to complete the job / work remaining b. Planned time remaining / work still remaining c. Actual work remaining / planned time remaining d. Total time remaining / actual time remaining
(Questions 405 to 407) Crescent SoftDesign, a designing company, currently has five projects A, B, C, D, and E on hand which require150 days, 135 days, 180 days, 140 days and 120 days respectively to complete. After 100 days, the operations manager identifies that these projects still require 60 days, 30 days, 70 days, 45 days and 30 days respectively for completion. Based on the given information, answer the following three questions. 405. Which of these projects has the least critical ratio? 45
Operations Management
b.
407. Using the critical ratio method, give the order of priority based on the revised time of completion after 100 days? a. A – B – C – D – E b. E – D – A – C – B c. E – A – D – C – B d. E – A – D – B – C
d.
412. Business modeling is a precursor to business process reengineering, ERP implementation, etc. What is the purpose of business modeling? a. To provide details of activities performed and workflow structure b. To provide an overview of operations without focusing on processes and systems c. To provide details of processes and systems d. Both a & b
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408. Which of the following is not a basic objective of scheduling activities? a. To meet customer requirements on time b. To carry out the production process most efficiently c. To minimize service delays d. To minimize inventory costs
c.
of
406. Which of the following projects is ahead of schedule? a. A and D b. A and E c. B and C d. B and E
Customers have become selective due to availability of wide range of products from various marketers Marketers have to maintain customer relationships effectively in a competitive market Changes in the marketplace have forced marketers to think about their business processes Marketers can take speedy decisions in a dynamic market environment
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a.
A B D E
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a. b. c. d.
BS
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409. Which of the following is not true ERP? a. ERP uses multiple databases to information b. It integrates all business functions organization c. Implementation costs are high d. It provides smooth information through the organization
about store
of an
flow
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410. The implementation of ERP in an organization has undergone a sea change over the years primarily due to which of the following factors? a. Changes in the ERP concept b. Changes in organizational structures c. Advances in software and hardware technologies d. None of the above 411. Which of the following is a result of BPR?
46
413. A good business model should be comprehensible, coherent and complete. Which of the following is not a primary basis for developing a business model? a. Goals b. Objectives c. Strategic plans d. Market structure 414. One of the critical steps of ERP implementation is the development of an integrated data model. How does this help an organization? i. Increases connectivity between departments ii. Helps in smooth flow of information between departments iii. Increases data redundancy iv. Ensures availability of right information a. b. c. d.
i, ii, iii i, ii, iv ii, iii, iv i, ii, iii, iv
Part A
of
i and ii ii and iii i and iii i, ii, iii
420. An organization is required to undergo a brief business process redesign exercise before actual ERP implementation. Why? a. To assess the readiness of the organization to change b. To assess the implications of the changes c. To facilitate speedy implementation d. To identify the gaps in terms of handling information
421. Strong leadership is an important success factor in implementing an ERP system. Which of the following will enable the steering committee to produce successful results in ERP implementation? i. The committee should understand the redesign and integration ii. The committee should be trained in process mapping iii. The committee should be fully involved in process redesign so that it can guide the team members
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416. Which of the following costs are not associated with ERP implementation? a. Cost of consulting b. Cost of process redesign c. Cost of training d. None of the above
Cl as s
a. b. c. d.
419. What is the basic objective behind defining corporate needs of an organization before ERP implementation? a. To assess the readiness of the organization to accept change b. To identify the gaps in terms of handling information c. To facilitate speedy implementation d. All of the above
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415. To guarantee the success of ERP implementation, organizations have to concentrate on three issues – functionality, technology and implementability. Which of the following statements hold true for technology issues? i. Technology used in ERP package should have low compatibility with other information systems ii. Technology used should be flexible and adapt to any future changes iii. Technology used should not be too costly to upgrade in future
BS
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417. Which of the following types of information are required to customize an ERP package as per an organization’s requirements? i. Information from mapping of business processes ii. Information from gap analysis iii. Market information iv. Information about the company’s competitors Only i i and ii ii and iii Only iii
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a. b. c. d.
418. The key activity of _____________ is to monitor the implementation process continuously in order to identify deviations, cost overruns, resource requirements, etc. during implementation. a. Project member b. Project leader c. Project team d. Steering committee
a. b. c. d.
Only i i and ii ii and iii i, ii, and iii
422. To gain competitive advantage, organizations should understand what factors are required to make them a qualifier for purchase from customers. In addition, they should know what factors could enable them to eventually win an order. Which of the following is a clear example of an order winner? a. ISO certification to compete in the global markets b. Minimum quality required to enter into a market c. Standardized products produced at low costs d. Customized products produced at reasonable costs 47
Operations Management
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iv, iii, ii, v, vi, vii. i i, ii, iii, iv, v, vi, vii iv, v, vi, vii, i, ii, iii i, ii, iii, iv, vii, vi, v
428. Which of the following is not considered a ‘member’ of a supply chain? a. Manufacturer b. Supplier c. Distributor d. Customer
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425. If HDFC Bank offers a wide range of products that cover every market segment; it can be termed as an order winner with respect to _____________. a. Price b. Product range c. Quality d. Delivery reliability
a. b. c. d.
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424. Quality encapsulates many dimensions like performance, features, reliability, conformance, durability, serviceability and aesthetics. A measure of a product’s life in terms of both its technical and economic aspects is associated with which of the following dimensions? a. Performance b. Reliability c. Durability d. Conformance
iii. Divide suppliers into different categories: first tier, second tier and so on. iv. Define customer base in term of sales, profitability, size, etc. v. Improve information infrastructure within the organization to accommodate ESCM requirements. vi. Constitute a team with representation from various functions within the organization and representatives from suppliers and customers to plan and implement. vii. Identify leaders who are capable of guiding the implementation process competently.
Cl as s
423. When an ERP marketer uses price as an order winner, it should focus on certain areas to reduce the costs involved during ERP implementation. Which of the following will not facilitate this objective? a. Identify the cost centers and devise plans to reduce production costs b. Set up tough cost targets c. Set up tough quality targets d. Set up a rigorous monitoring system to make the production process cost efficient
Fo rI
BS
U
426. The logistics-related decisions of an operations manager focus on which of the following? a. Modes of transportation, distribution and inventory management b. Selection of suppliers for raw material supply c. Layout of warehouse, administrative facilities and plants d. Effective management of material flow in the organization 427. Arrange the following steps in electronic supply chain management implementation in the correct sequence. i. Understand and evaluate the level of integration within the organization. ii. Determine the number of suppliers who have direct influence over the products or services delivered to customers across the entire supply chain.
48
429. Which of the following is an intangible benefit of SCM? a. Growth in revenue b. Improved facility utilization c. Optimum inventory management d. Improved customer satisfaction 430. What is the relationship between the location of a facility and the supply chain performance of the firm? a. Facilities close to the target market improve the performance of the supply chain b. Facilities away from target markets improve the performance of the supply chain c. Facilities close to target markets worsen the performance of the supply chain d. The location of a facility and supply chain efficiency of a firm are in no way related 431. Which of the following statements about designing of a logistics network in a supply chain is incorrect?
Part A
d.
436. Measurement is an SCM ‘enabler’. How are measurements helpful in supply chain management? i. They provide information about inputs, outputs, performance etc. ii. They are used to evaluate the performance of business processes iii. They provide insights into supplier’s performance in terms of delivery performance, quality of material supplied etc iv. They ensure periodic evaluation of the performance of processes, programs and systems that support continuous improvement
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432. If an organization follows the principles of supply chain management, it can attain a balance between customers’ expectations and growth and profitability objectives. Which of the following is not a ‘principle’ of supply chain management? a. Quality and performance management b. Customize the logistics network c. Enhance ability to meet customer requirements d. Have a supply chain-wide technology strategy
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c.
435. The health and well-being of suppliers is critical for organizations, which largely depend on suppliers for their requirements. Which of the following hampers development and maintenance of longterm relationships with suppliers? a. Show commitment for long-term profitability of suppliers b. Lay down mutually understood rules for building a long-term relationship c. Strive for heavy discounts to improve the organization’s short-term profitability d. All of the above
of
b.
Firms design a logistic network to meet average requirements of all customers Firms design a logistic network to meet even the toughest requirements of a single customer Firms never custom design a logistic network to meet the individual requirements of customers Firms design a logistic network so that some amount of customization is built in to meet the requirements of customers
Cl as s
a.
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433. Order-to-delivery process is an SCM component. It can be used to evaluate the performance of a _________ on the basis of on-time delivery, costs, defects, etc. a. Production manager b. Supplier c. Purchase manager d. Distributor
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BS
434. Every organization takes steps to maintain certain standards in terms of quality. Which of the following ‘components’ of SCM is not concerned with these initiatives? i. Human resources management ii. Order-to-delivery process iii. Business relationship management iv. Quality and performance management
a. b. c. d.
i and ii i, ii, iii ii, iii, iv i, iii, iv
a. b. c. d.
i and ii i, ii and iv ii, iii, iv i, ii, iii
437. Which of the following supply chain members traditionally assumed the role of monitoring consumer preferences? a. Retailer b. Wholesaler c. Distributor d. Manufacture 438. Which of the following statements correctly describes the differences between demand chain and supply chain? i. Every member in the demand chain has to collect customer information unlike the retailer in the supply chain ii. Any member in the supply chain can monitor consumer needs and wants, unlike only retailers in the demand chain 49
Operations Management
439. Which of the following is not a method to collect customer information? a. Focus groups b. Quantitative survey c. Point-of-sale databases d. Value analysis
443. Electronic supply chain management has many benefits, but together with the benefits, there are issues that must be addressed to improve the efficiency of ESCM. Which of the following can be considered the most sensitive issue? a. Information security b. Order taking c. Order delivery d. Customer information 444. Which of the following are essential conditions for a JIT system to be successful? i. Teamwork ii. Discipline iii. Supplier involvement iv. Employee performance
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440. Which of the following are common misconceptions about the ‘supply chain concept’? i. All customers buy from retailers ii. Industrial marketers should focus on client preferences and not end users iii. All members of the supply chain should work in unison to improve profitability iv. To improve supply chain efficiency it is necessary to have a supply chain-wide technology strategy a. Only i b. i and iv c. i and ii d. i, iii and iv
i and iv i, ii, and iii i, iii, and iv iii and iv
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i, ii, iii ii, iii, iv i and iv Only iv
a. b. c. d.
of
a. b. c. d.
iii. Suppliers can replenish the inventory as soon as the need arises iv. ESCM requires the firm to carry high inventory levels
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iii. In demand chains, any information regarding relevant consumer trends and products should be shared by all members unlike in traditional supply chains iv. The members in today’s emerging demand chains are different from those in traditional chains.
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441. How does electronic supply chain management cut procurement costs? a. By transporting goods quickly b. By enabling customers to directly order products c. By reducing communication costs d. By providing suppliers instant access to information 442. Electronic supply chain management helps better inventory management. Which of the following statements support this benefit? i. ESCM results in an extended organization that sums up supplier activities ii. Inventory level status can be instantaneously accessed by suppliers
50
a. b. c. d.
i, ii, and iv i, iii, and iv i, ii, and iii i, ii, iii, iv
445. Which of the following statements [c, pg.228] correctly depicts the characteristics of a JIT production system? a. Producing on need basis b. No room for surplus or safety stock c. Doing it right the first time [c, pg.230] d. All of the above 446. Which of the following is a feature of the JIT strategy related to production? a. b. c. d.
Produce in small lots Every worker is responsible to the immediate customer (worker) Continuous improvement Customer satisfaction
447. Which of the following is not true of a JIT system?
Part A
449. Identify the Japanese term related to JIT where a machine is enabled to detect defects automatically. a. Andon b. Soikufu c. Shojinka d. Jikoda
453. Building effective partnerships depends on four elements: trust, communication, linearity of production and time to make changes. Under which element do JIT firms employ special teams or departments to enhance their relationship with suppliers? a. Trust b. Communication c. Linearity in production d. Time to make changes
454. Suppliers require time to respond to changes in demand. This is one of the four elements that help build effective partnerships. Which statement correctly describes this element? a. It involves development of production schedules with uniform workloads b. Suppliers inform the JIT firm about their new initiatives to improve quality c. It focuses on building confidence in each other that helps further improve the relationship d. Suppliers purchase new machinery, hire and train labor to meet requirements
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450. “Nothing is produced until it is required” is a fact practiced in which concept? a. Make-to-stock process b. Materials requirement planning c. Just-in-time manufacturing d. Inventory management
d.
The JIT firm invites suppliers to participate in product design and suggests changes and/or improvements The JIT firm always maintains only one supplier for each type of material
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448. Which one of the following is not a result of implementing JIT systems? a. Small lot sizes b. Varying workstation loads c. Quick and economic set-ups d. Preventive maintenance
c.
of
It eliminates all inventory It is a ‘pull’ system It is a ‘push’ system Firms place very small and frequent orders for inventory
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a. b. c. d.
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451. Firms that practice JIT production systems require reliable suppliers. Therefore, JIT firms maintain long-term business relationships with a few selected suppliers. Which of the following is true about a supplier relationship under the JIT system? a. The JIT firm derives more mileage than the supplier from the relationship in the long run b. The supplier derives more mileage from the relationship c. The relationship should be profitable to both the firm and the supplier d. The supplier need not stick to the terms of supply under the contract
452. Which of the following is not a characteristic of JIT system? a. The JIT firm shares production plans and schedules with suppliers b. The JIT firm can provide assistance to suppliers to improve quality and productivity
455. JIT adopts the concept of ‘immediate customer’ to increase product quality and improve customer service. What does the term ‘immediate customer’ signify? a. Every worker in the JIT firm is considered a customer b. A person outside the firm who buys its products for use or consumption c. Each worker in the firm considers the next worker in the production line as a customer d. Each worker is fully responsible for a task and inspect his or her own work 456. Which of the following is characteristic of the JIT system? a. Uniform workstation loads b. Large lot sizes c. Quick and economic set-ups d. Flexible facilities
not
a
51
Operations Management 461. A company can compete on different quality functions. Which of the following is not a function of quality?
i. ii. iii. iv.
Lesser inventory Smaller production lot size Higher number of set-ups Higher costs
a. b. c. d.
a. b. c. d.
i, ii, and iii ii, iii, and iv i, iii, and iv i, ii, iii, and iv
462. Control charts do not _________.
b.
i. JIT workers are trained continuously ii. JIT workers are trained to perform multiple jobs iii. JIT workers are specialized in a particular operation Only i i and iii i and ii i, ii and iii
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i. Analyze existing set-up procedures ii. Separation of internal and external set-up activities iii. Convert internal set-up activities into external set-up activities i, ii, iii ii, iii, i i, iii, ii iii, i, ii
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The process is out of control and the cause should be established The process is in control The process is within established control limits with natural causes of variation The process is outside established control limits with only natural causes of variation
b. c. d.
464. Small boxes of peanuts are labeled ‘net weight 250 gm’. To construct control charts, random samples of 5 boxes were weighed. You can assume the value of D4 as 2.114 for the sample. Based on observations given in the table below, determine the upper control limit for the R-chart. Sample
Mean weight (X)
Range (R)
460. JIT does not focus on one of the following. Identify.
1
240
30
2
260
20
a. b.
3
250
20
4
270
30
5
240
60
TOTAL
1260
160
c. d. 52
463. Control charts are used extensively to monitor quality. Suppose some individual parts measured are below the lower control limit. What does this clearly indicate? a.
459. Having quick and economic set-ups is a characteristic of a JIT system. Firms adopt a procedure to reduce set-up times. Arrange the steps in the correct sequence.
a. b. c. d.
d.
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a. b. c. d.
c.
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458. How are workers in a JIT firm different from that of a non-JIT firm?
Display the measurements of every item being produced Display upper and lower limits for process variables or attributes and signal when a process goes out of control Indicate to the process operator the average outgoing quality of each lot Indicate to the operator the defective percentage in each lot
of
a.
Performance Features Reliability Warranty
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457. Quick and economic set-ups is a characteristic of a JIT system. What does this signify?
Eliminating external demand variations Reducing unreliable delivery of raw materials Reduction of inventory Reducing excessive set-up times
Part A
a. b. c. d.
Promptness Courteousness Ambience Timeliness
471. How can training employees increase productivity? a. It helps acquire new skills b. It helps improve existing skills c. It helps motivate employees d. All of the above 472. Which function of quality focuses on analyzing the defect rates of a product during production, and the number of customer complaints after product sale? a. b. c. d.
Conformity Aesthetics Serviceability Perceived quality
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466. Quality control is an important function that helps increase customer satisfaction. At which of the following stages does quality control begin? a. Procurement of raw material b. Start of production c. Finished goods inventory d. Dispatch to customers
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465. Quality in services can be measured in terms of tangible and intangible aspects in service delivery. Which among the following is not an example of intangibles in service delivery?
470. Which of the following can be a measure of output associated with productivity in service organizations? a. Number of calls made by a telemarketer b. Number of complaints received by a call center c. Amount of time spent in counseling a student d. Number of cars serviced in a period
of
60.49 68.53 67.65 69.52
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a. b. c. d.
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467. Productivity is measured as the output produced with a given set of inputs. Which of the following is not a measure of productivity? a. Number of kilograms of rubber produced per day b. Number of toys produced in one hour c. Average length of the rods in a lot d. Number of patients treated in day
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468. Bottlenecks in the production process can hamper productivity. Which among the following cannot be an example of a bottleneck that can hamper productivity? a. Layout b. Slow processing equipment c. Proper scheduling d. Inventory shortage 469. How can scheduling help increase productivity? a. By decreasing idle time b. By increasing running time of machinery c. By decreasing wastage d. All of the above
473. Identify the function of quality used by marketers to target a niche market that is influenced by individual preferences. a. b. c. d.
Conformity Aesthetics Serviceability Perceived quality
474. At one point cost of inspection and cost of undetected faults is optimum. What does this statement signify? a. b. c. d.
The cost of inspection is high The cost of undetected faults is high The total cost of quality control is minimal The average cost of quality control is minimal
475. At one point, there is an optimal trade-off between the cost of inspection and the cost of an undetected fault. At this point, the cost of total quality control is minimal. Which of the following is not an inspection cost? 53
Operations Management a. b. c. d.
a. b. c. d.
Prevention costs Failure costs Appraisal costs Both a & b
477. Failure costs, which are a type of quality costs, can be divided into internal and external failure costs. Which of the following is not an internal cost? a. b. c. d.
Scrap costs Downtime costs Retesting costs Cost of returned products
(Questions 482 to 487) Use the following data to answer the following six questions. Given below is the table that shows the means and ranges of 8 samples. Every sample contains 5 items. Conversion factors are given as A2 = 0.373, D3 = 0.136, D4 = 1.864. Sample
1
2
3
4
5
6
7
8
x
25
36
31
33
27
34
32
25
R
8
9
7
6
6
7
5
8
i & ii ii & iii i & iii ii & iv
se
a. b. c. d.
U
X-chart R-chart P-chart C-chart
BS
i. ii. iii. iv.
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478. Control charts are used extensively to monitor quality. They can be categorized under control charts for variables and control charts for attributes. Which of the following come under the former?
481. Universal responsibility is one of the principles of TQM. Identify the statement that best represents and underlines the spirit of this principle. a. Top management is responsible for the quality of products entering the market b. Production department is responsible for product quality c. Every employee at every level in the organization is responsible for quality d. Emphasis is on continuous improvement in process, skill sets, systems or operations
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476. The cost of quality can be divided into different categories. Evaluating quality and performance of products and machinery is associated with which type of costs?
Kaizen Andon Jikoda Shojinka
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Cost of training personnel Loss of goodwill Supervision of inspectors Cost of inspection facilities
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a. b. c. d.
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479. Which of the following control charts is used to determine the proportion of defective items in a selected sample? a. b. c. d.
X-chart R-chart P-chart C-chart
480. In which of the following approaches are continuous improvements in process, skill sets, systems and operations considered? 54
482. Calculate the mean of means for the given data. a. 31.145 b. 31.375 c. 30.375 d. 30.145 483. Calculate the mean of ranges from the given data. a. 6.8 b. 7.0 c. 7.3 d. 6.7 484. What is the upper control limit if an Xchart is developed? a. b. c. d.
32.986 35.275 35.505 34.275
485. What is the lower control limit if an Xchart is developed?
Part A c. d.
487. Calculate the upper limit for the R-chart. a. 0.93 b. 16.38 c. 13.048 d. 0.16
1 5
2 3
3 4
4 2
5 3
6 1
7 4
O
Sample Number of Defects
U
3.14 2.34 3.54 3.64
se
488. Calculate the average number of defects. a. b. c. d.
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489. If the data in the above question is used to construct a C-chart, then what would be the upper and lower control limits for this chart? a. b. c. d.
8.456 and -2.176 8.546 and 2.176 8.546 and 0 8.650 and 0
490. What is the condition in which a customer runs the risk of accepting a lot with minor defects? a. b.
Cost of prevention Type I error
492. What explains how well an acceptance plan differentiates between good lots and bad lots? a. AOQ b. OC curve c. Lot Tolerance Percent Defective d. Acceptable Quality Level 493. The cost of quality can be divided into three major categories - cost of prevention, cost of detection/appraisal and cost of failure. Which of the following is a prevention cost? a. Disposition of defective items b. Equipment maintenance c. Quality training d. Warranty charges
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(Questions 488 & 489) When the quality control department of Ambuja Rayon inspected 7 carpets manufactured in its plant, it identified the following number of defects in the process. Based on the information, answer the following two questions.
491. Under TQM, every department in an organization should treat every other department as its _________. a. Producer b. Customer c. Distributors d. Supplier
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486. If one has to plot an R-chart for the given data, what would be the lower limit for this chart? a. 0.16 b. 0.952 c. 0.93 d. 1.12
Type II error Cost of detection
of
27.764 26.135 25.245 25.135
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a. b. c. d.
494. Which of the following is not an objective of remedial maintenance? a. To minimize production losses by getting equipment back into working condition as quickly as possible b. To minimize investments in spare parts and standby machines used when equipment is under repair c. To perform appropriate maintenance based on the extent of the problem d. Regular monitoring of vital parameters of a machine 495. Preventive maintenance can be classified into periodic maintenance and irregular maintenance. Irregular preventive maintenance does not include one of the following. a. Repair b. Overhaul c. Reducing machine vibration d. Tasks like cleaning up oil spills 55
Operations Management
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501. Why do vendors prefer to enter into longterm contracts with firms to undertake facilities management services? i. To enable firms retain control over activities ii. To cover high initial costs at the beginning of the contract iii. Long term contracts fetch more profits to the vendor iv. To help firms reduce costs over time a. b. c. d.
ii and iii ii, iii and iv iii, iv and i i, ii and iv
502. Vendors replace skilled workers with semi-skilled workers in a manufacturing facility after some time. What could be the possible reason behind this move? i. To reduce direct operating costs ii. To train semi-skilled workers iii. To use them for new clients iv. To improve clients profits
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498. A facilities manager has to consult different personnel while performing alterations to facilities or expanding them for better design. Who among the following would be the least preferred choice for the facilities manager? a. CEO b. Production manager c. Architect and designers d. Marketing manager
i, ii, iii i, ii, iv iii and iv i and iii
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497. Which of the following is not a goal of maintenance management? a. Minimizing the availability of the firm’s assets for production purposes b. Improving the quality of products and increasing the firm’s productivity c. Using maintenance personnel and equipment efficiently d. Preserving the value of a firm’s machinery and reducing deterioration
a. b. c. d.
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496. Which of the following is not an activity of maintenance management? a. Improving efficiency of raw material purchase b. Minimizing loss of productive time c. Prolonging asset life d. Effective utilization of assets
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499. The process of hiring outside workers or specialized vendors to accomplish a particular task is called _________. a. Outsourcing b. Out-tasking c. Overtime d. Processing
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500. Loss of control is one of the costs of outsourcing certain or all activities to external service providers. Identify the possible consequences that may arise from loss of control. i. Vendor can take undue advantage of control ii. Client may lose the voice in crucial decisions iii. Costs reduce over a period of time iv. Client may not be able to control the vendors’ deviation from standards
56
a. b. c. d.
i and ii ii and iii i and iii ii and iv
503. Despite several disadvantages, firms prefer to outsource facilities management tasks. Which of the following does not support this statement? a. Increases quality of work b. Helps develop core competence c. Increases flexibility d. Increases operational costs 504. Which of the following statements does not support the importance of maintenance of machines in a facility? a. Machine failures do not hinder productivity b. Repairing a machine can be expensive
Part A
a. b. c. d.
i and ii iii and iv i, ii, iii i, ii, iii, iv
Mechanical maintenance Civil maintenance Electrical maintenance All of the above
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a. b. c. d.
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507. If a 5hp motor is a critical component in the manufacture of a certain product in a large organization, its maintenance is given utmost importance. Who would appropriately undertake maintenance of such equipment? Machine mechanic Plumber Electrician Supervisor
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a. b. c. d.
508. Match the following personnel with their respective maintenance responsibilities. i. Plumbing personnel ii. Electrical personnel iii. Housekeeping personnel iv. Instrumentation personnel p. q.
Lighting equipment Electronic routers
a. b. c. d.
i/p, ii/q, iii/r, iv/s i/q, ii/p, iii/r, iv/s i/r, ii/p, iii/s, iv/q i/r, ii/q, iii/p, iv/s
509. Identify the distinct difference between preventive and predictive maintenance a. Predictive maintenance is done after a machine breaks down while preventive maintenance is done before a machine breaks down b. Preventive maintenance is done after a machine breaks down while predictive maintenance is done before a machine breaks down c. Preventive maintenance involves regular servicing of equipment while predictive maintenance involves monitoring equipment continuously d. Preventive maintenance focuses on the past while predictive maintenance focuses on the future
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506. Maintenance of air conditioners is an example of which type of maintenance?
Water supply pipes Buildings
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505. Mr. Suresh Kumar was promoted as maintenance manager in Unicorn Manufacturing. He was a design engineer in the same plant earlier. What benefits can Kumar offer to Unicorn in his new position? i. Focus on regular maintenance to improve productivity ii. Help increase the life of assets and machinery iii. Help preserve the value of equipment iv. Minimize the salvage value of machinery
r. s.
of
d.
Equipment malfunction may reduce product quality Fixing a broken-down machine can stop production and may consume time
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c.
510. Krishna, a production worker detected some minor vibrations in a lathe machine that is very sensitive to movement. What does this indicate? i. The cutting precision will reduce ii. Rate of production can go up iii. Quality of product can come down iv. The equipment needs maintenance
a. b. c. d.
i, iii, iv ii, iii, iv i, ii, iii i, ii, iii, iv
511. Periodic maintenance is associated with ______. a. Preventive maintenance b. Predictive maintenance c. Remedial maintenance d. Mechanical maintenance 512. What is the term used for the maintenance activity that attempts to detect problems while the equipment is still performing at a satisfactory level? a. Remedial maintenance b. Predictive maintenance 57
Operations Management c. d.
516. Remedial maintenance is termed reactive. What does this mean? a. Remedial maintenance is taken up when machinery breaks down b. Remedial maintenance is done to avoid breakdown c. It occurs before purchase of new machinery d. It is carried out regularly
Periodic maintenance None of the above
1
2
U
Elapsed time after last maintenance (in months)
O
Amplitude meter Vibration analyzer Audio detector Richter scale
5
6
7
8
9
10
11
12
0.04
0.04
0.05
0.05
0.06
0.06
0.10
0.10
0.10
0.10
0.15
0.15
518. What is the mean time between failures? 7.83 months
b.
6.48 months
c.
7.98 months
d.
6.63 months
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a.
519. Calculate the probable number of breakdowns per year for a machine. a. b. c. d.
58
1.53 1.50 1.81 1.85
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4
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Probability of failure
3
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a. b. c. d.
(Questions 518 to 521) A manufacturing plant has 25 machines of the same type. The probability of failure of a machine depending on time lapsed (in months) after the last maintenance is given in the following table. Answer the following four questions based on the given information.
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515. ‘Condition monitoring’ uses various instruments to measure machine parameters like operating temperature, pressure, vibration, etc. Which of the following instruments is not associated with condition monitoring?
517. Which among the following is not an objective associated with remedial maintenance? a. To minimize investments in spare parts and standby machines used when equipment is under repair b. To minimize production loss by getting equipment back into working condition as quickly as possible c. To perform appropriate repair at appropriate levels d. To minimize failures or malfunction to the lowest possible extent
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514. ‘Condition monitoring’ is associated with ___________. a. Predictive maintenance b. Remedial maintenance c. Periodic maintenance d. Irregular preventive maintenance
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513. Which of the following is not a cost associated with preventive maintenance? a. Cost of replacing materials and parts b. Cost of replacing the entire machine c. Cost of instruments used in preventive maintenance d. Wages of staff and technicians
520. What can be the probable number of break-downs per year for all machines in a plant? a. 37.50 b. 38.25 c. 45.25 d. 46.25 521. If the yearly cost of servicing a broken down machine is Rs.12000, what is the average cost of repairs per machine per occasion? a. Rs.314 b. Rs.265 c. Rs.260 d. Rs.320
Part A
2
3
4
5
0.1
0.2
0.3
0.3
0.1
522. If there are 15 identical machines in the plant, what is the expected number of break-downs between maintenance, if the maintenance is performed every two months? a. 3.5 b. 3.65 c. 4.5 d. 4.65
527. Which of the following is a precaution taken by maintenance managers during maintenance planning? a. Ensuring sufficient inventory of frequently used tools and equipment within the plant b. Reducing inventory costs by cutting inventory of tools and equipment used during maintenance c. Storing frequently used tools and equipment in a centralized location in case of multiple plants d. All of the above 528. What is the difference between a JIT manufacturing system and a traditional manufacturing system with respect to simple preventive maintenance? i. Simple preventive maintenance is done by specialized maintenance staff ii. Simple preventive maintenance is done by production workers iii. Simple preventive maintenance is carried out at the beginning of every shift iv. Shop floor workers should assist repair specialists in case of a major break-down
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523. What is the expected number of breakdowns between maintenance, if the maintenance is performed every three months? a. 9.5 b. 9.465 c. 9.765 d. 9.565
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1
of
Months after maintenance Probability of break-down
526. Prioritizing work is very important in maintenance planning. On what basis are tasks prioritized when resources are scarce? a. Type of tools used to perform each task b. Significance of tasks in maintaining production flow c. Based on personnel who carry out tasks d. All of the above
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(Question 522 to 524) The probability of failure after maintenance for a machine is given in the table below. Answer the following three questions, based on the given information.
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524. If the average cost of preventive maintenance is Rs.650 and that of remedial maintenance per machine is 5500, calculate the average total cost of maintenance per month, if the maintenance is performed every 3 months. Assume the number of machines as 15. a. Rs.63457.50 b. Rs.54765.50 c. Rs.45254.50 d. Rs.21152.50
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525. Identify the correct sequence of steps followed in maintenance planning. a. Develop plan – identify problem – estimate work to be done – carry out the sequence of tasks b. Identify problem – develop plan – estimate work to be done – carry out the sequence of tasks c. Identify problem – estimate work to be done – develop plan – carry out the sequence of tasks d. Develop plan – carry out the sequence of tasks – identify problem – estimate work to be done
a. b. c. d.
i and ii i, ii, and iii ii, iii, and iv i, iii, and iv
529. To provide a clean and conducive work environment and enable efficient and effective progress of the core functions of an organization is an objective of ____________. a. Quality management b. Facilities management c. Maintenance management d. Inventory management 530. Which of the following is not an example of a project? 59
Operations Management a.
531. The extent of time by which an activity can be delayed beyond its earliest start time without extending the project is called __________. a. Slack time b. Latest start time c. Optimistic time d. Expected start time
d.
c.
536. The following activities are part of a project to be scheduled using CPM. Identify the correct network diagram for the given data. Activity
a.
O
b.
60
B
E
G
C
D
F
B
E
G
C
D
F
A
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535. The process of reducing the duration of the project by reducing scheduled time of some activities is called crashing. Which of the following statements on project crashing is false?
A A C B, D D E, F
A
se
534. Which of the following statements is false? a. Project management differs from the management of more traditional activities due to the limited lifetime of projects b. In linear programming, dummy activities are added to paths to make them equal in length c. A Gantt chart contains no precedence relationships, but may be useful for simple projects d. Slack time is the extent of time by which an activity can be delayed without delaying the entire project, assuming its preceding activities are completed as early as possible
Immediate Predecessor
A B C D E F G
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533. What are the benefits of a project plan? a. It guides project execution b. It documents project planning assumptions c. It provides a baseline for progress measurement and project control d. All of the above
b.
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532. Minimum amount of time that must lapse before beginning an activity is called ________. a. Expected start time b. Earliest start time c. Latest start time d. Expected finish time
Crashing is not effective when applied to tasks with zero slack Crashing shortens the length of the critical path Crashing can be achieved by subcontracting Crashing can be achieved by employing more workers
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Developing a new product or service Production of radiator caps Airport expansion Implementing six sigma to bring down cost overruns by 20%
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a. b. c. d.
c.
B
E
G
C
D
F
A
B
E
G
C
D
F
d. A
Part A Dispatching Johnson’s rule
542. A project contains critical and non-critical activities. Which among the following correctly defines a critical activity?
c.
d.
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b.
Critical activities are those activities, which if advanced, extend the project duration Critical activities are those activities, which if delayed, reduce the project duration Critical activities are those activities, which if delayed, extend the project duration Critical activities are those activities, which if advanced, reduce the project duration
of
a.
543. Which of the following is an outcome of an activity in a project? a. b. c. d.
Critical path Event Optimistic time Critical path
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538. Which of the following is not true about projects? a. It is a temporary endeavor b. It is used to create a unique product or service c. It is an operation constrained by limited resources d. It involves continuous flow of repetitive work
c. d.
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537. Dummy activities are introduced in PERT/CPM methods. Which of the following statements about them is not true? a. Dummy activities are used to indicate zero-length activity duration b. Dummy activities are used to ensure that two activities have the same beginning and end nodes c. Dummy activities are used to ensure that the network reflects the project under consideration d. Dummy activities are used to represent activity predecessors
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539. Managers use many terms as part of networks in project management. In this context, what is the term used for an outcome of an activity or group of activities? a. Project b. Event c. Critical path d. Node
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540. Which of the following statements about ‘critical path’ is true? a. It describes the longest of all paths through a network b. Some activities on the critical path may be slack c. Every network has exactly one critical path d. It is the longest path of interrelated activities in a project with zero slack time 541. Which of the following methods can be used to identify the best possible schedule for a project? a. PERT d. Routing
544. Which of the following correctly describes ‘pessimistic time’? a. b. c.
d.
It indicates the best guess for the completion of an activity It is amount of time that an activity is expected to consume It is the maximum time an activity can take considering obstacles and unfavorable circumstances It is amount of time that should be consumed before beginning an activity
545. Which of the following terms, associated with networks in project management, is referred to as ‘float’? a. Optimistic time b. Pessimistic time c. Most likely time d. Slack time 546. If in a certain project, the only precedence relationship is that activity A has to precede activities B and C, then which of the following network diagrams correctly represents this situation? 61
Operations Management c. d.
B A
549. For projects where time values are affected by chance variations, PERT is used. To apply it certain conditions have to be satisfied. Which among the following is not such a condition? a. Activities should have identifiable start and finish times b. The project must have a large number of interrelated or overlapping activities c. The activities should be clearly distinguishable from each other d. The project should be flexible and accommodate different sequences and timings
C
b.
c.
C
B
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A A
C
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B B
d. A
C
a.
D
E
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A
Activities Optimistic Pessimistic Most time tp likely time to (Weeks) (Weeks) time tm (Weeks) 1-2 3 5 4
D
B
E
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b.
C
B
(Questions 550 to 554) The following table gives the optimistic, pessimistic and most likely times for the network diagram. Use this data to answer the following five questions.
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547. Activity A and activity B precede activities C, D and E. Activities A and B are independent of each other. Activities D and E follow activity C. Identify the correct network diagram for this situation. A
A
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C
c.
D
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C
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B
B
E A
D C E
d. 548. What is the formula for calculating ‘float’ in the critical path method? a. (Expected time) + (given time) b. (Expected time) - (earliest start time) 62
(Latest finish time) - (given time) (Latest start time) - (earliest start time)
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a.
1-4 2-3
3 2
5 3
4 2
2-5 3-6
3 5
5 7
4 5
3-7
7
10
8
4-3
4
6
5
5-3
2
3
2
6-7
6
9
8
[
550. What is the expected time for the activity 5-3 in the project? a. 5.33 weeks b. 2.17 weeks c. 4.0 weeks d. 7.83 weeks 551. What is the sum of the expected times of the activities on the critical path? a. 23.33 weeks b. 23.0 weeks c. 22.33 weeks d. 22.0 weeks
Part A
554. What is the probability of finishing the project in 23 weeks? a. 0.3336 b. 0.4910 c. 0.4024 d. 0.4332
(t o + 4t m + t p ) 6
a. b. c. d.
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558. What must the prototype of a product necessarily possess?
The final product in a smaller version A model with the basic product characteristics A model with final physical attributes Blueprint of the product
559. A CAD system incorporates computer graphics and computer-aided engineering systems. In what ways can managers make use it? i. ii. iii. iv.
Creation of a design Analysis of a design Modification of a design Developing a prototype
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555. There are both benefits and limitations in PERT. Which of the following statements is not a benefit of PERT? a. Users understand the relationships between the activities through graphical displays b. Used in tactical level planning and operational level control c. Effective in planning single project activities in any type of industry d. Effectively handles situations in which two or more projects share available resources
d.
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553. What is the probability of completing the project in 24 weeks? a. 0.8510 b. 0.8023 c. 0.9217 d. 0.7902
c.
t p − t o 6
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552. What is the sum of the variances of the activities on the critical path? a. 0.59 b. 0.632 c. 0.611 d. 0.582
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556. A certain activity in a project has to be crashed. Calculate the time-cost ratio for this activity using the given details: Crash cost = 25000, Normal cost = 20000, Crash time = 13 weeks, Normal time = 17 weeks. a. 5000 b. 2500 c. 1250 d. 625 557. Which of the following formulae correctly represents the ‘expected time’? n
a.
∑ iP i =1
b.
Z=
i
D−E σ 2 cp
a. b. c. d.
i & ii i, ii, iii ii, iii, iv i, iii, iv
560. Communication with which of the following departments provides maximum assistance to operations managers in deciding the quantity, quality and other specifications of the product or service to be produced. a. b. c. d.
Finance department Purchase department Marketing department Suppliers
561. Unlike conventional computer systems that manipulate numbers to solve problems, systems with artificial intelligence manipulate _______. a. b. c. d.
Factors Symbols Instructions Signals 63
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570. Which of the following is disadvantage of automation? a. High initial investment b. Higher level of maintenance c. Lower flexibility to different job requirements d. Higher product quality
not
a
571. Which of the following is a disadvantage of using Computer Aided Manufacturing? a. Reliability in labor inputs b. Reduction in labor costs c. Improvement in productivity d. None of the above
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564. _________ refers to a computer application that integrates various computerized systems into a single multifunctional system. a. Computer integrated manufacturing b. Artificial intelligence c. Expert system d. Flexible manufacturing system
569. Which of the following is not an advantage of automation? a. Reduction in lead time b. Reduction in wastage c. Higher initial investment d. Higher productivity
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563. Which of the following is not a benefit derived by a firm adopting automation? a. Low level of maintenance b. Reduced lead-time c. Improvement in work environment d. Efficient use of materials
568. Automation is generally not possible in which of the following? a. Automobile production b. Thermal power stations c. Consultancy activities d. Tablet manufacturing
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562. What is the term used for computers that are capable of performing the tasks of a human being that require higher intellectual ability? a. Automation b. CNC technology c. Artificial intelligence d. Robotics
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565. ________ is a form of flexible automation in which several machine tools are linked to a material-handling system. a. Computer integrated manufacturing b. Artificial intelligence c. Expert system d. Flexible manufacturing system
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566. _____________ is a technology that includes a set of procedures and guidelines based on which machines can automatically execute activities performed by humans. Automation Artificial intelligence CAD CAM
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a. b. c. d.
567. Automation is mostly used by manufacturers in which of the following functions of operations management? a. b. c. d.
64
Staffing Planning Organizing Control
572. ‘It involves two or more machining centers which are automated to process different kinds of jobs’; identify this technology? a. CAD b. CAM c. FMS d. CNC 573. Which of the following technologies integrates CAD/CAM, group technology systems, MRP II, financial reporting systems, etc and brings in automation in each of the processes involved? a. FMS b. CNC c. CIM d. None of the above 574. CIM system integrates various computerized systems. It is also termed as _____________ due to the integration involved.
Part A
576. Despite many advantages, CIM has not been implemented on a large scale. Identify the reasons for this. i. Huge costs of installation and implementation ii. Standardized interfaces between CIM components were absent iii. Lack of integration iv. Increased operating costs
580. In manufacturing, robots are used in three functions – material handling, processing operations, and assembly and inspection. Which of these operations involve the handling of a tool by a robot to perform a particular action? a. Material handling b. Processing operations c. Assembly and inspection d. Both a & c
581. Employing robots is not justified in which of the following areas? a. Tasks that are repetitive and involve the same basic work motion in every cycle b. Tasks to be performed under hazardous conditions and unsafe environment for humans c. Tasks that require a part or tool that is heavy and difficult to handle d. Tasks where contingency decision making is needed
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i and ii ii and iii iii and iv iv and i
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a. b. c. d.
Transfer of material Loading of material Welding activities Unloading of material
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575. What is the primary difference between conventional computer systems and computer systems with artificial intelligence? a. Speed b. Automation c. Better performance d. Ability to reason
a. b. c. d.
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Automated manufacturing system Multi-functional system Flexible system Non-functional system
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a. b. c. d.
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577. Expert systems are programs designed to provide users with the expertise of professionals in a particular field. Inputs to this knowledge base and the rules to obtain a solution are obtained from which of the following sources? a. Users b. Professionals c. Programmers d. All of the above 578. Robots are used in different industries like electronics, automobile, etc. Which area of manufacture does not use robots extensively? a. Material handling b. Processing operations c. Assembly and inspection d. Facility location 579. Which of the following operations are not done by robots in materials handling?
582. What are the advantages of EDI in operations management? i. Reduces paper work ii. Helps track orders placed with vendors iii. Increases inventories iv Improves coordination across departments a. b. c. d.
Only i i, ii, and iii i, ii, and iv ii, iii, and iv
583. Globalization promotes free and fair trade among member countries, but sometimes results in unfair trade. Which among the following does not support this statement? a. All member countries of WTO have to treat every other member nation as their most favored nation b. Tariffs and duties with respect to import of goods have to be liberalized c. Member countries do not lift existing quantitative restrictions d. All member countries have to gradually open up their markets to foreign companies 65
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589. Which of the following conditions can be a constraint to achieve economies of scale globally? i. Markets across the globe demand the same kind of product ii. Every market needs customized products to meet its requirements iii. The same product with slight variations is demanded by different markets a. b. c. d.
Only i i and ii ii and iii i, ii, and iii
590. There are certain impediments to globalization that can block an organization in its globalization endeavor. For instance, MNCs operating in different markets find it difficult to achieve economies of scale due to varied preferences and requirements in each market. Identify the type of impediment faced by the MNCs. a. Economic impediment b. Managerial impediment c. Institutional impediment d. None of the above
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586. Chinese companies have become dominant players in the global manufacturing sector. They make products in bulk quantities that allow them lower the costs per unit produced. What type of competitive advantage is discussed in this example? a. Comparative advantage b. Economies of scale c. Proprietary product knowledge d. All of the above
Economies of scale in production Economies of scale in purchasing Economies of scale in marketing All of these
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585. Many MNCs have established their production and development centers in India to reduce operation costs. Which source of competitive advantage has led to India becoming a production and development hub for foreign companies? a. Comparative advantage b. Economies of scale c. Proprietary product knowledge d. All of the above
a. b. c. d.
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584. Some countries have certain competitive advantages over others. Which of the following competitive advantage does India have over America and Western Europe? a. Technology b. Labor c. Trade surplus d. Nuclear fuel
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587. Organizations operating globally can obtain economies of scale not only in manufacturing but also in purchasing. Which of the following examples supports this statement? a. Toyota's leadership in the low-end truck market worldwide due to large volume production b. GM’s strategy to outsource manufacture of $7.5 billion worth of auto components c. Satyam Computers strategy to produce customized software for its clients to suit their requirements d. Nokia launching new cell phone models to maintain market leadership 588. Punj Lloyd is an engineering construction company involved in construction of pipelines, oil storage tanks, power plants, etc, throughout the globe. If it uses the same salesforce to acquire orders in different countries, what kind of approach is the company adopting?
66
591. What is the primary reason for countries to put in place institutional impediments for foreign players? a. To encourage foreign companies to operate in the country b. To encourage local companies to cooperate with foreign companies c. To encourage exports from local companies d. To protect local companies from the threat of foreign companies 592. Managers cannot simply apply marketing knowledge gained in one market to another market due to varying preferences and cultures. This statement reflects which of the following impediments for the marketer?
Part A Economic impediment Managerial impediment Institutional impediment Both a & c
c. d.
a. b. c. d.
Only iv i and ii ii and iv i, ii, and iii
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598. A global company can enter a new market either through joint ventures or by establishing a wholly-owned subsidiary. Identify the possible drawbacks of a wholly-owned subsidiary? i. Full control on operations ii. Low risks iii. Takes a lot of time to understand the market iv. No means to spread the risk a. b. c. d.
i and ii ii and iii iii and iv iv and i
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594. Which of the following is an ideal interaction approach between headquarters and a subsidiary of a global company to develop new products for a certain market in a certain country? a. Leave the entire new product development process to the local subsidiary or division b. Collective efforts from both headquarters and the subsidiary c. Centralize the new product development process at headquarters d. Outsource R & D to a third party
597. Why do global organizations recruit local people for subsidiaries in each country? a. Local people can provide information on the local climate b. Local people can provide better insights into the local business environment c. Local people can use technology more efficiently than outsiders d. Local people can provide global information on products and markets
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593. What are the reasons for global organizations to look out for more competent managers across the world? i. International markets are complex and require acumen to understand ii. Managers must be able to look out for global market opportunities and grab them as they come iii. Managers should be capable of providing insights into developing future products iv. Companies can get good managers at low salaries
Bureaucratic in nature Behavioral in nature
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a. b. c. d.
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595. In the case of global organizations, the concept of ‘resource allocation’ is broad in scope. Which of the following is considered a scarce resource by global organizations? a. Capital b. Raw material c. Technology d. Technologists and managers 596. It is difficult to design organization structure for a global organization. Most global organizations prefer which of the following approaches to organization structure? a. Centralized in nature b. Decentralized in nature
599. Tornado (an American cellular phone manufacturer) wants to establish a manufacturing plant in India to cater specifically to the Indian market. Which of the following factors should Tornado consider while deciding on the location of a plant in India? i. Level of demand for the product ii. Infrastructure availability iii. Availability of cost-effective labor iv. Export policy a. b. c. d.
i, ii, iii i, ii iii, iv Only iv
600. In which of the following methods of entry into foreign markets does a company have minimal control over the marketing strategy? a. Joint venture b. Alliances c. Subsidiary d. Licensing 67
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Part A: Answers and Explanations
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This section contains answers and explanations for the multiple-choice questions in part A given earlier in the book
Part A: Answers and Explanations
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1. (b) Importance and recognition given to employees Elton Mayo in 1927 carried out studies at Western Electric’s Hawthorne plant. The initial studies tried to examine the relationship between light intensity on the shop floor and employee productivity. Finally, Mayo and his team concluded that it was not light or other physical conditions, but the attention and importance the workers received during the study that was responsible for their increased productivity.
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2. (b) Ford Motors Henry Ford applied the concepts of scientific management of Taylor in the assembly line production system of Ford Motors in 1911.
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3. (b) Reducing clerical costs The computerization of operations began when the first computer was installed in General Electric Appliance Park in 1954. The sole purpose of computerization those days was to reduce manual labor and the costs involved in tasks like preparing salary statements and accounts statements. 4. (b) Motivating Motivating is one of the activities of operations managers. It involves encouraging workers through praise, recognition, and other intangibles.
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5. (a) Strategic decisions Strategic decisions are long-term and broad in nature and usually span five years or more. Longterm strategic decisions are concerned with production and process design, facility location and layout, capacity, expansion of existing facilities, etc. These decisions impact the long term profitability of an organization.
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6. (a) Analyzing the firm’s financial position Analyzing the firm’s financial position falls under the basic function of financial management and not operations management.
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7. (c) Scientific management Division of labor or work specialization is a development of scientific management. According to Taylor, each worker should be assigned a task based on his or her skill, strength and ability to learn.
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8. (c) Planning The planning function oversees decisions regarding what products to make and when. It also includes activities like planning the product-service mix, location and capacity planning, production methods to use for each item, procurement of equipment, number of shifts and work hours etc. 9. (b) One or two years Tactical decisions are medium-term in nature and have a time-frame of one or two years. These decisions are concerned with identifying manpower requirements, determining the appropriate inventory level for various materials, determining reordering level and order quantity, identifying vendors and so on. 10. (d) All of the above Operations management, as a whole, deals with design of products and processes, acquisition of resources, transformation of resource inputs into outputs and distribution of goods and services.
Operations Management 11. (b) Organizing Operations under the organizing function include: decisions to centralize or decentralize operations; decisions on kind of functions, products, or organization structure; establishing workcenter assignments; assigning responsibility for every activity; arranging supplier and subcontractor networks and establishing maintenance policies.
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12. (a) i, ii, iii Inclusion of purchasing functions, dispatch, and other allied activities in this field and the influence of service-related concepts and procedures broadened the scope of this field of study. As the term ‘Production Management’ did not cover the entire field, it was replaced with ‘Operations Management.’
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13. (a) In the early 1940s during World War II During World War II (1939-45), the United States and many European nations formed operations research teams in most of their military branches to find efficient ways to utilize resources like men, weapons and machinery. The massive deployment of manpower, supplies, planes, ships and other resources created the need to find the most efficient way to utilize them. At the end of World War II, the successful operations research techniques were incorporated into decision-making in many business organizations.
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14. (c) Elton Mayo In 1927 Elton Mayo and his team carried out studies at Western Electric’s Hawthorne plant. The initial studies tried to examine the relationship between light intensity on the shop floor and employee productivity. Finally, Mayo and his team concluded that it was not light or other physical conditions, but attention and importance the workers received during the study that was responsible for their increased productivity.
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15. (c) Expert systems In the 1990s, many new concepts and technologies like artificial intelligence and expert systems influenced manufacturing systems. Programmable machines (like robots) were introduced in the production process to perform tasks that were repetitive or hazardous for a human being to perform.
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16. (c) Higher maintenance costs Higher maintenance costs are a major disadvantage of computerization. Initial establishment and implementation costs are so huge that they prompt organizations to defer computerization. Besides, the cost of maintaining these systems is also high. 17. (b) ii & iii
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The key objectives of an operations manager are to minimize inventory and maximize resource utilization. Maximizing customer satisfaction is a primary concern for the top management and the marketing department. However, customer satisfaction is only a secondary objective for the operations manager. 18. (a) Quality and on-time delivery In customized product design, the emphasis is on quality and on ensuring delivery on-time, rather than on cost. In standardized product design systems, importance is given to cost-control and quality rather than on the flexibility of the system. 19. (c) Labor costs
Labor costs fall under direct costs while administrative costs, maintenance costs, and rentals fall under indirect costs. 72
Part A 20. (b) Top-level managers In an organization, corporate objectives are developed by the top-level managers. 21. (d) All of the above All the options are considered while formulating corporate objectives.
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22. (b) Standardized product design Standardized production is used when a company manufactures a limited variety of products in large batches to reduce costs. 23. (c) i & iii Feasibility studies evaluate whether the idea generated is feasible both technically and economically. Such studies test whether production is technically feasible and the product profitable to produce and market.
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24. (b) Strategic business units Strategic business units (SBU) are autonomous operating divisions which have independent control over their own functions. Every SBU has its own business strategy, objectives and competitors and these will often be different from those of the parent company.
25. (c) Lower costs As a result of manufacturing steel by processing steel scrap, costs are substantially lower to the company than to the large steel plants producing primary steel from iron ore. This lower-cost process gives Nucor a price advantage over competitors.
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26. (a) Designing the production system Designing the production system is one of the key responsibilities of any operations manager. It involves selecting the product design, the production system and the inventory policy for finished goods for each product line.
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27. (a) i and ii Industrial products like boilers and turbines are made based on specific requirements of customers, while televisions and ceiling fans are produced in large numbers (also termed as standardized production) where customization of each piece is not possible.
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28. (b) Growth stage During growth stage the sales volume grows exponentially and profits are registered for the firm. In introduction stage, sales growth is weak, in maturity stage it is stagnant, and in the decline stage the sales decline.
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29. (b) The role of operations department decreases as the product moves up the lifecycle As the product moves up the lifecycle, the organization’s focus shifts towards increasing the market share and improving the quality of the product. Hence, the role of operations department decreases.
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30. (b) A prototype helps test the product performance under standard conditions A prototype may not have all the features of the final product however it has all the product’s basic characteristics. The prototype is tested under standard conditions and defects are noted. This would enable the organization to improve the product in terms of quality and performance. Once the final structure of the prototype is in place, the prototype design is evaluated for profitability. 31. (d) Facility planning Facility planning deals with location of the facility and its layout. Decisions regarding facility location are based on the accessibility to raw material and nearness to markets. Allocation of resource deals with the allotment of existing resources like men, machines, material, etc, to different strategic alternatives. Technology selection and process development deals with selection of the most suitable technology for producing products and product design and development is used to develop new products. 73
Operations Management 32. (a) Organization strategy The operations strategy should be in accordance with the organization strategy, and the organization strategy should in turn be in line with the corporate vision and mission. If the organization strategy is not consistent with the corporate vision and mission, the organization cannot survive in the competitive marketplace. Further, operations strategies should be consistent with strategies in other functional areas such as marketing, finance and human resources.
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33. (a) Strategic planning is concerned with long-term planning while operational planning involves short-term day-to-day planning Strategic planning is different from operational planning in the scope of its application. Strategic planning is concerned with long-term planning and involves selection of target markets and distribution channels, whereas operational planning is concerned with short term, day-to-day planning.
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34. (c) It should focus on having short-term operational superiority over competitors Operational superiority is very important for maintaining the competitive position of manufacturing and service organizations. The operations strategy should be flexible so that it can support a product or service through its entire life cycle and accommodate future changes in market demand or business objectives. 35. (b) Product variety When an organization focuses on product variety as a competitive advantage it offers a large number of different products to various customer segments. This is true in the case of HDFC that offers different financial products to different segments.
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= 10,00,000/2,00,000 = 5 years
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36. (a) 5 years Payback period = Net investment / Expected annual income
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37. (b) 4.8 years Payback period = Net investment / Expected annual income = 12,00,000/2,50,000 = 4.8 years
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38. (c) 5.3 years Payback period = Net investment / Expected annual income
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= 8,00,000/1,50,000 = 5.3 years
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39. (b) Project B Of all the investments, Project B is the best option. Though Rs.12, 00,000 are invested in this project, the payback period is the shortest due to greater expected annual income. 40. (b) Optimize the use of resources for best strategic use The main objectives behind allocating resources to different alternatives (which are also called strategic alternatives) include minimizing wastage in the facilities and employing resources to the best possible use. 41. (d) i, ii, iii and iv Demand for a product is influenced by conditions like the price of the product, price of substitutes, price and availability of complementary products, income of consumers, their tastes and preferences, and their reactions to changes in price.
74
Part A 42. (b) Responsiveness Forecasted demand may not be equal to actual (true) demand. The organization has to adjust its operations according to the actual demand on a real-time basis. This characteristic of the organization is termed as responsiveness. The quicker the organization is in responding to the changes in the forecasted demand, the more successful it would be in meeting the actual demand. 43. (b) Forecast error
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A forecasting error is the difference between the forecasted demand for a particular period and the actual demand in that period. 44. (b) Decrease the value of α
Overreacting to the most recent demand implies that the demand forecasted is very optimistic. Therefore to reduce the forecasted demand, the value of α should be reduced.
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45. (a) Low
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A high alpha is used to stabilize unstable demand (like that for new products) and a low alpha is used to even a stable demand. 46. (d) All of the above Demand forecasting is used to develop marketing plans, facilities plans and financial plans.
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47. (b) Delphi Method Qualitative methods are judgmental and subjective in nature and are based on the estimates and opinions of individuals like experts in case of Delphi method and consumers in case of market research method. 48. (d) Exponential smoothing is used to determine independent demand Exponential smoothing is used to determine dependent demand
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49. (d) Forecasts are created using only quantitative data Forecasts use both qualitative as well as quantitative data to forecast demand.
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50. (a) Time-series methods
Time-series methods uses past (historical) data to predict future demand.
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51. (d) Plant capacity
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Plant capacity is not a factor that is considered to forecast demand. Operations managers may increase or decrease the running capacity of the plant depending on the demand. Hence, it cannot be considered a factor that influences demand. Rather plant capacity is influenced by the demand.
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52. (d) Mean absolute percentage error Mean absolute percentage error (MAPE) provides information on the extent of forecast error in relative terms while the other measures provide information in absolute terms. 53. (c) Spare parts inventory Spare parts inventory does not generally require long-term forecasts as they are more an operational issue than strategic issue. 54. (d) Extent of accuracy of demand forecasts Demand is influenced by conditions like the price of a product, and the price of its substitute and complementary products; the incomes of customers, their expectations regarding price changes, and their tastes and preferences; the number of customers and their travel costs to the point of purchase (PoP). Accurate forecasts of demand help organizations to suitably increase or reduce production. Therefore accurate forecasts, as such, do not influence the demand for the product. They instead help the management in decision-making relating to product demand. 75
Operations Management 55. (d) Increased locking up of working capital as inventory Working capital is locked up as inventory, only when there is excess production. Excess production happens when demand is overestimated. However, when demand is underestimated, production will not be sufficient to meet the demand. Hence, there are greater chances of lockingup of working capital in the form of inventory as a consequence of overestimation of demand rather than underestimation.
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56. (a) Short-term demand Short-term demand estimates for individual products are generally very detailed, and are used to plan and schedule production operations. Long-term and medium-term demand forecasts are used for making location, layout and capacity decisions.
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57. (b) Aggregate product demand forecast On the basis of the aggregate product demand forecast (that is obtained in terms of sales volume) individual forecasts are made for labor and/or material requirements. Hence, raw material demand forecast and labor demand forecast (types of short term demand forecasts), are derived from aggregate product demand forecast.
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58. (d) Planning and controlling
Forecasting demand is most important to the planning and control functions of management. Forecasting is a step in the planning process where plans are developed based on forecasts. Under the control function, actual results are compared with that of planned standards (based on forecasts) and deviations are identified and corrected.
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59. (b) The geographical distance between the experts In Delphi method, forecast is made by the coordinator after considering the opinions of a panel of experts who are geographically apart. Also, as the membership of each expert is concealed from others, no issue of leadership arises during the process. Thus geographical distance between the experts cannot be a hindrance to the success, as the experts need not communicate with each other. The success of this technique depends on the talent of the coordinator and the absence of bias on the part of the experts. Two main problems inherent in this method are that opinions of members might be influenced by a socially dominant individual. Members may fear loss of credibility if they back away from a publicly stated opinion.
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60. 87 In the six-month simple moving average technique, the forecast for the seventh month will be the average of the preceding six months. Thus, the forecast for the month of July is the average demand of generator sets during Jan, Feb, March, April, May, and June. Similarly, the forecast for January 2007 would be the average of demand during July, Aug, Sep, Oct, Nov, and Dec months.
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Forecast for January 2007 = (87 + 88 + 86 +89 + 86 + 87) / 6 = 523/6 = 87.1666 (approx 87)
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January February March April May June July August September October November December
78 80 85 82 84 85 87 88 86 89 86 87
82.33 83.83
86.83 87.17
Part A 61. (a) 1 Each element in the weighted moving average method is weighted by a factor and the sum of the weights should be equal to one. 62. (c) Trial & error
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Certain weights are assigned to each element and managers use past experience (not future forecast) as well as the trial and error method to calculate these weights. The simple moving average method and exponential smoothing are other types of time series forecasting methods like the weighted forecasting method. 63. (c) Exponential smoothing
64. (c) Larger data storage space
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The exponential smoothing method is based on the assumption that the most recent data is a better indicator of future trends than past data. The method is useful when demand for products exhibit seasonal tendencies. The simple moving average method is effective only when a product does not experience fluctuation in demand over a period of time and past demand for the product was not seasonal. Delphi method is a qualitative forecasting method The advantages of the exponential smoothing method are: availability of standard software packages; relatively little data storage and computational requirements; accuracy of forecasts and easy understanding of results. 65. (a) Latest time period
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66. (b) WMAt+1 =
∑C A t
t
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t =1
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In the exponential smoothing method, the demand for the most recent time period is given maximum weightage. The weights assigned to the preceding periods decrease exponentially.
Where,
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∑C A
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The formula for calculating the weighted moving average is WMAt+1 =
t
t
t =1
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WMAt+1 = Weighted moving average at the end of the time period t, At = Actual demand in time period t, Ct = Percentage weight given to time period t, 0 ≤ Ct ≤ 1 and C1 + C2 + C3+... + Ct = 1
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67. (c) i and ii
Smoothing constant ‘α’ shows the effects of past demand on future demand forecasts and helps smoothen out the effects of any noise. But, α is not used to predict future trends in demand.
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68. (d) Y intercept or constant value In linear regression, the relationship between the dependent variable and a single independent variable is defined by a straight line. Y = a + bX where, Y = Value of the dependent variable, X = Value of the independent variable, a = Y intercept (Constant value), and b = Slope of the line, ‘a’ is the Y-intercept and its value defines the point at which the regression line crosses the Y-axis. 69. (a) If the slope is positive, then the trend line increases positively If the slope is positive, then the trend line increases positively. If the slope is negative, then the trend line decreases negatively. 77
Operations Management 70. (b) 6.67 Slope represents the variation in Y for a unit change in X. Here, Y represents sales and X represents advertising expenditure. To calculate the slope, change in sales, represented in units, should be converted into percentage. Hence, slope can be calculated by: Percentage of change in sales/percentage of change in advertising
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{[(20000-15000)/15000] x 100} / 5 = 6.666 = 6.67 (approx) 71. (a) Exponential smoothing
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For short-range decisions like purchasing, job scheduling, project assignment and machine scheduling, time series techniques like moving averages (SMA or WMA) and exponential smoothing are the most preferred forecasting methods. Regression analysis is used in medium range forecasting as well as long term forecasting. Linear regression analysis is useful in long term forecasting of major occurrences and aggregate planning. 72. (b) Delphi method
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Delphi method is used when no data is available or if it is too expensive to collect data. The other three methods primarily require data to forecast demand. 73. (d) None of the above
No forecasting method, either qualitative, time series or causal, gives 100% accurate forecasts. They can only be highly accurate and 100% accuracy is not possible.
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74. (a) Cost is directly proportional to extent of accuracy
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Accuracy of forecasts depends on data availability. Forecasts can be more accurate when more data is available. Also, it is costly to collect huge volumes of data. Hence, to avoid these costs, some organizations use readily available data at low costs and end up with inaccurate forecasts. Thus, accurate forecasts come at a dearer price. 75. (b) 6
Actual Demand (A)
(A - F)
|A - F|
500
510
10
10
510
510
0
0
520
515
-5
5
540
550
10
10
550
545
-5
5
10
30
Fo rI
BS
U
se
Demand Forecast (F)
Sum
Solution:
Mean absolute deviation = MAD = = 30/5 = 6
78
1 n
n
∑ A t − Ft t =1
Part A 76. (c) 50 Actual Demand (A)
(A - F)
(A - F)2
500
510
10
100
510
510
0
0
520
515
-5
25
540
550
10
100
550
545
-5
25
10
250
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Sum Solution:
MSE =
= =
250/5
=
50
77. (a) 2
1 n
n
∑ (A
− Ft ) 2
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Mean Square Error
t
t =1
Actual Demand (A)
(A - F)
500
510
10
510
0
515
-5
540
550
10
550
545
-5
O
U
se
520
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Demand Forecast (F)
510
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Demand Forecast (F)
10
BS
Sum
Solution:
1 n
n
∑ (A
t
− Ft )
t =1
Fo rI
MFE =
= 10/5 =2
78. (c) 1.14 Demand Forecast (F) 500 510
Actual Demand (A) 510
(A - F)
|A - F|
(|A-D|/2) x 100
10
10
1.96
510
0
0
0
79
Operations Management 520
515
-5
5
0.97
540
550
10
10
1.82
550
545
-5
5
0.92
10
30
5.67
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Sum Solution:
MAPE =
100 n
n
A t − Ft
t =1
At
∑
79. (a) 1.67
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MAPE = 5.67/5 = 1.134 Actual Demand
500
510
Deviation (A-F) 10
510
510
0
520
515
-5
540
550
10
550
545
-5
Sum
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Cl as s
Demand Forecast
10
O
n Actual Demand − Forecast demand TS = ∑ MAD i =1 TS = 10/6
se
= 1.67
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80. (d) Base demand Base demand is the average of sales over a given time period. This figure can be taken as the right forecast if the demand for a product is not impacted by seasonal, trend, cyclic, or promotional factors.
Fo rI
BS
81. (c) Cyclical component Cyclic component refers to changes in demand patterns, which exist for more than a year. These changes could either show an upward or downward movement. A good example is the demand for luxury products that is linked with the business cycle. Sales usually increase during the boom phase and slow-down during recession.
82. (b) Promotional component The sales of LG televisions doubled when LG increased its advertising budget. Here, LG gave more weightage to the promotional component to arrive at an aggressive estimate.
83. (c) The demand for camera mobile phones in India has increased steeply since 2001 The demand for camera mobile phones has shown a positive trend over a period of time. The longterm pattern is clearly visible in this example. The prices of gold increased and decreased, leading to rise and fall in demand. Hence, it is cyclical. The Airtel example highlights the promotional component, and the demand for wrist watches displays the irregular component.
80
Part A 84. (d) Understand objectives – identify influencing factors – identify customer segments – select forecasting technique The forecasting process starts with understanding its objectives. Then, all the major influencing factors are identified. Next, all possible customer segments in the market are marked out and their impact on the forecast has to be understood. Finally, a suitable forecasting technique has to be selected.
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85. (b) Time series methods
Time series analysis can be categorized into two broad categories, based on the complexity involved: static and adaptive. Static methods assume that estimates of trend and seasonal components do not vary from year to year. Adaptive forecasting is an advanced form of time series analysis, where trend and seasonal components are adjusted after each demand observation. 86. (b) Static forecasting method
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Static forecasting methods assume that estimates of trend and seasonal components do not vary from year to year. In this method, estimates of trend and seasonal components are determined based on historical data, which is projected to obtain future demand data. 87. (d) Provides optimal solutions that are always practical
One of the main drawbacks of these models is that the solution obtained may not always be the optimal one for the real problem. This is because these models do not take into account nonquantifiable criteria. Sometimes, models may provide a solution that cannot be put into practice. 88. (b) Nature of demand
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There are three elements of constrained optimization models: decision variables, objective functions and constraints. 89. (c) Motivation
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90. (c) Feasible solution
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Motivational levels are qualitative in nature. Linear programming deals with different variables that need to be quantified. A feasible solution satisfies all the restrictions of a linear programming problem.
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91. (a) Constraint
BS
Constraints are practical limitations restricting the choice of decision variables. In this case the practical limitation is the availability of man hours that is restricted to 600 hours. 92. (c) Linear programming
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Linear programming is used to allocate resources to strategic alternatives to ensure that they are utilized optimally. Exponential smoothing and regression analysis are methods to forecast demand for a product. Decision tree analysis is another operations technique helpful in decision-making like linear programming. 93. (c) Destination requirements Destination requirement is a constraint considered while arriving at transportation decisions and not production plan decisions. 94. (b) Maximize Z = 200x + 150y As profits have to be maximized, profits from each telephone model have to be considered. Hence, the objective function would be maximize Z = 200x + 150y, where 200 and 150 represent profit per unit of each model in rupees. 81
Operations Management 95. (a) 2x + y ≤ 650 Total machine hours are 650. The superior quality telephone takes two hours (2x) while the other takes one hour (y) to be produced. Hence, the total number of telephones produced using available machine hours has to be less than or equal to 650 hours. Thus, 2x + y ≤ 650 96. (d) x + y ≤ 600 97. (b) Rs. 70000 Substitute the number of telephones manufactured in the objective function.
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Z = 200x + 150y = 200(200) + 150(200) = 40000 + 30000 = 70000
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The total demand is 600 units and production should not exceed demand. Hence, x + y ≤ 600.
98. (d) x = 200, y = 200
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Options (a) and (b) are not feasible as they violate the constraint on total machine hours (650 hours). Substituting the number of telephones manufactured in the objective function Z = 200x + 150y for options (c) and (d), option (d) gives a maximum profit of Rs.70000. 99. (b) Optimality
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The assumptions that are made while constructing a linear programming problem are proportionality, additivity, divisibility, and certainty. Using these, problems are solved for achieving optimality, i.e., achieving an optimum solution. Hence, optimality is not an assumption but a result. 100. (a) Profits
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Profits can be maximized while inventory, advertising expenditure and production costs have to be minimized. Hence, profits can be considered for a maximizing function.
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101. (c) 3x + 2y = 120
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The coordinates of the line are (40, 0) and (0, 60). When these coordinates are substituted in each of the above options, we get LHS = RHS only in option (c). Hence, the constraint is 3x + 2y = 120. 102. (d) (0,60), (40,0), (80,0), (80,60)
BS
ABCS is the feasible region. Coordinates of A – (0,60), Coordinates of B – (40,0), Coordinates of C – (80,0), and Coordinates of S – (80,60).
Fo rI
103. (a) x = 80
The line passes through the coordinates (80,0) At that point, the value of x=80 and y=0. Thus, x = 80 would be the equation of the line. 104. (c) 800
The coordinates are (0,60), (40,0), (80,0), (80,60) At A(0,60), Z = 20(0) + 35(60) = 2100 At B(40,0), Z = 20(40) + 35(0) = 800 At C(80,0), Z = 20(80) + 35(0) = 1600 At S(80,60), Z = 20(80) + 35(60) = 3700
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Part A 105. (d) The resources considered in the linear programming problem should have unlimited supply The resources in any linear programming problem are scarce and the objective is to use them optimally.
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106. (a) ii, i, and iii The first and foremost step in formulating a linear programming problem is to identify the decision variables. Next is to identify the objective function, and finally comes identifying constraints present in the problem. 107. (c) In the feasible region A feasible region is obtained when constraints are plotted on the graph. The optimum solution always lies in the feasible region.
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108. (a) Adding a slack variable A slack variable is always added to the left-hand side of the ‘lesser than or equal to’ inequality (constraint) to convert it to an equation.
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109. (b) Iteration An iteration of the simplex method forms the sequence of steps in moving from one basic feasible solution to another. 110. (c) To minimize the sum of all transportation costs The objective of any transportation problem is to minimize the transportation costs.
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111. (d) Stepping stone method While methods mentioned in options (a), (b), and (c) can be used to develop the initial feasible solution, the stepping stone method is used to test the solution for optimality.
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112. (c) Vogel’s approximation method Vogel’s Approximation Method is most effective and preferred over other methods as it usually results in an optimal or a near-optimal solution.
BS
U
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113. (b) Additivity The objective function and constraints include several decision variables. Here, it is assumed that the total value of the objective function and each constraint is equal to the sum of individual contributions from each decision variable. It means that the model does not consider any synergistic or anti-synergistic effects among decision variables while calculating the total value for the objective function.
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114. (d) Customized service Industrial design services vary from company to company and depend upon their products and target markets. Hence they are categorized as customized services. 115. (d) All of the above The term ‘structure’ has a broad meaning and includes issues like the number of plants, size of plants and their location, plant capacity, choice of equipment and process technology, production control, workforce management, etc. 116. (c) Increases to a certain level As the price of a commodity decreases, demand increases as consumers buy more of the commodity. However, this is observed only until a certain point. Beyond this there will not be a proportionate increase in demand when prices are decreased. 83
Operations Management 117. (c) Backward integration Backward integration refers to gaining ownership over the source of raw material supplies and other materials required for production. Forward integration refers to gaining ownership of frontend activities (distribution networks through which products are distributed to the customers).
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118. (a) Level of training for distributor employees Option (a) is not a factor while making decisions on backward integration. It is among forward integration issues. Backward integration decisions are concerned with ‘make or buy’ decisions, availability of funds, return on investments, and long-term relationships with the suppliers of raw materials.
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119. (d) i, ii, and iii The basic objectives of process planning and design in an organization are to produce products with desired quality, at the right time, and in required quantities. To produce products below competitor prices is not a basic objective; rather it is dependant on the strategy of the company.
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120. (a) Product flexibility Product flexibility is the ability of the production system to shift quickly from producing one product to another. Some business strategies call for the production of many custom-designed products/services, in small lots. Product/service flexibility is required in such cases. 121. (a) Square In an assembly chart, operations are represented by circles and inspections by squares.
O
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122. (b) Less manufacturing cycle time The process-focused production system may lead to loss of time, especially when a major portion of production time includes the time in which jobs are waiting to be processed in different departments. Also, process-focused production systems require greater employee skill, more employee training, supervision, and complex production control.
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123. (b) Lower initial investments Product focused production systems entail high investments initially in terms of capital equipment and machinery.
Fo rI
BS
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124. (c) Discrete unit processing Discrete unit manufacturing refers to the production of distinct products like radio or television sets. These products can be made in batches, and the system can be shifted to produce other products in similar batches. However, assembly lines and continuous processing do not help in changing jobs. Job shop process is used to produce highly customized products where one job can be carried out at one point of time on one machine. The flexibility is minimal here. Hence, ABC must use discrete unit processing. 125. (c) Process planning Process planning forms the basis for designing factory buildings and facility layouts, and selecting production equipment. It also has a bearing on quality control, job design and capacity in different facilities of the organization. 126. (c) Employee skill level requirements Operations managers generally make process-design decisions after taking into consideration several factors like nature of demand, degree of vertical integration, flexibility, degree of automation, quality level, and degree of customer contact. However, employee skill level requirements are dependent on the type of process plan decided and are considered only after developing the process plans.
84
Part A 127. (a) As demand is seasonal Pepsi cola should not be produced in winter season Seasonality of demand is not directly linked to the production because companies focus on meeting annual demand. A company may bring down production capacity in the lean season and increase it to peak capacity during high demand. Also, production can be beefed up just before the season begins and inventory can be stocked to meet the excess demand.
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128. (d) Ability of the organization to market its products Ability of the organization to market its products is a factor that affects the forward integration process of the organization, while the remaining options refer to the factors affecting the backward integration in an organization.
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129. (b) It helps decentralize the overheads Vertical integration relieves an organization from excessive dependence on the purchasing function and provides flexibility in manufacturing. This can result in an increase in profits due to centralized overheads, pooling of R&D and design efforts, and economies of scale.
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130. (b) Backward integration The raw material for a readymade garment retailer is fabrics. Hence, when Eastside acquired a textile mill, it gained ownership of a supplier leading to greater control over fabric production and supply. This is a backward integration strategy. 131. (a) Product-focused systems In this type of process design, products or services tend to flow along linear paths without backtracking or sidetracking. Items follow a similar production sequence, which can be anything from a pipeline (for oil) to an assembly line (for televisions or radios).
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132. (b) Process manufacturing Process manufacturing involves the movement of materials between different operations such as screening, crushing, storing, mixing, milling, blending, cooking, fermenting, evaporating and distilling. It is widely applied in the cement, plastic, paper, chemical, steel and brewing industries.
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133. (a) Product-focused systems Product-focused systems require higher initial investments because of the use of specialized and expensive fixed position processing equipment in the production process.
BS
U
134. (c) i, ii, and iii In process-focused production systems, all operations are grouped according to the type of process. The system is also referred to as an intermittent production system because production is performed on products intermittently (that is on a start and stop basis). In this system, the products move from department to department in batches (jobs) that are usually determined by customers’ orders. The diversity of customer orders is a primary criterion for adopting a process-focused production system.
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135. (d) It requires high employee skills Organizations draw the following benefits by implementing a coding system. Coding gives a clear picture of the steps that are involved in producing a part. Hence, it is easy to route the parts during production. Coding results in standardization of part designs. A database can be maintained with the design details of old parts. Whenever a new product is to be designed, the codes of existing products can be accessed to identify similar parts present. This simplifies the process of manufacturing new products. Parts with similar characteristics can be grouped into families as similar products are generally produced in similar ways. 136. (d) Increase in the in-process inventory In cellular manufacturing, parts spend less time in waiting before they are processed. Hence, the in-process inventory levels get reduced. 85
Operations Management 137. (a) Assembly charts In assembly charts it is standard practice to indicate operations by circles and inspections by squares. Gantt charts and flow charts are entirely different in the sense that they are used for scheduling of operations in a manufacturing plant. Assembly and process charts are used for process planning.
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138. (a) Job shop production systems Job shop production systems involve production of customized products. As a result, product designs vary between different customer orders. Since the customization is high, number of products produced in a given time period is very low.
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139. (c) The total cost of production increases as the output volume increases The product-focused systems require initial investments in the form of expensive machinery and this result in high initial fixed costs. But, as the product-focused systems produce a single or few varieties of products, the variable costs remain low. Product-focused systems are used to produce bulk volumes and as the volume of output increases, the total cost of production decreases.
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140. (b) Higher fixed costs and lower variable costs Product focused systems need high initial costs (fixed costs); however operating variable costs remain low due to limited scope for product variety. 141. (c) i, ii, iii Except alternative ‘iv’, all others are reasons for companies to set up facilities in select zones. Low cost of manpower is a country-specific factor and does not significantly differ within and outside exclusive zones.
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142. (b) Proximity to input sources A manufacturing facility that uses bulk raw materials has to be in proximity to raw material source. In this case, bauxite is the basic raw material for aluminum production and it is available from mines.
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143. (c) Healthcare industry Hospitals are service organizations where location plays a major factor. People prefer to go to a hospital close to their homes. Since services cannot be stored, they have to be developed and delivered in close contact with customers. Hence, proximity to customers is necessary.
U
144. (b) The physical distribution of various departments for ease in production A facility layout represents the physical spread of all the equipment, machinery, parts, etc. in a plant/facility. They are distributed so as to ensure smooth work flow and maximum efficiency.
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BS
145. (a) Equipment is dedicated to the manufacture of a narrow product line Product layout is used to produce a narrow product line and all machinery and equipment is dedicated for this. Material handling costs are low as there is less scope for product change over. Product layouts are extensively used to produce standard products and not customized products. 146. (a) Graphic and schematic analysis In Graphic and schematic analysis templates, two-dimensional cutouts of equipment drawn to scale are the most common layout-planning tools. Templates are moved about within a scaled model of the walls and columns of a facility to identify the best layout through trial and error. These templates are also used for developing product and fixed-position layouts. Managers can use various models like load distance and computer models. CRAFT is a type of computer model. 147. (c) Suitability of climate Cotton yarn manufacturing units require a certain level of humidity in the atmosphere throughout the year which is present in only certain places. This is because cotton is affected by high humidity levels. Hence, many companies are set up in low humidity locations. 86
Part A 148. (b) To serve the customer better Better customer service is a primary objective of the marketing department and not the operations department. 149. (d) Cost of technology
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Plant location decisions fall within the internal environment of the organization while technology is part of the macro environment. The cost of acquiring technology is not a direct function of plant location. 150. (c) Fixed position layout
Fixed position layout involves movement of men, machines and equipment to the product, which remains stationary. The product here may be bulky, large, heavy or fragile. Layout adopted in ship building is an example of fixed position layout.
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151. (d) CRAFT analysis
CRAFT analysis is used for developing a process layout and not for determining plant location.
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152. (a) A retailer
The success of a retail organization primarily depends on the number of customers visiting the facility. Here, the location is more market/customer oriented than supply oriented. For example, discount stores are present in downtown areas of most cities in America where the low income population resides. 153. (c) Employee layout
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Employee layout is not a type of facility layout. The various types of layouts are process layout, product layout, hybrid layout and fixed position layout. 154. (b) Grouping technology layout
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In a grouping technology layout (also called cellular manufacturing layout), dissimilar machines are grouped into cells and each cell functions like a product layout within a larger job shop or process layout. 155. (b) When expansion of the existing plant is possible
BS
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A new location is necessary under all conditions except option ‘b’. The need for selection of facility location also arises when there is no possibility of expanding the existing plant and the firm is compelled to search for a new location. 156. (c) iii, ii, i, iv
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A firm first looks out for a location and identifies two or more possible locations. It then selects the best location from available choices. After selecting the location, it designs a layout. Firms can then revise or redesign the layout in the future depending on its strategies (expansion etc,). 157. (b) In a town/city
The location of the facility affects the company’s ability to serve its customers quickly and conveniently. Rahul must set up the printing press within reach of target markets. In this case, a town or city is an ideal location as people who wish to publish their work live largely in cities. 158. (b) High transportation costs If selection of a location leads to high transportation costs, it would reduce profitability of the firm. Low labor costs, availability of public utility services and tax holidays are factors that would encourage firms to choose a particular location. 87
Operations Management 159. (c) Close to the raw material source Cement plants are generally located near limestone quarries. This is because raw material required is huge and transportation cost over long distances cannot offset the benefits accrued from other options mentioned in the question.
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160. (a) Functional layouts Process layouts, also known as functional layouts or job-shop layouts, involve grouping of similar equipment or functions (for instance, lathe machines in one section, drilling machines in another section and all activities related to assembling the product in another area, etc.). 161. (b) Proximity to markets The major markets for auto-ancillary units are auto makers like Hyundai and Ford. Proximity to these plants enables them to service clients more effectively.
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162. (d) Availability of real estate Government provides many benefits to industries that set up operations in special export zones. In addition to tax holidays, infrastructure support and low interest loans from banks, etc, companies are provided land at low costs. The land provided is not prime real estate as SEZs are located away from cities or towns. 163. (c) Define location objectives – identify relevant decision criteria – relate objectives to the criteria – evaluate alternative locations – select the best location Though there is no standard procedure, the following steps serve as a guideline for location decisions. The correct sequence includes: define location objectives and associated constraints, identify relevant decision criteria, relate objectives to the criteria using appropriate models, do field research to relevant data and use models to evaluate alternative locations and select the location that best satisfies the criteria.
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164. (d) Competitors Location objectives and associated constraints are defined on the basis of the views and requirements of promoters, owners, employees, suppliers and customers of the firm. Competitor views are not an important factor.
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165. (a) Revenue From the figure it is evident that there is only one line representing revenue for the two locations, while fixed costs, variable costs (difference between total and fixed costs) and total costs are different for the two locations. Hence, revenue can be considered the same for both locations.
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BS
166. (c) 25000 Solution: Price per unit = variable cost + contribution 50 = 30 + contribution Hence, contribution per unit = (Rs50 - Rs30) = Rs.20 Break-even point = fixed cost / contribution per unit = 500000/20 = 25000 units Hence, 25000 units are required for the firm to break even. 167. (c) Delhi Solution: Total costs = total variable cost + fixed cost Chandigarh = (300 x 1000) + 400000 = 700000
88
Part A Gurgaon Delhi
= (285 x 1000) + 450000 = 735000 = (275 x 1000) + 500000 = 775000
168. (a) Chandigarh Solution: Total revenue when annual ouput is 1000 units
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Delhi would have the highest total cost per year if annual output of a firm located there is 1000 units.
= 1000 x 1000 = Rs.10,00,000
Profit = Total revenue – Total costs 1000000 – 700000 = 300000
Profit at Gurgaon
=
1000000 – 735000 = 265000
Profit at Gurgaon
=
1000000 – 775000 = 225000
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Profit at Chandigarh =
Chandigarh would have the highest annual profit if annual production is 1000 units and selling price per unit is Rs.1000.
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169. (a) Chandigarh Though variable costs are higher, annual profits are highest at Chandigarh. Hence, in terms of profit, it is a better choice over Delhi and Gurgaon. 170. (c) It reduces space utilization A good layout always helps increase space and machine utilization.
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171. (a) Process layout Process layouts, which are also known as functional layouts or job-shop layouts, involve grouping of similar equipment or functions (all lathe machines in one area, all drilling machines in another area and all assembling works in some other area).
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172. (b) General purpose machines Process layouts mostly use general purpose machines that can change rapidly to new operations for different product designs.
BS
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173. (d) Increased utilization of men and material In process layouts, men and machines are utilized most efficiently, owing to use of general purpose equipment. The other options are not advantages. Production requires more time as work-inprogress has to travel from one place to another. This increases accumulation of work at different stages of production.
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174. (b) Product layout Product layouts are designed to accommodate only a few, mostly one or two, standardized products and process designs. Process, hybrid and fixed position layouts allow production of customized products. 175. (c) Ship-building
Ship-building is an example of fixed position layout where all the men, material and equipment are brought to the ship that is stationary. 176. (b) Process, product In a fabrication and assembly plant, fabrication is done on process layout while assembly is done on product layout. Fabrication involves different processes like drilling, grinding, etc. Hence, it requires a process layout. In the assembly section, each part is assembled one after the other and does not require any deviations. Thus, a product layout can be used for assembly. 89
Operations Management 177. (b) CRAFT model Except line balancing, all other options are models used in process layout development. CRAFT model finds a layout by evaluating thousands of alternatives quickly. CRAFT has the capacity to handle plants comprising up to 40 work centers of different shapes and sizes. It can account for mobile and immobile process centers. The model considers various types of layouts and different materials-handling methods that a firm can use in its work centers.
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178. (c) Load distance model
The load distance model is an important model used to minimize material flow in a layout. In this model, the number of loads (standardized amount of material) moved between each pair of process centers over a period of time and distances between them are considered. Line balancing is used to determine product layouts.
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179. (b) Japan
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In Japan, space availability is a major constraint as it is a very small nation in terms of geographic area. Hence, layouts were designed to use minimal available space. In contrast, in USA, India and China, as space is not a problem, comparatively larger layouts are designed. 180. (d) i/q, ii/r, iii/p, iv/s
CRAFT is used to analyze and evaluate thousands of alternative layouts very quickly. Load distance model is used to reduce material movement costs in a production plant. Line balancing is used to study workflow in an assembly line. Graphic and schematic analysis is used to study twodimensional scaled drawings of equipment and machinery to arrive at the best possible layout.
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181. (a) Layouts focusing on customer receiving and servicing
182. (c) Restaurants
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Two extremely different types of layout of service facilities exist based on degrees of customer contact. At one extreme is the layout totally designed around customer-receiving service functions. The other is the layout designed around technology, processing of physical materials and production efficiency.
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In a restaurant, the service layout has to cater to activities of receiving and servicing customers (customer focus) as well as processing and preparation of food items (process layout).
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183. (d) 8.11, 10.06
BS
Solution: The coordinates of the center of gravity can be identified by
∑ (X V ) ∑V i
Fo rI
Xc = Yc =
i
i
∑ (Y V ) ∑V i
i
i
Where,
Xc = X coordinate of the center of gravity, Yc = Y coordinate of the center of gravity, Vi = Volume of items transported to and from location i, Xi = X coordinate of location i, Yi= Y coordinate of the location i
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Part A X
Y
Volume (Vi)
ViXi
ViYi
A
4
4
60
240
240
B
12
6
90
1080
540
C
10
14
110
1100
1540
D
5
13
100
500
1300
∑V
Total
i
= 360
∑V X i
i
= 2920
Volume-weighted X coordinate = Xc =
∑ (X V ) ∑V i i
Xc = 2920/360 = 8.11 Volume-weighted Y coordinate = Yc =
i
i
= 3620
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i
∑VY
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Substituting these values in the equation for
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Distribution Center
∑V Y ∑V i
i
i
Yc = 3620/360 = 10.06
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The X and Y coordinates of the point of center of gravity are 8.11 and 10.06.
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184. (d) Historical analogy method The historical analogy method is a forecasting method. The other options – point rate method, center of gravity method and analytical Delphi method are standard methods to locate the optimal location for a firm.
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185. (a) Form panels - Identify trends and opportunities - Determine directions and strategic goals of the organization - Develop alternatives - Prioritize alternatives Analytic Delphi Method helps managers take complex multi-location decisions. This method requires the participation of a coordinating panel, forecasting panel and strategic panel. The coordinating team selects two teams from within the organization, the forecasting and strategic panels. These two panels participate in two Delphi inquiries. In the first, the coordinating panel uses a questionnaire to elicit information from the forecasting panel regarding future trends, threats and opportunities. In most cases, the process is repeated several times till consensus is reached. In the next step, information collected through the first Delphi inquiry is given to the strategic panel. This information is used by the strategic panel in the second Delphi inquiry to identify the organization's direction and goals. After strategic goals have been identified, the strategic panel develops various alternatives. Finally, all alternatives generated in the previous step are presented to members of the strategic panel to obtain their subjective value judgments.
186. (d) They can be generalized to all organizations LDRs cannot be generalized to all the organizations. They are organization-specific and must be tailor-made to fit each organization’s requirements. Extensive mathematical analysis is required to arrive at the LDRs for a specific organization. 187. (b) Job design Job design is the basis for job analysis. 91
Operations Management 188. (c) Job description Job description describes the tasks, duties and responsibilities of a job. It includes information regarding job content, job requirements in terms of necessary and desirable qualifications, work experience, mental and physical effort involved, scope of responsibilities, nature of reporting relationships and so on.
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189. (b) Job analysis Job analysis investigates job content, physical conditions in which the job is done, and qualifications necessary to carry out job responsibilities.
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190. (b) Jobs are consistent with organizational goals An effective job design ensures that jobs are consistent with the organization’s goals. It also ensures that employees are sufficiently paid and not over-paid. Measuring work done by employees falls under work measurement and does not include job design.
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191. (d) i/r, ii/p, iii/q, iv/s Skill varieties mean the various abilities and skill sets required for a particular job. Task identity defines identifiable tasks to complete a job. Task significance is the influence the job has on individuals inside and outside the organization. Autonomy is the flexibility and discretion available in carrying out the job. Feedback is the level of information provided to employees on their performance.
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192. (c) Increase in worker inputs One of the objectives of a good job design is to reduce (not increase) worker inputs like time and physical effort.
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193. (a) i, ii, iv Job design should be technically, behaviorally, and economically feasible for workers as well as the organization. Political issues are external and not internal to the organization.
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194. (a) It gives the detailed set of activities to be performed on the job Job content is the central aspect of job design. It defines the set of activities to be performed in the job. These include duties, tasks and job responsibilities to be carried out by the jobholder, equipment, machines and tools to be used and the required formal interaction with others.
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195. (c) i, ii, and iii
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Job content determines the qualifications and skills an organization should seek when selecting personnel. Job content also determines the nature of training programs to be conducted and level of compensation that is to be given. 196. (c) Lower flexibility in job rotation
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Lower flexibility in job rotation is not an advantage of work specialization. This is because in the absence of a worker, it is difficult to shift workload to other available workers as they may not possess the required variety of skills or expertise. 197. (b) Ease of supervision and training workers Ease of supervision and training workers is an advantage of work specialization while the other options are probable problems that might arise as a result of work specialization. 198. (a) Only i Salary is the basic compensation for work done. A fixed salary fulfils basic needs. A bonus can act as a source of employee motivation. Promotion fulfils self esteem needs and health insurance fulfils security needs.
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Part A 199. (d) Low interest loans Monetary benefits are tangible benefits other than salary. Monetary benefits may include company shares, retirement benefits, health insurance, low interest loans, bonuses, etc. Low interest loans come under monetary benefits as employee saves some amount of money due to low interest rates. The other three options are types of non-monetary benefits.
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200. (d) iii, i, ii The correct sequence is Job design, followed by Job analysis and Job description. 201. (c) Using stop watch In time study, work measurement is done through time using a stop watch 202. (c) i, ii, and iv
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Setting work standards helps work measurement by providing benchmarks for evaluating workers’ performance leading to comparison of efficiency of different work methods and improved machine utilization by reducing idle time. Delegation is based on the experience and skill levels of employees and the authority of the superior. 203. (c) Work sampling
Work sampling uses several random observations made during everyday work in the organization instead of historical or stored data. 204. (c) Delphi method
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Delphi method is not a technique of work measurement but is used in forecasting and decisionmaking.
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205. (a) The average of observations made always represents time required to perform each elemental task
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The averages of observations made in a time study need not always represent the standard time required to perform each elemental task. Workers tend to behave differently while conducting a time study. Some may become nervous and perform poorly while others may produce more output than in usual circumstances. Hence, the readings have to be recorded several times to smooth out such behavior. Apart from this, certain other allowances have to be considered like working conditions, environmental disturbances, etc. while computing the standard time. 206. (c) Dearness allowance
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Dearness allowance is associated with compensation. It is calculated as a percentage of the basic pay of the employee. Contingency, interference and relaxation allowance are considered in the time study to calculate standard time. 207. (b) 3.375 minutes Normal time
= average cycle time x worker rating = 3.75 x 0.90 = 3.375 minutes
208. (c) 3.835 minutes Standard time
= normal time/available fraction time = 3.375/(1- 0.12) = 3.375/0.88 = 3.835 minutes 93
Operations Management 209. (b) Pre-determined Motion Time Study Pre-determined Motion Time Study (PMTS) is the technique of setting work standards that use recorded standard time data for each of the basic motions associated with performing a task and summing them up to determine time required to perform the whole task.
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210. (c) PMTS provides time for basic motions while Standard Data provide time for job specific motions PMTS differs from standard data in that PMTS provides time for basic motions (which are generic in nature) rather than job-specific work elements. 211. (d) Work sampling Work sampling is a technique of analyzing work by taking several observations, usually at random, to see the relative frequency with which various elemental activities take place.
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212. (a) Ratio delay Ratio delay, performance measurement and time standards are primary applications of work sampling. Ratio delay refers to the activity time percentage for an employee or equipment. Ratio delay shows the percentage of time an employee or equipment was occupied or idle. 213. (c) Time standards Time standards refer to identification of the standard time for completion of a task. Companies use time standards to generate time schedules and assign tasks.
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214. (b) ii and iii The employee self-timing technique is cost effective and simple to use, but not that accurate as other work measurement techniques. Also, it does not take allowances into consideration while measuring work.
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215. (d) All of the above The time consumed by an average worker, working at average speed, to perform a specific task under normal operating conditions is generally referred to as time standard, work standard, or just standard. It is expressed in terms of time elapsed per unit of output, or units of output per unit of time. Managers use these standards in planning, controlling and scheduling operations.
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216. (a) Maynard Operations Sequence Technique MOST stands for Maynard Operations Sequence Technique.
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217. (d) Varying the compensation method Strategies for aggregate planning include varying utilization of the workforce, varying workforce size in response to output requirements, varying size of inventory, back orders, sub-contracting and plant capacity. Varying the compensation method is part of human resource management function. 218. (a) Master production schedule Master production schedule translates the aggregate plan into production schedules. The Master Production Schedule (MPS) defines the type and volume of each product to be produced within the planning horizon. The MPS is a detailed plan that specifies the exact timing for production of each unit. 219. (a) Time series analysis Time series analysis is not an aggregate planning technique. It is associated with forecasting. 220. (a) Heuristic approach Heuristic models are based on historical aggregate planning data available with organizations. 94
Part A 221. (b) Maintaining fixed plant capacity Varying workforce utilization is a strategy where the firm maintains a stable workforce and varies workforce utilization in accordance with demand or required output. Other pure planning strategies are back-orders, sub-contracting and varying plant capacity. Adjusting or varying plant capacity by changing equipment capacity over short-term or long-term is a pure strategy to absorb demand fluctuations.
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222. (b) Defining how resources can be best employed to meet market demand
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Except ‘b’ all other options are part of capacity planning. Aggregate plans define how resources can be best employed to meet market demand for given products. The objective of an aggregate plan is to minimize production costs, make appropriate changes in production rates and workforce levels. It is also to improve profits, customer service and utilize resources. Capacity requirement planning is primarily concerned with ensuring sufficient capacity available to meet market demand. 223. (b) Medium range
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Medium-range planning focuses on a period of six to 18 months. Examples of medium range planning are aggregate planning, master production scheduling and materials requirement planning. 224. (d) Customers
A production plan contains information about the production process, manufacturing facilities, inventory requirements, suppliers, etc. Such a plan is usually made based on sales estimates.
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225. (d) 0 units
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25 workers in 26 days can produce 2600 units. This is exactly equal to the demand for the month of June, as given in the table. Hence, existing inventory will remain untouched as there is no necessity to use it to meet demand. The available inventory at the end of June is the same i.e. 500 units. 226. (a) Rs.6000
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In July, 25 people working for 25 days with a daily output of 4 units can produce 2500 units for the month. As the demand is 2700 units, the additional 200 units are taken from the inventory on hand of 500 units. Hence, the inventory left is 300 units. Thus, inventory carrying cost will be Rs. 20 x 300 units = Rs.6000.
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227. (c) 0 units
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In August, 25 people working for 25 days with daily output of 4 units can produce 2500 units for the month. As demand is 2800 units, additional 300 units are taken from the inventory. Hence, there will be no inventory available. 228. (d) Rs.1500 In September, 25 people working for 26 days with a daily output of 4 units can produce 2600 units for the month. As the demand is 2750 units, there is shortage in supply of 150 units. Thus, the shortage cost in September will be 150 units x Rs. 10 = Rs.1500. 229. (c) To evaluate the performance of a specific plan
Computer simulation is used to evaluate the performance of a specific plan, based on real-world variables and situations. Simulation provides what-if analysis of different situations, using different variables with alternative values attached, to judge the system performance under different conditions. 95
Operations Management 230. (b) Estimation of overall demand for the end product MPS is based on an estimation of overall demand for the end product. A final assembly schedule is developed only when customer orders are received.
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231. (c) Back orders are common in make-to-stock organizations Back orders are common in make-to-order (not make-to-stock) organizations. This is because actual production does not begin until customer orders are placed.
Forecast Orders MPS quantity Projected on-hand inventory
3
60
55
65
55
60
65
0
100
100
15
55
90
100
100
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MPS start
2
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232. (a) 55 units In the first month, demand is 60 units, which can be met from inventory on hand. Hence, at the end of the first month inventory available = inventory on hand + MPS quantity – projected requirements for the month. That is = 75 + 0 - 60 = 15. For the second month, customer orders are 60 and inventory on hand is 15. There is a deficit of 45. To meet demand for the second month, production has to start in the first month as production lot size = 100 units. Then, inventory at the end of the second month = 15 + 100 - 60 = 55 units. (See the following table)
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233. (c) 75 units The inventory at the end of the second month is 55 units. The order for the third month is 80 units. The inventory on hand at the end of the third month = 55 + 100 - 80 = 75 units. (See the following table) 2
3
Forecast
60
55
65
Orders
55
60
80
0
100
100
15
55
75
100
100
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1
MPS quantity
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Projected on-hand inventory
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MPS start
234. (d) Revising and updating master production schedule Forecasted demand and actual demand for a product may differ significantly due to unexpected events. Transactions, records, and reports developed as part of MPS are updated and reviewed continuously to accommodate these differences. This process of continuous reviewing and updating is called ‘rolling through time’ 235. (a) Capacity planning Capacity planning is important to determine adequate production capacity to meet forecast demand levels. Capacity planning is also used by organizations when deciding on issues like whether or not to use sub-contracting or overtime to achieve production goals.
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Part A 236. (c) Identifying the right layout design for the desired capacity The capacity planning process involves identifying available capacity and additional capacity requirements and evaluating and summing up capacity required at each work center. If there is any gap between planned and available capacity, it is increased by overtime, sub-contracting, etc. or the master production schedule is revised. Designing a plant layout precedes capacity planning and is part of plant layout.
Capacity used ×100 Capacity available
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238. (b) Capacity utilization rate =
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237. (a) i, ii, iii, iv The correct sequence of activities in a capacity plan is to identify current capacity, forecast future capacity, identify and evaluate sources to meet capacity requirements and select the most appropriate alternative.
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Capacity utilization rate measures the rate at which available capacity is used in production. It is obtained by dividing used capacity by available capacity. To measure in terms of percentage, multiply the obtained value with 100. 239. (d) Increased complexity in operations The complexity in operations can lead to diseconomies of scale or increase in per unit cost. Efficient processes decrease fixed costs, while automation reduces per unit cost considerably.
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240. (d) All of the above All the stated options can be reasons for diseconomies of scale. Complexities in operations can lead to high cost due to production bottlenecks. When modifications in machinery or replacements take place frequently, it may prove costly. Further, when scale of production increases, distribution and storage costs also increase.
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241. (c) A service firm with a single office cannot efficiently serve customers in another geographical area Unlike manufacturing organizations, a service organization based in one geographical location cannot usually serve customers efficiently in other geographical areas. The service capacity should be located near customers because most service delivery processes involve customers. As a result, service organizations generally operate through branches or franchises in different locations.
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242. (d) Both i & ii The two major sources of inputs that influence the MPS are forecasts and customer orders. Maketo-stock environment takes inputs from forecasts in deciding the MPS. On the other hand, maketo-order environment takes inputs from customer demand and generates an MPS based on that.
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243. (a) Long range planning Long-range planning focuses on a period of over one year and is generally carried out annually. Process planning and strategic capacity planning are examples of long-range planning. Mediumrange planning focuses on a period of six to 18 months. Examples of medium range planning are aggregate planning, master production scheduling and materials requirement planning. Short-range planning focuses on a period less than six months. Order and workforce scheduling are examples of such planning. 244. (d) Material receiving costs Carrying costs include opportunity costs besides storage costs, staffing costs, equipment and maintenance costs, insurance costs, loss of inventory due to pilferage, spoilage or breakage in warehouses and the cost of obsolescence. 97
Operations Management 245. (a) Demand is greater than expected Buffer stocks come in handy when demand for a product suddenly increases. In such situations buffer stocks help meet the excess demand.
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246. (b) Estimated demand during lead-time The calculation of the reorder point should ensure that inventory level reaches zero at the end of each reordering cycle. This is because a positive inventory level at the end of the cycle raises average inventory and associated costs. To ensure this condition is satisfied, reorder level is set equal to the number of units estimated to be used during lead-time.
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247. (c) The cost of ordering varies and is dependent on the quantity ordered Under the EOQ model, the cost of ordering (Co) is fixed and independent of quantity ordered (Q). The model makes the following assumptions: The price of the inventory item (p) is independent of the order quantity. It means that the benefits of economies of scale are not taken into consideration while purchasing. The total holding cost of inventories is proportional to the number of inventory items stored. Demand for a product or its usage rate is constant over time. Materials are always issued in equal quantities to the indenting departments and the inventory supply rate is always greater than or equal to the usage rate (i.e. there is no scope for shortage of inventory). The leadtime for material delivery is known with certainty and it remains constant. The quantity of inventory ordered is delivered in a single lot and there is no scope for splitting of deliveries.
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248. (a) Carrying costs Carrying costs include opportunity costs, storage costs, staffing costs, equipment and maintenance costs, insurance costs, interest charges for financing inventories, taxes, security and other expenses associated with holding materials in warehouses.
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249. (d) i, ii, iii, iv Acquisition (purchase) costs, holding costs, ordering costs and stock-out costs are considered in calculating inventory costs.
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250. (c) Total inventory costs EOQ model always aims to reduce total inventory costs, which include ordering costs, purchasing costs, carrying costs and stock-out costs. 251. (c) Stock-out cost
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Stock-out costs arise only when the inventory is exhausted and the firm is unable to meet demand. Such costs are penalty costs and come into the picture only when there is no inventory to meet demand. Hence, it is a secondary inventory cost. 252. (a) Lead-time
Lead time refers to the time between placing the order for the material and receiving it.
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253. (c) 1000 units
Opening inventory = 500 units, Closing inventory = 200 units, Sales forecast = 1300 units Assuming actual sales is equal to forecast (1300 units), Sales = 500 units (inventory) + 800 units (produced). But, closing inventory is 200 units, which means that it is part of the total lot produced (as the opening inventory of 500 units was sold). Hence, total units produced = 800 units (sold) + 200 units (inventory) = 1000 units. 254. (d) i, iii and iv Finished product inventories offer organizations the ability to show products to customers, not raw material inventories.
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Part A 255. (d) The purchase price per unit varies depending upon quantity ordered One of the assumptions of the EOQ model is that purchase price per unit is fixed and is independent of order quantity. It means that benefits of economies of scale, if any, are not taken into consideration. 256. (b) 200 units
EOQ =
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Assuming 50 units /week as weekly demand, EOQ can be calculated using the formula:
2C o D Ch
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Where, Co is the ordering cost (Rs. 200), D is the demand in units per unit time (50 units), Ch is the holding cost per unit per unit time (Rs. 0.50). Hence, EOQ = √((2 x 200 x 50)/ 0.5) = 200 units.
258. (b) To avoid backlogs in customer order
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257. (a) Q system Under the Q system (also called Fixed Order Quantity System), inventory is continuously checked and a new order is placed when the inventory level reaches the reorder point. Organizations maintain finished goods inventory to avoid backlogs in customer orders. Finished goods inventory helps during sudden increase in customer demand. 259. (b) Work-in-progress inventory
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Work-in-progress goods are semi-finished items stored temporarily during the production process. 260. (c) Finished products
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261. (d) Hiring cost
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Firms maintain adequate levels of inventory to successfully operate in an uncertain environment. Inventories help firms take advantage of unexpected opportunities. For instance, a sudden and unexpected increase in demand can be met with larger finished goods inventory.
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Hiring costs are those incurred by an organization as part of recruitment. It is not a factor that influences the quantity of material ordered. Purchase, carrying and ordering costs influence the quantity ordered. 262. (a) Purchase costs
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The cost of purchasing a unit of a particular item is its purchase cost. Suppliers sometimes provide discounts to customers (manufacturers) based on purchase costs (quantity of purchase). Discounts are usually given while purchasing quantities in bulk.
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263. (d) Material-receiving costs While pilferage, spillage and maintenance costs come under carrying costs, material-receiving costs fall under ordering costs. 264. (d) i/r, ii/p, iii/s, iv/q Discounts are given by suppliers on the basis of total cost of purchase when material is purchased in bulk. Damage to inventory either in the warehouse or in production facilities can increase carrying costs. Ordering costs are considered fixed and so decrease with increase in order size. Marketers may lose customer goodwill if they cannot supply goods on time due to non-availability of finished goods in the inventory.
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Operations Management 265. (b) Q system In Q system, order quantity (Q) is always constant and the order is placed when the level of inventory reaches the reorder point. This system is also referred to as the reorder point system. 266. (b) Time required for replenishing inventory after placing an order
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Lead time gives the time required to replenish inventory once the order is placed. Lead time is an important consideration in inventory management. 267. (a) i and ii
268. (b) 175 units = average daily demand x lead time = 25 x 7 = 175 units
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Reorder point
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The calculation of the reorder point should ensure that inventory level reaches zero at the end of each reordering cycle. This is because a positive inventory level at the end of the cycle results in a rise in average inventory and associated costs. To ensure this condition is satisfied, reorder level is set equal to the number of units estimated to be used during the lead-time.
269. (d) Stock-out costs
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One of the assumptions of EOQ concept is that stock-outs are not allowed. It implies that inventory is replenished just before the time when it becomes zero. Hence, the total cost of maintaining inventory can be assumed to have only three components: ordering costs, holding costs and variable item costs. 270. (b) Rs.8000
271. (c) Rs.150000
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Total order cost (A) = fixed cost per order x (demand / quantity per order) = 2000 x (300000/75000) = 2000 x 4 = 8000
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Holding costs per order (B) = holding costs per unit x (quantity per order /2) = 5 x (75000/2) = 5 x 37500 = 150000
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272. (b) Rs.3000000 Total Variable cost (C) = item cost x demand = 10 x 300000 = 3000000 273. (b) Rs.3158000 Total cost of maintaining inventory
= Total order cost (A) + Holding cost per order (B) + variable cost (C) = 8000 + 150000 + 3000000 = 3158000
274. (b) Reorder level Reorder level is the quantity of inventory where a new order is placed for replenishment. In the Q system, the reorder level is equal to quantity used in lead time plus safety stock. But in EOQ model, it is equal only to the quantity used in the lead time. 100
Part A 275. (c) EOQ In the EOQ system, lead time is known and is assumed to remain constant.
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276. (d) Producing and transporting in larger batches reduces material-handling and production costs The first three options are reasons for holding raw material inventory while option (d) is a reason to hold semi-finished goods inventory. Producing and transporting in larger batches reduces material-handling and production costs of semi-finished goods for a firm.
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277. (a) ABC ABC is one of the most widely used inventory classification models. It is also known as ‘Always Better Control’ model. As per ABC classification, items are classified on the basis of their annual consumption value. Items with highest value are classified as A, next lower value items are classified as B and the lowest value items are classified as C.
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278. (a) Minimizing total inventory cost EOQ method is used to identify order quantity to minimize total cost i.e. the sum of ordering and carrying costs. 279. (d) i, ii and iii All the above factors must be taken into consideration by the purchase department while buying material and supplies from a supplier.
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280. (a) Materials purchased Value analysis aims at reviewing design of materials to be procured and attempts to modify the design to replace high cost and obsolete parts with cost effective parts and designs. Value analysis mainly aims at controlling costs of purchasing material.
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281. (d) Quality control Quality control is part of raw material purchase. It is an activity taken up by the production/ quality control department, sometimes in conjunction with the purchase department.
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282. (d) All of the above Processing requisition for materials and supplies, locating suppliers or vendors, and negotiating purchasing contracts are tasks carried out by the purchase department.
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283. (d) Standardized packaging for all types of components Standardized packaging for all kinds of parts is a characteristic of modern purchasing. Earlier, the type of packaging depended on the type of components.
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284. (a) Procurement requests Procurement requests are placed by individual departments, which require materials and the purchase manager only facilitates requests. This is more so in a bio-pharmaceutical company where the R&D department requests for specialty chemicals and instruments. 285. (d) Public relations Maintaining public relations does not fall under the purview of the purchase department in a production-centric firm. It is the responsibility of the marketing or corporate communications/PR department.
286. (b) Purchase indent -Quotation - Purchase order A purchase indent from a department within the firm initiates the purchase process. This is followed by request for quotations from suppliers by the purchase department.. After selecting a supplier, the purchase order is placed by the purchase department. 101
Operations Management 287. (c) Value engineering Value engineering is related to product review and components in terms of design and other features so as to retain all properties of the item while reducing cost as much as possible.
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288. (d) None of the above All three options are factors that influence vendor selection. The cost, quality and reliability of a product along with the delivery and service determine the preference for a particular vendor. 289. (b) Decentralized purchasing When specific material requirements vary between production facilities, a firm must adopt a decentralized purchasing system. Centralized purchasing reduces flexibility and outsourcing reduces control of the firm over the purchasing function.
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291. (d) i, ii, iii, iv All the options provide information about vendors and suppliers.
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290. (d) ABC analysis ABC analysis is used in materials management and is not performed by the purchase manager.
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292. (d) Negotiate with suppliers Value analysis deals with measuring and enhancing the value of a material/product. It reviews the design of products and identifies costly components in the product. Attempts are made to replace high-cost parts with economical ones. Negotiating with suppliers is not an activity under value analysis, though it is part of the purchase function.
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293. (c) Can the vendor supply the material at the right time? Value analysis is concerned about increasing product value by reviewing design and modifying the product without affecting its usability. Option (d) relates to vendor supply and does not come under value analysis. 294. (a) Purchase requisitions
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Purchase indents are also called requisitions, which include a clear specification of materials required.
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295. (a) User department
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The user department that utilizes material or goods issues purchase indents. They are issued to the purchase department, which requests for quotations from vendors for the materials. 296. (d) Name of the user department
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The name of the user department is present in the purchase indent or requisition and not in the supplier’s quotation. The latter usually contains price per unit, delivery schedule, mode of transportation, special terms and conditions, etc. 297. (c) Purchase order The purchase order is the legal document authorizing the supplier to supply goods. It represents the buyer’s obligation to buy materials against specified terms.
298. (b) Purchase department The purchase department is responsible for proper delivery of goods purchased. As this department acts as an interface between the user department and suppliers, it is answerable to the user department for delays in delivery of material. 102
Part A 299. (d) When the quantity of the part required is small India Rubber can buy the part when the quantity required is small or when total costs to make it are more than buying costs. 300. (d) To take advantage of knowledge and expertise of suppliers
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Organizations opt for in-house production when they want to control all value chain activities, to use excess plant capacity productively, or when they do not want competitors to get to know the product design. Suppliers’ knowledge and expertise is a factor when the organization decides to outsource rather than produce in-house. 301. (a) ABC
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The ABC classification system is also referred to as ABC (Always Better Control) analysis. The purpose is to alter expenses associated with controlling materials according to their usage value 302. (a) Conveyance authorization card
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A Kanban system uses three types of cards to initiate material transactions: production authorization card, vendor authorization card and conveyance authorization card. A conveyance authorization card authorizes a materials handling agent to move the tray to a specified destination. This specifies the product’s name, its identification number and delivery destination. The dual-card Kanban system makes use of two Kanban cards, a conveyance card and a vendor card. 303. (a) Vendor analysis
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The functions of materials management are production control, materials handling and inventory control. Vendor analysis is associated with purchase management (purchase department). 304. (c) The system considers availability of materials
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Resource allocation is made based on value of the inventory. The more valuable the inventory is, the more the resources allocated. Even though the method facilitates selective control of materials, the method suffers from several limitations. One limitation is that ABC analysis does not consider the aspect of availability of materials.
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305. (a) 1 & 2 Calculate usage value of each material and arrange them in the descending order of their usage values. Usage Value % of usage value (cost per unit x annual usage)
Cumulative value
1
20000
37.90
37.90
2
20400
38.65
76.55
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Type of material
3
6000
11.37
87.92
4
5500
10.42
98.34
5
500
0.95
99.29
6
375
0.71
100
Total
52775
100
Here, we can see that two materials (materials 1 and 2) out of 6 materials account for 76.55% of total costs. That means 76.55% of total resources are to be assigned to control 33.33% of the materials (two out of six materials). So, materials 1 and 2 are categorized ‘A’ type materials. 103
Operations Management 306. (c) i, ii and iii Alternatives i, ii and iii are tasks carried out by the raw material inventory department. Alternative ‘iv’ is associated with the receiving department. The tasks of the receiving department include unpacking incoming materials, checking quantity and inspecting quality and then generating receiving reports. 307. (d) i, ii and iii
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Storing raw materials safely is a task of the raw material department. All other tasks are carried out by the shipping department. 308. (a) An item is critical if its usage is high
In ABC analysis, an item is said to be critical if its usage is high. The purpose of this analysis is to alter expenses associated with controlling materials according to their usage value.
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309. (a) Characteristics of products
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The details of product characteristics need not be entered in inventory records file as the inventory department has nothing to do with product attributes. 310. (c) Locating and receiving raw materials
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Locating and receiving raw materials is the function of the raw materials inventory department. All the other options are functions of the production department. The function of production control aims at directing and regulating goods movement through the entire manufacturing cycle from the process of purchasing materials to making the finished product. The departments involved in this function are purchasing department, receiving department, raw materials inventory department and production department. 311. (b) Processing requisitions for materials
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Processing requisitions for material is done by the purchase department and not by the receiving department. The main task of the former is to acquire the required materials in the right quantity, of the right quality, from the right source, at the right time and at the least possible cost. The primary responsibility of the receiving department is to process incoming shipments of materials. 312. (c) Materials management
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Materials management is the study of flow of materials through various operations in a production facility. Inventory management deals with managing inventory and maintaining it at optimum levels. Operations management encompasses both materials management and inventory management. Purchase management is a separate sub-function under materials management. 313. (b) i, ii and iv
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Shortage in materials supply affects the firm in many ways. They include stoppage or breakage in production, delay in delivery to customers, increase in operational expenses, etc. On the other hand, the efficiency of the production process actually decreases rather than rising. 314. (a) Stock large volumes of materials to avoid shortage To reduce shortages it is not advisable for a materials manager to stock huge volumes of inventory. This will lead to heavy carrying costs, which will eat into the firm’s profitability. 315. (b) 25% increase Solution: Sales = Rs.60 lakhs, Profit = Rs.12 lakhs (20% of sales), Material cost = 30 lakhs (50% of sales). If 3 lakhs are saved in material costs, the amount is passed onto profits. The percentage change in profit = (3/12) x 100 = 25%. The profit now is 15 lakhs. Hence, profit increases by 25%
104
Part A 316. (a) To maintain low inventory turnover One of the objectives of materials management is to maintain high inventory turnover (not low) so that less capital is tied up in inventory. 317. (c) Finished goods inventory department
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Purchase department, raw material inventory department, receiving department and production department are associated with production control. The finished goods inventory department is associated with inventory control function. 318. (c) Non-uniformity in maintaining records
Under centralized purchasing, purchase records are uniformly maintained. This is not the case under decentralized purchasing where there is a great deal of difference in record maintenance across purchase departments in different units of the firm.
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319. (d) Information on inventory levels
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A materials receiving report contains quantity of material, price, description and other technical specifications. Information on inventory levels is associated with an inventory records file. 320. (b) Maintaining stocks of material at various stages of production
321. (a) Purchase department
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The tasks of raw material inventory department include labeling raw materials to make them ready for use in the production process, storing raw materials safely and protecting them from damage and pilferage, updating and maintaining records of quantities of various raw materials, arranging for replenishment of stocks in liaison with the purchase department and auditing raw materials periodically. Maintaining stocks of material at various stages of production is the task of the inventory control department.
O
The inventory control function is represented in three departments - Raw materials inventory department, production department and finished goods inventory department. Purchase department is associated with the inventory control function of materials management.
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322. (c) To move materials to the required location in a timely and cost-effective way without affecting the primary objective of production control and inventory control
BS
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Materials handling refers to managing the physical movement of materials into, through, and out of the firm. The primary objective of materials management is to move materials to the required location in a timely and cost-effective way without affecting the primary objective of production control and inventory control functions. 323. (b) Physical distribution
Fo rI
The sub-function ‘physical distribution’ is associated with the movement of finished products and other materials. The sub-function ‘traffic’ deals with arranging the most economic transportation method for both incoming and outgoing materials. Finally, the sub-function ‘logistics’ deals with obtaining, producing and distributing materials and products at/to the desired place, at the right time. 324. (c) Variable-sequence robot The function of variable-sequence robots is similar to that of fixed-sequence robots, but the sequence of tasks can be changed depending on the nature of operations to be performed. 325. (c) Maintain minimum inventory till the next replenishment JIT purchasing implies that inventory can be replenished just-in-time for manufacture. The method advocates reduction in size of purchased quantities to the extent that materials reach the production point directly. Hence, safety stocks need not be maintained. 105
Operations Management 326. (d) Reduced flexibility In JIT purchasing, flexibility is higher in terms of ability to change materials required at the last minute depending on changes in customer/client preferences, etc. Thus, flexibility is not reduced. It rather increases. 327. (b) Toyota Motor Company
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The Kanban system was developed by Toyota Motor Company, Japan. 328. (c) Conveyance authorization card
329. (d) Type 5
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A conveyance authorization card authorizes a materials handling agent to move the tray containing material or component parts to a specified workstation. Here, this material is used in the production process.
Quantity used per year
Cost per unit
Usage value (quantity used x cost per unit)
1
2000
20
40000
2
4500
3
1500
4
3000
5
2500
10
45000
35
52500
20
60000
25
62500
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330. (a) 40000
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Material type
Material type Quantity used per year Cost per unit 2 3 5
40000
10
45000
1500
35
52500
3000
20
60000
2500
25
62500
U
331. (b) Type 5
20
4500
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4
2000
O
1
Usage value
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From the above table it is evident that Type 5 material have the highest usage values of Rs.60000 and Rs.62500 respectively. Hence, it falls under ‘A’ category. 332. (c) Type 1
Type 1 material has the least usage value of Rs.40000. Hence, this material is under C category.
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333. (b) Production authorization card A Kanban system uses three types of cards to initiate material transactions: production authorization card, vendor authorization card and conveyance authorization card. The production authorization card authorizes the production department to start the production process. This card describes the product’s name, identification number and description and the list of materials needed for continuing the production process. 334. (b) Materials requirement planning The primary objective of an MRP system is to manage the inventories of parts which are demanddependent and schedule production activities. MRP system helps an operations manager compute the net requirement of a component after taking into consideration inventory on hand, scheduled receipts and order releases.
106
Part A 335. (d) i, ii, iii, iv
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An MRP system requires a host of information that includes: customer orders pending for future deliveries; unfinished orders that must be completed in the planned production period; demand forecasts that specify the quantity of products demanded and the time period in which these demands are to be satisfied; capacity information that helps anticipate and correct resource shortage; details of dependent demand inventory items at various stages of the transformation process and the stages through which these items traverse to make an end product; changes in inventory requirements due to product design changes expected during the planning time period; available inventory at the beginning of the planning time period; quantities of ordered, purchased or contracted inventory items that an organization expects to receive during the planning time period 336. (b) Greater investment in inventory
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The primary purpose of MRP is to provide adequate supply of demand-dependent inventory as and when required. By doing so it helps an organization improve customer service, reduce (not increase) investment in inventory, improve operating efficiency and speed up response to market changes 337. (d) i, ii, iii, iv
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All the statements are true. The Bills of Material contain the list of materials along with the quantity required to produce one unit of a product. It shows the hierarchical levels or phases a product goes through during production (from raw material to end product). It consists of the complete list of all end products, the structure (subassemblies, parts, and raw materials which constitute the product assembly) of the products, and the quantity of each item required for producing each higher-level product in the hierarchy. It also contains information about whether a particular item was produced internally or purchased from external sources. The purchase or production lead-time to acquire the item is also specified. 338. (c) Longer idle time
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Ability to price competitively, better customer service, and reduced set-up and tear-down costs are advantages. In addition, comprehensive material tracking and optimized production scheduling are also advantages of MRP system. They help in better response to market demand and lower the lead time.
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339. (a) Required quantities and delivery dates of final products
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The Master Production Schedule (MPS) file contains information about when and how many units of finished products are required. It also gives the available cumulative lead-time for purchasing, receiving, fabricating, and assembling. 340. (c) i and iii
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The primary objective of an MRP system is to manage demand-dependent inventories and schedule production activities. 341. (b) Finished goods inventory on hand MRP system helps an operations manager find the net requirement of a component after taking into consideration inventory on hand, scheduled receipts and order releases. Finished goods inventory is not considered under MRP as it is the final output of production and MRP system is part of the production process. 342. (c) i, ii and iii The operating efficiency can be improved by controlling the raw material inventory, and by responding quickly to production requirements by speeding up or delaying the material supply. Controlling the movement of finished products is not under the scope of MRP. 107
Operations Management 343. (d) 30 and 45 One unit of B requires 3 units of E. One unit of E requires 2 units of F. Therefore, total quantity of F required = (3 x 2 x 5) = 30 units. One unit of E requires 3 units of G. One unit of B requires 3 units of E. Therefore, total quantity of G required = (3 x 3 x 5) = 45 units. 344. (b) 5 hours
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F & G are required to produce E. Lead times of F & G are 1 hour and 2 hours respectively. Therefore, production of E will start only after 2 hours when both F & G are ready. The lead time to produce E is 2 hours. Hence, to produce E the total time required is 4 hours. After E is produced, it takes one hour before production of B can commence. Therefore, the total time to produce B is (2 + 2 + 1) = 5 hours. 345. (c) 48 and 48
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One unit of I requires 3 units of G. One unit of D requires 2 units of I. Therefore, total quantity of G required = (3 x 2 x 8) = 48 units
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One unit of I requires 3 units of H. One unit of D requires 2 units of I. Total quantity of H required = (3 x 2 x 8) = 48 units 346. (d) 9 hours
G & H are required to produce D. Lead times of G & H is 2 hours each. Hence, production of I will start only after 2 hours. The lead time to produce I is 3 hours. To produce I the total time required is 5 hours. After I is produced, it takes 4 hours to produce D. Therefore, the total time to produce D is (2 + 3 + 4) = 9 hours
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347. (d) 600 units
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One unit of E requires 3 units of G. One unit of B requires 3 units of E. One unit of alpha requires four units of B. Therefore, total quantity of G required = (3 x 3 x 4 x 10) = 360 units. One unit of I requires 3 units of G. One unit of D requires 2 units of I. One unit of alpha requires 4 units of D. Therefore, total quantity of G required = (3 x 2 x 4 x 10) = 240 units 348. (b) 11 hours
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Total units of G required are 360 + 240 = 600 units.
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B, C, & D are required to produce alpha. Time required to produce B is 5 hours, for C it is 5 hours and for D it is 9 hours. Hence one must wait for 4 hours for D to be ready. Once D is ready, it takes 2 hours to produce alpha. Hence, total time required to produce alpha is 9+2 = 11 hours.
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349. (d) Order release
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Order release is part of the primary reports, which is an output component of the MRP system. The steps in information processing include explosion, netting, offsetting and finally consolidation of material requirements. 350. (b) i and iii Explosion uses the information from MPS and BOM to develop the sequence to be followed to produce the end product. 351. (b) Netting Netting is the step in MRP information processing that is used to develop a materials requirement plan for each item in the BOM file for each time bracket. 352. (c) Offsetting Offsetting uses the information obtained from explosion and netting to determine planned order releases i.e. the quantities to be ordered (either internally through production or from an external supplier) so that the materials arrive as and when they are needed. 108
Part A 353. (a) Next lower The planned order releases for the finished product or component become the gross product requirement for items at the next lower level in the product structure chart. 354. (c) i/s, ii/r, iii/p, iv/q
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Performance reports contain information about the performance of an MRP system. They also help identify a problem and verify whether the system can achieve planned objectives. Exception reports contain information about errors and deviations from planned objectives. Suspension reports are generated to cancel an order due to changes in MPS. Planning reports contain information about material requirements. 355. (d) Longer implementation time
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The implementation of an MRP system involves huge costs and takes long time for installation. Hence, longer implementation time is a disadvantage of the MRP system 356. (d) i, ii, iii, iv
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The factors that ensure the effective implementation of MRP systems include commitment from top management, educating and training the employees about the system, continuous collection of information regarding the materials used and a high degree of accuracy in all operations. 357. (b) Obsolete data
Obsolete data like an outdated BOM can badly affect the success of an MRP system. Hence, all the data pertaining to materials should be accurate and up-to-date. 358. (c) Assemble-to-order
359. (a) Explosion
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O
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In assemble-to-order approach in materials requirement planning, only the final assembly of the machine is made based on the customer order specifications. Smith & Smith also does the same. In assemble-to-stock approach, the firm combines multiple component parts into a finished product, which is then stocked in inventory to satisfy customer demand. In manufacture-to-order approach the items are either fabricated or assembled completely in adherence to customer specifications. Items are manufactured by machines to customer orders and do not involve any assembly in fabricate-to-order approach.
BS
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The first step in the MRP information processing is that of explosion in which end product is disassembled into components required for its production. It starts with the time when the product is required and then proceeds backward to determine each production or purchasing activity that is necessary to make each higher-level item in the product structure chart. 360. (b) Planning report
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While master production schedule, bill of materials and inventory records file are inputs to a MRP system, planning report is an output. 361. (b) E-F-G-C-A-B-D The least time on workstation 1 is for job E. Place E at the beginning of the sequence. Least time on workstation 2 is again job E, which is already placed. The next least time is for job D on workstation 2. Place D at the end of the sequence. Continue this process to arrive at the sequence: E-F-G-C-A-B-D. 362. (b) Sequencing rules When jobs are processed in a single stage of production, they can be scheduled one after another. If two or more stages of production are required, firms should ensure that jobs are sequenced in a way that idle time is minimized. Operations managers can use job sequencing rules and develop a job sequence that minimizes total time required to complete a given job. 109
Operations Management 363. (b) Backward The backward scheduling method schedules orders as per their due dates. The operations manager schedules production activity based on due dates for job orders so that the production activity can be timed to complete the order on time. Forward and hybrid scheduling are also types of scheduling methods. Routing is a scheduling activity.
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364. (c) Increased overtime costs An increased overtime cost is a disadvantage of a fixed workforce strategy. In this strategy, regular workers are made to work overtime as part-time workers are not employed to meet additional demand. 365. (c) Work-in-process inventory level is high
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Work-in-process inventory will be high in forward scheduling because jobs are assigned based on earliest available time slots. As the jobs start at the earliest possible time, they are completed before they are required at subsequent work centers.
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366. (d) There are large variations in the production process and the equipment is designed for a broad range of applications There are few variations in the production process for repetitive operations. In these operations, labor is trained and the equipment designed for a narrow range of applications. 367. (b) Flextour approach
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Under Flextour, employees are given some freedom in choosing their start time, but they must work eight hours a day. 368. (a) Help sequence jobs in a way that idle time is minimized
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Gantt charts do not help sequence jobs in a way that idle time is minimized. This is possible through the use of Johnson’s sequencing rules. 369. (c) It helps maximize the number of service workstations required
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Queuing analysis helps determine the optimum (not maximum) number of workstations required to meet demand.
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370. (c) Lower, higher
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The lower the critical ratio, the higher the priority in sequencing the job in the next day’s production activities. 371. (c) 0.714, 0.857, 1.400
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Critical ratio = Planned time remaining / actual work remaining Job
Due Date
Actual work remaining
Planned time remaining
Critical ratio
1
25
7
25-20 = 5
0.714
2
32
14
32-20 = 12
0.857
3
27
5
27-20 = 7
1.400
372. (a) Job 1 The critical ratio for job 1 is the least at 0.714. Hence, it is given first priority over job 2. Job 3 is already ahead of schedule. 110
Part A 373. (d) Critical ratio The critical ratio method is a job sequencing technique an operations manager can use to verify whether a job is on schedule. Whatever the method employed, the process of scheduling involves three activities: routing, loading and dispatching. 374. (d) Maximizing resource allocation
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One of the basic objectives of scheduling jobs is to optimize the resources allocated to meet customer requirements. 375. (a) Loading
When assigning specific jobs to each work center, loading decides capacity limitations of centers as well. 376. (a) Flextime approach
377. (d) Time
1
2
3
4
M1
X1
X1
X1
Y2
M2
Y1
Y1
X2
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Under flextime, employees are given the option of choosing their work timings provided they work for a specified number of hours in a given time period, say a week. 5
6
7
8
Y2
Y2
X3
X3
X2
9
Y3
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In forward scheduling, both jobs start immediately after job orders are received. Job X starts on machine 1 (M1) and job Y on machine 2 (M2). X runs on M1 for 3 hours and Y runs on M2 for 2 hours. Y remains idle for the third hour as X is under process on M1. In the fourth hour Y goes to M1 for 3 hours and X goes to M2 for 2 hours. Hence in the sixth hour X has to wait to be processed on M1 as Y is still on M1. In the seventh hour, X goes to M1 for 2 hours and Y goes to M2 for 1hour. Hence, Job Y gets completed at the end of seventh hour and Job X gets completed at the end of eight hour.
1
2 X1
U
Time M1 M2
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378. (b)
3 X1 Y1
4 X1 Y1
5 Y2
6 Y2 X2
7 Y2 X2
8 X3
9 X3 Y3
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BS
In backward scheduling, the schedule is calculated backwards from the due date of completion. As this is nine hours, scheduling starts at the ninth hour and works backwards. Here the last sequence for jobs X and Y are placed at the ninth hour. X3 needs 2 hours and Y needs 1 hour. M1 is occupied up to the eighth hour. In the seventh hour Y2 is processed on M1 and X2 on M2. Y2 requires 3 hours and X2 requires 2hours. Y2 would be on M1 until fifth hour and X2 would be completed in the sixth hour itself. In the fourth hour, X1 must be completed on M1 and Y1 on M2 in the third hour. Hence, X1 starts in the second hour and Y1 in the third hour. 379. (b) 8 hours In forward scheduling, both jobs start immediately after job orders are received. Job X starts on machine 1 (M1) and job Y on machine 2 (M2). X runs on M1 for 3hours and Y runs on M2 for 2hours. Y remains idle for the third hour as X is under process on M1. In the fourth hour Y goes to M1 for 3 hours and X goes to M2 for 2 hours. Hence in the sixth hour X has to wait to be processed on M1 as Y is still on M1. In the seventh hour, X goes to M1 for 2hours and Y goes to M2 for 1hour. Hence, Job Y gets completed at the end of seventh hour and Job X gets completed at the end of the eighth hour. 111
Operations Management 380. (c) 7 hours
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In forward scheduling, both jobs start immediately after job orders are received. Job X starts on machine 1 (M1) and job Y on machine 2 (M2). X runs on M1 for 3hours and Y runs on M2 for 2hours. Y remains idle for the third hour as X is under process on M1. In the fourth hour Y goes to M1 for 3 hours and X goes to M2 for 2 hours. Hence in the sixth hour X has to wait to be processed on M1 as Y is still on M1. In the seventh hour, X goes to M1 for 2hours and Y goes to M2 for 1hour. Hence, Job Y gets completed at the end of the seventh hour and Job X gets completed at the end of eighth hour. 381. (b) 2 hours
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In backward scheduling, the schedule is calculated backwards from the due date of completion. As this is nine hours, scheduling starts at the ninth hour and works backwards. Here the last sequence for jobs X and Y are placed at the ninth hour. X3 needs 2 hours and Y needs 1 hour. M1 is occupied up to the eighth hour. In the seventh hour Y2 is processed on M1 and X2 on M2. Y2 requires 3 hours and X2 requires 2 hours. Y2 would be on M1 until the fifth hour and X2 would be completed in the sixth hour itself. In the fourth hour, X1 must be completed on M1 and Y1 on M2 in the third hour. Hence, X1 starts in the second hour and Y1 in the third hour.
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382. (c) 3 hours
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In backward scheduling, the schedule is calculated backwards from the due date of completion. As this is nine hours, scheduling starts at the ninth hour and works backwards. Here the last sequence for jobs X and Y are placed at the ninth hour. X3 needs 2 hours and Y needs 1 hour. M1 is occupied up to the eighth hour. In the seventh hour Y2 is processed on M1 and X2 on M2. Y2 requires 3 hours and X2 requires 2hours. Y2 would be on M1 until the fifth hour and X2 would be completed in the sixth hour. In the fourth hour, X1 must be completed on M1 and Y1 on M2 in the third hour. Hence, X1 starts in the second hour and Y1 in the third hour. 383. (a) Routing
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It explains the sequence of operations and processes to be followed to produce a particular product. Routing determines what work is to be done and where and how it is to be done. Hence, routing describes the ‘specification of workflow.’
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384. (b) Loading Loading is defined as assigning specific jobs to each work center for the planning period. Loading of jobs is done upto the standard capacity of the workstation.
BS
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385. (b) Shortest processing time Here, jobs are processed in the shortest time. Under this rule, jobs with shorter processing times get completed earlier than jobs with longer processing times. This rule ensures that minimum number of jobs are left for processing.
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386. (c) A – D – C – E – B From the given data, the earliest due dates are given below: A – 4 days, B – 8 days, C – 6 days, D – 5 days, and E – 7 days. Therefore, the order of jobs is A – D – C – E – B. 387. (a) 4.2 days Job Sequence A D C E B
Processing Time 4 2 4 3 5
Due Date 4 5 6 7 8
Average time = (0+1+4+6+10)/5 = 21/5 = 4.2 days 112
Flow Time 0+4=4 4+2=6 6 + 4 = 10 10 + 3 = 13 13 + 5 =18
Delay 4-4=0 6–5=1 10 – 6 = 4 13 – 7 = 6 18 – 8 = 10
Part A 388. (c) 13 days Processing Time
Due Date
Flow Time
Delay
B
5
7
0+5=5
5–5=0
A
4
4
5+4=9
9–5=5
C
4
6
9 + 4 = 13
13 – 6 = 7
E
3
7
13 + 3 = 16
D
2
5
16 + 2 = 18
Flow Time
Delay
389. (b) 6.8 days
16 – 7 = 9
18 – 5 = 13
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Hence, the total delay for job D is 13 days.
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Job Sequence
Processing Time
Due Date
B
5
7
0+5 = 5
5–5=0
A
4
4
5+4 = 9
9–5=5
C
4
6
9+4 = 13
13 – 6 = 7
E
3
7
13+3=16
16 – 7 = 9
D
2
5
16+2 = 18
18 – 5 = 13
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Cl as s
Job Sequence
Average delay = (0+5+7+9+13) /5 = 34/5 = 6.8 days 390. (c) 11 days
Processing Time
O
Job Sequence A
Due Date
Time Flow
Delay
4
4
0+4=4
4–4=0
5
8
4+5=9
9–8=1
4
6
9 + 4 = 13
13 – 6 = 7
D
2
5
13 + 2 = 15
15 – 5 = 10
E
3
7
15 + 3 =18
18 – 7 = 11
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B
BS
U
C
The last job performed using this rule is E and the delay for job E is 11 days.
Fo rI
391. (d) 5.8 days
Job Sequence
Processing Time
Due Date
Time Flow
Delay
A
4
4
0+4 = 4
4–4=0
B
5
8
4+5 = 9
9–8=1
C
4
6
9+4 = 13
13 – 6 = 7
D
2
5
13+2 =15
15 – 5 = 10
E
3
7
15+3=18
18 – 7 = 11
Average delay = (0+1+7+10+11)/5 = 29/5 = 5.8 days 113
Operations Management 392. (a) A Job A has the shortest slack time as the difference between due date and processing time for job A is (4 – 4) = 0 days. 393. (d) 11 days Processing Time
Due Date
A C D B E
4 4 2 5 3
4 6 5 8 7
Time Flow
Delay
0+4 = 4 4+4 = 8 8+2 =10 10+5 =15 15+3=18
4–4=0 8–6=2 10 – 5 = 5 15 – 8 = 7 18 – 7 = 11
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Job Sequence
394. (b) 5.0 days Processing Time
A
4
Due Date
Time Flow
Delay
4
0+4 = 4
4–4=0
C 4 6 D 2 5 B 5 8 E 3 7 Average delay = (0+2+5+7+11)/5 = 25/5 = 5 days
4+4 = 8 8+2 =10 10+5 =15 15+3=18
8–6=2 10 – 5 = 5 15 – 8 = 7 18 – 7 = 11
Time Flow
Delay
395. (b) 4.4 days
D
Processing Time
se
Job Sequence
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Job Sequence
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Jobs D and B are having the same slack time of three (5 – 2) & (8 – 5) days respectively. But job D has a processing time of 2 days, which is less than for job B (5 days). Here D is dispatched before B. But the last job to be processed using this rule is E, which has a maximum slack time of 4 (7– 3) days. The time delay for job E is 11 days.
Due Date
2
5
0+2 =2
0
3
7
2+3=5
0
4
4
5+4 = 9
9–4=5
C
4
6
9+4 = 13
13 – 6 = 7
B
5
8
13+5 =18
18 – 8 = 10
U
E
Fo rI
BS
A
Average time delay = (0+0+5+7+10)/5 = 22/5= 4.4 days
396. (a) Earliest due date Average delay using each of these rules (calculated earlier) is as follows: Earliest due date = 4.2 days, First in, first serve = 5.8 days, Shortest processing time = 4.4 days, and Slack time remaining = 5.0 days. Hence, to reduce the average delay to a minimum, earliest due date rule can be suggested for the job A, B, C. D, and E. 397. (b) Repetitive operations Repetitive operations are also called continuous operations as they are performed continuously to produce goods in bulk. Here, stock-outs can hinder the production process and lead to high costs for the firm.
114
Part A 398. (d) 5 weeks Job A was processed on machine X in the first two weeks and on machine Y in the 6th and 7th weeks. Finally, it is processed on machine Z in week 8. The total time is 5 weeks. 399. (a) Machine X
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Machine X was the most utilized. From the Gantt chart, it is clear it was used for 6 weeks. Machines Y and Z were utilized for 4 weeks each. 400. (d) All of the above
Johnson’s job sequencing rules help the operations managers in minimizing processing time, maximizing the operating efficiency, and reducing the operating costs.
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401. (c) Gi = Ai1+Ai2+Ai3+…+Aim-1 Hi= Ai2+Ai3+Ai4+…+Aim
A problem of n jobs and m machines can be simplified to n jobs and two machines to use Johnson’s sequencing rule. Two fictitious machines (Gi and Hi) are introduced where
Cl as s
Gi = Ai1+Ai2+Ai3+…+Aim-1 and Hi= Ai2+Ai3+Ai4+…+Aim
402. (c) Rate of arrival of customers is greater than the rate at which service is rendered In a service organization, when the arrival rate of customers is greater than the rate at which service is rendered to each customer a queue forms. 403. (d) To minimize processing time of jobs
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Waiting time in a queue often proves costly to service firms and so they use queuing analysis to minimize this as far as possible. Queuing also helps operations managers to determine the optimum number of service stations required, which can lead them to striking a balance between waiting costs and cost of providing additional service stations. Johnson’s job sequencing rules is useful for proper scheduling of jobs. It helps firms minimize the processing time of jobs 404. (b) Planned time remaining / work still remaining
405. (d) E
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Critical ratio is calculated by dividing the actual time remaining to complete work by work remaining (in time units). If the critical ratio of an operation is less than one, the operation is behind schedule. If the critical ratio is more than one the operation is being processed ahead of schedule.
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Critical ratio is calculated by dividing the planned time remaining to complete the work by actual work remaining (in time units). Critical ratio for Project A = (150 -100)/60 = 0.833, Critical ratio for Project B = (135 - 00)/30 = 1.167, Critical ratio for Project C = (180 -100)/70 = 1.143, Critical ratio for Project D = (140 -100)/45 = 0.889, Critical ratio for Project E = (120 -100)/30 = 0.667. Projects A, D and E have critical ratio less than one. Hence they are on priority as they are behind schedule. Among them Project E has the least critical ratio of 0.667 and therefore is of highest priority. 406. (c) B and C If the critical ratio of an operation is less than one, it can be said the operation is behind schedule. If the critical ratio is more than one, the operation is being processed ahead of schedule. Of the five projects, only B and C have a critical ratio more than one. Hence, B and C are ahead of schedule. 407. (c) E – A – D – C – B The lower the critical ratio, the higher the priority for sequencing that job during further production. Hence, by arranging the five projects in order from least critical ratio to highest critical ratio, we get, E – A – D – C – B. 115
Operations Management 408. (d) To minimize inventory costs Minimizing inventory costs is the objective of inventory management. Scheduling is concerned with meeting customer requirements on time by carrying out the production process efficiently and by reducing service delays. 409. (a) ERP uses multiple databases to store information
410. (c) Advances in software and hardware technologies
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ERP uses a centralized database to integrate the diverse business functions like marketing, production, finance, etc. This facilitates information flow between departments. The disadvantage of ERP implementation is that it takes a long time and involves huge costs.
Since the 1970s, advancements in computer and communication hardware have changed the entire ERP implementation process and have made it highly complex.
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411. (d) Marketers can take speedy decisions in a dynamic market environment
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Options (a), (b) and (c) are factors that have led to the need for business process reengineering. Option (d) is a consequence of BPR implementation. Corporate restructuring can help marketers take speedy decisions in a dynamic market environment. 412. (b) To provide an overview of operations without focusing on processes and systems The purpose of business modeling is to provide a general overview of the operations of a business without going into the technical details of processes and systems. It defines the activities performed and workflow structure in a broad manner. 413. (d) Market structure
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A good business model should be comprehensible, coherent and complete. It should define clearly the different systems and subsystems of a business. A business model is developed on the basis of the organization's goals, objectives and strategic plans. The market structure is external to the organization and is one of the many factors that helps decide on the organization's goals, objectives and strategic plans. 414. (b) i, ii, iv
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Integration of data across departments helps in better connectivity and smooth flow of information. It reduces data redundancy and ensures availability of right information to the concerned department or personnel. 415. (b) ii and iii
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The technology used should be scalable and should support open and non-proprietary technology standards. These characteristics reduce risk and ensure the compatibility of the systems with other IT solutions. The technology should be adaptable to any future changes in business processes without excessively incurring large investment in up gradation.
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416. (d) None of the above Cost of consulting, process redesign and training are incurred in various stages of ERP implementation. 417. (b) i and ii Information gathered from mapping and gap analysis is used for customization of the ERP package. The other two options are not basic requirements for customizing an ERP package. 418. (d) Steering committee The key activity of the steering committee is to monitor the ERP implementation process continuously in order to identify deviations, cost overruns, resource requirements etc, during ERP implementation.
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Part A 419. (a) To assess the readiness of the organization to accept change Defining corporate needs before ERP implementation helps the organization to assess its readiness to change. Implementing an ERP system involves the redefinition of the roles of different functional departments and the authority and responsibility of individuals throughout the organization. Hence, organizations have to adapt to these changes as quickly as possible. 420. (b) To assess the implications of the changes
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Even though an organization may be willing to adapt to changes, it may not be able to assess the implications of the changes. Hence, it must undergo a brief business process redesign exercise before actual implementation. 421. (d) i, ii and iii
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422. (d) Customized products produced at reasonable costs
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To carryout successful ERP implementation, the members of the steering committee should be able to understand business redesign and integration. The steering team should be trained in process mapping and reengineering methodology and it should be fully involved in the process redesign so that it can guide the team members (implementation team) properly. “Customized products produced at reasonable costs” is an example of an ‘order winner.’ The remaining are examples of qualifiers that is a basic requirement for any ERP marketer. 423. (c) Set up tough quality targets
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Tough quality targets can be set up if the organization uses quality as the order winner. Further, when quality is given more importance, price of the product shoots up as quality never comes cheap. 424. (c) Durability
425. (b) Product range
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Durability of a product is defined as the measure of the product’s life in terms of both its technical and economic dimensions.
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Product range implies all the products that are offered by an organization. HDFC Bank offers a wide range of products like deposits, loans, bank accounts, NRI products, insurance products, investment products like mutual funds, pension plans, etc. 426. (a) Modes of transportation, distribution and inventory management
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Logistics is concerned with transportation of materials, distribution of finished products, inventory of materials and finished products in warehouses, etc. Selection of suppliers for supply of raw materials is a function of inventory management. Layout of warehouses, administrative facilities and plants is associated with facilities location and layout decisions. Effective management of material flow in the organization is associated with materials management. 427. (b) i, ii, iii, iv, v, vi, vii To improve ESCM implementation, the following activities should be undertaken: 1) Understand and evaluate the level of integration within the organization, 2) Determine the number of suppliers with direct influence over products or services delivered to customers across the entire supply chain, 3) Divide suppliers into different categories: first tier, second tier and so on, 4) Define customer base in term of sales, profitability, size, etc., 5) Improve information infrastructure within the organization to accommodate ESCM requirements, 6) Constitute a team with representation from various functions within the organization and representatives from suppliers and customers to plan and carry out implementation, 7) Identify leaders capable of guiding the implementation process competently. 117
Operations Management 428. (d) Customer Supply chain members include manufacturers, suppliers, distributors, wholesalers, retailers, logistic service providers, etc. Customers are the basis for all supply chain activities. Supply chain members strive hard to meet customer demand for products they deal with. 429. (d) Improved customer satisfaction
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Tangible benefits include revenue growth, improved facility utilization, optimized inventory management, etc. Intangible benefits include improvement in quality, improvement in customer satisfaction and enhanced customer and supplier relationships. 430. (a) Facilities close to the target market improve the performance of the supply chain
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The capacity and location of a facility has a significant effect on the performance of the supply chain. More facilities close to the customer may improve supply chain effectiveness although cost of maintenance of so many facilities will be high. 431. (c) Firms never custom design a logistic network to meet the individual requirements of customers
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Companies usually design logistics systems either to meet average service requirements of all customers or to satisfy the toughest requirements of a single customer. However, both these approaches lead to poor resource utilization. Hence, a certain amount of customization is built into the network to meet specific requirements of customers. 432. (a) Quality and performance management
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Quality and performance management is a component of SCM and not considered a principle of SCM. All other options mentioned are principles of supply chain management. 433. (b) Supplier
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The order-to-delivery process can be used to evaluate suppliers’ performance on the basis of criteria like on-time delivery, cost, defects, lead time, flexibility in scheduled time, etc. 434. (b) i, ii, iii
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The quality and performance component is related to initiatives that organizations and suppliers take towards improving and maintaining quality standards. It helps identify quality defects in supplier products and facilitates cooperation between suppliers and the manufacturer to improve the quality of items supplied. 435. (c) Strive for heavy discounts to improve the organization’s short-term profitability
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To improve supplier satisfaction, organizations should have clear and mutually understood rules of relationship. Organizations should show commitment for long-term profitability and success of suppliers. This commitment would require suppliers’ involvement in new product development and improvements in current products or services. But focus on discounts to increase short-term profits will hamper development and maintenance of long-term relationships with suppliers. 436. (d) i, ii, iii Measurements provide information on inputs, outputs, performance of business processes, supplier’s performance, etc. The latter can be measured using metrics like on-time delivery performance, quality, etc. Periodic evaluation of performance of processes, programs and systems is associated with periodic review, another SCM enabler. 437. (a) Retailer
Traditionally, retailers have been the closest to consumers. Owing to this proximity, retailers assume the role of monitoring consumer preferences. But the use of the Internet and direct sales are changing all that. Consumers are now interacting with different entities in the purchasing process. 118
Part A 438. (a) i, ii, iii
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The most essential pre-requisite for a supply chain to become a demand chain is to share information collected by various members. Information sharing allows all members to identify the product and packaging requirements, marketing opportunities, etc. and can plan activities accordingly. Every member of the demand chain, whether they design, manufacture, market, sell or transport a specific product, needs to monitor consumer needs and wants. The members in today’s emerging demand chains are the same as those in traditional chains, but their respective roles and responsibilities have changed. 439. (d) Value analysis
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Value analysis is not a method for collecting customer information. It deals with the process of identifying components with the most value in the production process. Some methods used to collect customer information include point-of-sale databases, focus groups, quantitative surveys, “shadowing” of consumers, in-house research, etc. 440. (c) i and ii
441. (c) By reducing communication costs
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There are two common misconceptions in the supply chain concept. One is that all consumers buy from retailers. This can be true in most cases but many consumers are shifting to other channel members who deliver products at the right time and at reasonable prices. The second misconception is that industrial marketers should monitor only their customers and need not bother about end-users. They should not ignore the fact that demand for their products is based on endusers.
442. (b) i, ii and iii
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ESCM helps supply chain partners communicate through the Internet. Communication through Internet is quicker and cost effective. As the supplier can access information regarding inventory and procurement automatically, the purchasing department can lessen its involvement in minor transactions and focus on high value activities like vendor selection and sourcing. The other two options are not related to procurement.
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ESCM results in an extended organization with suppliers being electronically linked. Hence, it provides instant information about the status of inventory levels to suppliers. As and when the inventory is depleted, suppliers replenish with just adequate levels to carry out production. Thus, there is no need to maintain a large inventory in the organization.
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443. (a) Information security
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Security of information is the most sensitive issue when information is shared or exchanged over the Internet. An organization has to ensure that the rightful recipient views the information. All other options are some types of information shared over the Internet between supply chain partners. 444. (d) i, ii, iii, iv
Teamwork, discipline, employee performance, and supplier involvement are considered important elements for successful implementation of the JIT system in an organization. 445. (d) All of the above All options correctly depict the characteristics of a JIT production system. 446. (a) Produce in small lots Traditionally, firms manufacture products in large lots, resulting in a lower number of machine setups. But JIT manufacturing firms undergo a larger number of set-ups as they produce in small lots. 119
Operations Management 447. (c) It is a ‘push’ system JIT system is a pull system rather than a push system.
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448. (b) Varying workstation loads Just-in-time manufacturing helps firms maintain uniform loads at workstations. Some of the characteristics of a JIT system are uniform workstation loads, small lot sizes, closer supplier ties, maintenance of high quality, quick and economic setups, flexible facilities and multi-skilled workforce, preventive maintenance, and continuous improvement. 449. (d) Jikoda Jikoda means autonomation. This approach enables machines to be autonomous and automatically detect defects.
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450. (c) Just-in-time manufacturing The Just-in-time concept states that 'nothing is produced until it is required.' The practice of JIT aims at assembling finished products just before they are sold, sub-assembling just before products are assembled and fabricating components just before sub-assemblies are done.
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451. (c) The relationship should be profitable to both the firm and the supplier
Under the JIT system, the relationship should be profitable to both the supplier and the JIT firm in the long run. Hence, the JIT firm and the supplier should work towards the betterment of each other by abiding to the terms of the contract.
453. (b) Communication
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452. (d) The JIT firm always maintains only one supplier for each type of material JIT firms maintain fewer suppliers, but they are more than one. JIT firms normally share their production plans and schedules with suppliers to enhance their understanding of the production and supply the material at the right time. They also help suppliers with their expertise and suggest ways to improve quality and productivity. This will help firms improve the quality of end products. When the firms plan to introduce new products, they also take suggestions from suppliers regarding product design and types of materials that can be used to improve quality as well as profitability.
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Communications play an important role in establishing a good partnership. The JIT firms can establish a buyer - quality engineering team that stays in constant touch with suppliers. This reduces potential miscommunication with suppliers. They should also inform the JIT firm about new programs undertaken by them to improve quality and ensure timely delivery of supplies.
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454. (d) Suppliers purchase new machinery, hire and train labor to meet requirements Option (d) talks about time to make changes to meet demand. Option (a) talks about linearity in production, option (b) talks about communication, and option (c) talks about trust.
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455. (c) Each worker in the firm considers the next worker in the production line as a customer In a JIT firm each worker considers his/her next worker in a production line as his/her customer. This is because the work done by him/her passes to the next worker for further processing. 456. (b) Large lot sizes Firms that follow JIT type of manufacturing system maintain inventory in the smallest possible lot sizes. This is required as small lot sizes reduce cycle inventory (the excess of inventory, above the safety stock, that is carried between two orders), cut lead times and also help in achieving a uniform workload. JIT manufacturing systems follow uniform workstation loads where material is fed to the workstation uniformly and uniform output is produced across different workstations. Besides, these firms have flexible facilities and quick and economic set-ups.
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Part A 457. (a) i, ii and iii Traditionally, firms manufacture products in large lots, resulting in a lower number of machine setups. But JIT manufacturing firms undergo a larger number of set-ups as they produce in small lots. Therefore, JIT manufacturing firms require quick and inexpensive setups to minimize the disadvantages of having more number of set-ups and higher costs. 458. (c) i and ii
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In a JIT production system, workers must be capable of performing more than one operation. Hence, the entire workforce is trained continuously (at regular intervals) to develop a variety of skills to perform any function the firm requires. A worker is trained to perform several operations rather than being limited to a single assigned operation. 459. (a) i, ii, iii
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The successful implementation of a JIT system is greatly dependent on its ability to reduce set-up times. JIT firms engage specialists and consultants to train workers to reduce set-up times. Firms adopt the following steps to reduce set-up times: 1) Analyze existing set-up procedures, 2) Separation of internal and external set-up activities and 3) Convert internal set-up activities into external set-up activities. 460. (a) Eliminating external demand variations
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External demand variations cannot be eliminated by using the JIT system. By using JIT principles, firms can reduce wastage that arises during the production process such as the waste of overproduction, of time spent in waiting, in transportation and movement, in processing, in keeping excess inventory and in defective parts. 461. (d) Warranty
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All the options are functions of quality except warranty, which is an external failure cost, due to poor quality of product.
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462. (a) Display the measurements of every item being produced Control charts do not give the measurement of every item being produced. They only display the upper and lower limits for process variables or attributes and signal when a process is no longer in control, when the variable is outside the upper or lower limit. Control charts for variables are used to evaluate the mean and variability of the process distribution i.e. the average outgoing quality of each lot. Control charts for attributes ensure that the items after inspection are identified either as defective or non-defective.
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463. (a) The process is out of control and the cause should be established If the values fall outside the control limits then the process is considered out of control. Remedial action has to be taken to rectify these discrepancies.
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464. (c) 67.65
Upper Control Limit =D4 R , Lower Control Limit = D3 R .
D3 and D4 are constants whose values are based on the sample size.
R = ∑R/n = 160/5 =32
UCL = D3 × R = 2.114 × 32 = 67.65 465. (c) Ambience Ambience generally is associated with physical evidence, i.e., infrastructure, layout, furniture, décor, etc. 121
Operations Management 466. (a) Procurement of raw material Quality control begins as early as procurement of raw materials. Raw materials have to be procured with the right specifications and in the right quantity. This is part of preventive control. 467. (c) Average length of the rods in a lot Average length of the rods in a lot is an example of the quality of rods and not productivity.
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468. (c) Proper scheduling
Layout, slow processing equipment and inventory shortages can reduce productivity. But, proper scheduling helps the operations mangers increase productivity. 469. (d) All of the above
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Through proper scheduling, one can decrease the idle time of the material spent in waiting, increase the running time of machinery and also decrease extent of wastage in the plant. 470. (d) Number of cars serviced in a period
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Options - (a), (b), and (c) are inputs to calculate productivity in service organizations, while option (d) is an output. 471. (d) All of the above
Training helps increase productivity through all these ways. 472. (a) Conformity
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A products’ conformity to specifications can be identified by analyzing their defect rates during production and the number of customer complaints after sale. 473. (b) Aesthetics
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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 may feel it is not tastefully designed. So companies can use this quality dimension to cater to a niche market.
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474. (c) The total cost of quality control is minimal
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An optimal trade-off between the cost of inspection and the cost of undetected faults exists when the cost of total quality control is minimal. 475. (b) Loss of goodwill
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The cost of undetected faults includes customer complaints, loss of goodwill, product replacement cost, product liability suits, product recall programs and returned products. 476. (c) Appraisal costs
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Detection or appraisal costs are costs associated with evaluating the quality and performance of products and machines. These include inward materials inspection, tests and inspection throughout the transformation process, equipment maintenance, etc. 477. (d) Cost of returned products
Cost of returned products is an example of external costs. Internal costs include scrap, repair, retesting of repaired products, downtime, loss due to process variability and disposition of defective items. 478. (a) i and ii Quality control charts can be broadly classified into control charts for variables and control charts for attributes. Control charts for variables include X-Chart and R-Chart.
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Part A 479. (c) P-chart P-chart and C-chart fall under control charts for attributes. P-chart determines the proportion of defects in a given sample while C-chart is used to determine the total number of defects in a product. 480. (a) Kaizen
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Kaizen is a concept under Total Quality Management (TQM). It emphasizes continuous improvement in process, skill sets, systems or operations. All the other terms are associated with just-in-time approach.
482. (c) 30.375
Mean of means ∑x n
=
243 8
= 30.375
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x=
Sample 1 2 3 4 5 6 7 8 Total
x 25 36 31 33 27 34 32 25 243
R 8 9 7 6 6 7 5 8 56
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R 8 9 7 6 6 7 5 8 56
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483. (b) 7.0
x 25 36 31 33 27 34 32 25 243
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Sample 1 2 3 4 5 6 7 8 Total
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481. (c) Every employee at every level in the organization is responsible for quality Maintaining quality is not just a prerogative of top management or the quality inspection department but every employee at every level. Quality responsibilities result in employees being more committed, motivated and creative in performing assigned tasks.
R=
∑ R 56 = =7 n 8
484. (a) 32.986 Upper control limit is given by the formula UCL = x + A2 R
= 30.375 + (0.373 × 7) = 32.986 485. (a) 27.764 The formula to calculate lower control limit is LCL = x - A2 R = 30.375 – (0.373 × 7) = 27.764 123
Operations Management 486. (b) 0.952 The formula for lower control limit in an R-chart is LCL = D3 × R = 0.136 × 7 = 0.952
488. (a) 3.14 Number of Defects
1
5
2
3
3
4
4
2
5 6 7 Total
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Sample
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The formula for upper control limit in an R-chart is UCL = D4 × R = 1.864 × 7 = 13.048
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487. (c) 13.048
3 1 4
22
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Average number of defects, c = 22/7 = 3.14 489. (c) 8.546 and 0
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Control limits for a c-chart is given by the equations
LCL = c - 3 c
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UCL = c + 3 c
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where, c is the average number of defects produced by a process. UCL = 3.14 + 3 3.14 = 8.456
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LCL = 3.14 – 3 3.14 = -2.176 As LCL is negative it can be taken as zero.
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490. (c) Type II error
The probability of accepting a lot with some percent of defective items is termed as consumer’s risk or Type II error. 491. (b) Customer TQM believes that each department should treat other departments as its customers. 492. (b) OC curve The operating characteristics (OC) curve is an important feature of acceptance plans. It shows how well an acceptance plan differentiates between good and bad lots. The OC curve is used to determine the limit of average outgoing quality.
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Part A 493. (c) Quality training
494. (d) Regular monitoring of vital parameters of a machine
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Prevention costs include investments made in machinery, technology and education/training programs to reduce defects. It also includes costs to administer the firm’s quality program, data collection and analysis and vendor certification. Equipment maintenance is a detection or appraisal cost. Disposition of defective items is an internal failure cost and warranty charges are an external failure cost. Predictive maintenance is concerned with inspecting vital signs of the machine regularly to identify the health of the system. Some objectives of remedial maintenance are to minimize production losses by getting the equipment back into working condition as quickly as possible, to minimize investments in spare parts and standby machines used when equipment is under repair, and to perform appropriate maintenance based on the extent of problem.
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495. (c) Reducing machine vibration
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Reduction of machine vibrations does not come under irregular preventive maintenance. It is a form of remedial maintenance. 496. (a) Improving efficiency of raw materials purchase
Improving the efficiency of raw materials purchase in an organization is not associated with maintenance management. It is more related to materials management. 497. (a) Minimizing the availability of the firm’s assets for production purposes
498. (d) Marketing manager
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One of the goals of maintenance management is to maximize (not minimize) the availability of the firm’s assets for production.
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499. (b) Out-tasking
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A facilities manager has to plan activities in facilities in consultation with top management, production managers, architects, designers, etc., who are directly related to the management of facilities. Marketing managers are seldom consulted for planning a facility.
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Out-tasking involves hiring outside workers or specialized vendors to carry out a particular task. Out-tasking (i.e. hiring individuals, specialized vendors) is done more frequently than outsourcing (i.e., hiring of full-service, single source vendors). 500. (b) i, ii, iv
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If the client organization gives control of its facilities to an external agency, it is virtually like inviting the agency to gain monopoly over its facilities. This can lead to loss of control over crucial decisions like alterations, expansion of facilities or cost savings. The client may also lose the power to control any deviations in vendor performance. Loss of control can lead to strained relationships between client and vendors and become the cause for serious conflicts. The service providers’ need to raise profits can lead to exploitation of client resources or reduction in quality of work. 501. (a) ii and iii In a long term contract, vendors can easily cover initial costs and have scope to make more profits by revising prices. Firms lose control over activities if they are in the hands of the vendor. 502. (c) i and iii Usually vendors replace skilled workers with semi-skilled workers in a client’s organization either to decrease direct operating costs or to use them for a new client. 125
Operations Management 503. (d) Increases operational costs Advantages of outsourcing include increase in quality of work and flexibility of operations, reduced operation costs and more focus on core competencies. 504. (a) Machine failures do not hinder productivity
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Machine failures can actually reduce productivity halting the production process. Equipment malfunction can reduce product quality and it may prove expensive to repair them 505. (c) i, ii, iii
Mr. Kumar can help improve productivity, increase the life of assets and machinery, preserve equipment value and maximize the salvage value of machinery. 506. (b) Civil maintenance
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Civil maintenance includes building construction and maintenance, maintenance of service facilities like water filters, air conditioning, plumbing, etc. Other activities include maintaining drainage systems, fire fighting equipment, security systems, waste disposal, etc. 507. (c) Electrician
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As the 5hp motor is an electrical component, it has to be maintained and serviced by a qualified electrician. 508. (c) i/r, ii/p, iii/s, iv/q
A plumber maintains water supply pipes, an electrician takes care of lighting equipment, housekeepers are responsible for cleanliness of buildings and instrumentation personnel maintain and service routers.
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509. (c) Preventive maintenance involves regular servicing of equipment while predictive maintenance involves monitoring of equipment continuously
510. (a) i, iii, iv
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The objective of preventive maintenance is to service machines regularly so that equipment functions satisfactorily under optimum load conditions without breakdown or reduction in efficiency. Predictive maintenance involves identification of possible problems before they occur. Options a & b are similar for both types of maintenance operations.
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Any abnormal vibration in equipment indicates that it is not functioning properly in terms of precision cutting. Quality and productivity can come down drastically. The vibration also indicates that the equipment needs maintenance.
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511. (a) Preventive maintenance Periodic maintenance and irregular preventive maintenance fall under preventive maintenance. Periodic maintenance activities are conducted at regular intervals, i.e. weekly, monthly etc.
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512. (b) Predictive maintenance Predictive maintenance is taken up when problems or indications of problems are detected in machinery and equipment. Problems do not mean that the equipment is not functioning properly. But it indicates that such problems or indications can cause breakdown of machinery in future if they are neglected. 513. (b) Cost of replacing the entire machine Cost of replacing the entire machine is associated with remedial maintenance where the entire machine has to be replaced with a new machine due to breakdown or failure.
514. (a) Predictive maintenance Condition Monitoring refers to monitoring the performance of machinery to spot indications that may lead to failure or breakdown. It is associated with predictive maintenance. 126
Part A 515. (d) Richter scale The first three options are examples of instruments used in condition monitoring. Option (d) is used to measure earthquake intensity. 516. (a) Remedial maintenance is taken up when machinery breaks down
517. (d) To minimize failure or malfunction to the lowest possible extent
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Remedial maintenance is performed only when there is breakdown or failure of machinery. So, it is reactive in nature. Preventive and predictive maintenance are proactive in nature. The objective of preventive maintenance is to minimize failure or malfunction to the lowest possible extent. Remedial maintenance, on the other hand, is reactive in nature and is done after a machine breaks down. 518. (c) 7.98 months
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Mean time between failure = ∑ i.Pi
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= (1x0.04) + (2x0.04) + (3x0.05) + (4x0.05) + (5x0.06) + (6x0.06) + (7x0.10) + (8x0.1) + (9x0.1) + (10x0.1) + (11x0.15) + (12x0.15) = 0.04 + 0.08 + 0.15 + 0.20 + 0.30 + 0.36 + 0.7 + 0.8 + 0.9 + 1.0 + 1.65 + 1.80 = 7.98 months 519. (b) 1.50
Number of break-downs per year = Number of months / mean time between failures = 12/7.98 = 1.50
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520. (a) 37.50
There are 25 machines in the plant.
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Hence, the number of break-downs per year for 25 machines = 25 x 1.50 (number of break-downs per year for a machine). This is equal to 37.50 521. (d) Rs.320
Given
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522. (d) 4.65
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Average cost of repairs per machine per occasion = 12000/37.5 = Rs.320
N=15, t=2, P1=0.1, P2=0.2
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B1 = NP1 where B1= number of break downs during the first month after service = 15 x 0.1 = 1.5
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B2 = N(P1 + P2) + B1P1 where B2 = the number of break-downs expected between servicing if the service is performed every two periods = 15(0.1 + 0.2) + 1.5 x 0.1 = 4.5 + 0.15 = 4.65
Thus, the expected number of break-downs between servicing is 4.65 523. (c) 9.765 Given N=15, t=3, P1=0.1, P2=0.2, P3=0.3
From the previous question, we know that B1=1.5 and B2=4.65 B3 = N(P1 + P2 + P3) + B2P1 + B1P2 127
Operations Management = 15(0.1 + 0.2 + 0.3) + (4.65 x 0.1) + (1.5 x 0.2) = 9 + 0.465 + 0.3 = 9.765 Thus, the expected number of breakdowns between servicing is 9.765 524. (d) Rs.21152.50
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Total cost of maintenance for every 3 months = CP x N + CR x Bt Where CP is the cost of preventive maintenance and CR is the cost of remedial maintenance. TC = (650 x 15) + (5500 x 9.765) = 9750 + 53707.5 = 63457.5 Average total cost of maintenance per month = TC/3 = 63457.5/3 = Rs.21152.5
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525. (c) Identify problem – estimate work to be done – develop plan – carry out sequence of tasks
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In maintenance planning, problems (if any) in machinery and equipment are identified first. Then, an estimation of the amount and type of work to be performed is made. Based on the estimate, plans are developed followed by implementing the sequence of tasks to be carried by different personnel. 526. (b) Significance of tasks in maintaining production flow
Maintenance tasks are prioritized on the basis of their importance in maintaining a continuous production process when maintenance resources are scarce.
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527. (a) Ensuring sufficient inventory of frequently used tools and equipment within the plant
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Maintenance managers often maintain inventories of equipment and materials required for maintenance activities within the plant to reduce lead-time before repair can begin. Organizations with production facilities in more than one location reduce inventory costs by storing basic and frequently-used maintenance materials at each location, and occasionally-used materials at a central location.
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528. (c) ii, iii and iv Breakdown in a manufacturing plant adopting JIT system can create a shortage of inputs for all workstations and can hamper the productivity seriously. Hence, production workers are required to do simple preventive maintenance at the beginning of every shift. And in case of major preventive maintenance, they should assist maintenance specialists in the process.
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529. (b) Facilities management
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The primary objective of facilities management is to provide a clean and conducive work environment and enable efficient and effective progress of the core functions of an organization, be it manufacturing, distribution or research. Maintenance management is a primary function associated with facilities management. 530. (b) Production of radiator caps Production of radiator caps is a repetitive and regular process that cannot be classified as a project. It is a process. A project is generally undertaken to solve a problem or take advantage of an opportunity. It is short-term in nature. Examples of projects include new product development, buying a new plant, or solving a production problem. Setting up a plant to manufacture radiator caps is an example of a project. 531. (a) Slack time Slack time refers to the amount of time that an activity can be delayed beyond its earliest start time without extending the duration of a project.
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Part A 532. (b) Earliest start time The earliest start time is the minimum amount of time that must lapse before beginning an activity. 533. (d) All of the above The benefits of a project plan are: it guides in project execution, help document project planning assumptions and provides a baseline for progress measurement and project control.
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534. (b) In linear programming dummy activities are added to paths to make them equal in length In linear programming, addition of dummy activities ensures that two activities do not have the same beginning and end nodes. As a result the paths are not equal in length. 535. (a) Crashing is not effective when applied to tasks with zero slack
536. (a)
B
E
C
D
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A
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Crashing is also effective when applied to tasks with zero slack time. One of the steps in crashing is to highlight the activities on the critical path with the smallest time-cost ratio and crash those activities by ensuring that the reduced time is equal to the smallest slack value of the non-critical activities. G
F
From the table we can infer that activity A precedes B and C, activity B and D must precede E, activity C precedes D, activity D precedes F, and activities E & F precede G.
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537. (b) Dummy activities are used to ensure that two activities have the same beginning and end nodes
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Dummy activities ensure that two activities do not have the same beginning and end nodes. They are the activities that do not utilize any time or resource but are introduced to indicate the precedence relationship. 538. (d) It involves continuous flow of repetitive work
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A project is a non-repetitive task that runs for a limited time to achieve the set objective. 539. (b) Event
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An event is the outcome of an activity or group of activities. It represents the completion of some activities and the beginning of some others in the network. 540. (d) It is the longest path of interrelated activities in a project with zero slack time
CPM is a networking methodology which is employed to compute the minimum time required to complete a project and at the same time identify the sequence of tasks to be performed. The critical path depicts the longest path of interrelated activities in a project with zero slack time. 541. (a) PERT PERT and CPM are two important tools that are used to identify the best possible schedules in project management. The other three options are used to schedule routine tasks to different machines in a production process.
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Operations Management 542. (c) Critical activities are those activities, which if delayed, extend the project duration Critical activities are those activities which if delayed can extend the project duration. Therefore, identifying critical and non-critical activities helps project managers determine which activities can be delayed without affecting the project duration. 543. (b) Event
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An event is the outcome of an activity or group of activities. It represents the completion of some activities and the beginning of some others in the network.
544. (c) It is the maximum time an activity can take considering obstacles and unfavorable circumstances
Pessimistic time for an activity is the maximum amount of time required to complete the activity under unfavorable circumstances.
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545. (d) Slack time
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Also called ‘float,’ slack time is a measure to determine the criticality of an activity. An activity with more float is less critical and can be delayed in case of resource scarcity. B
546. (b) A
C
547. (c)
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Only option A is the appropriate network diagram for the given situation. In option b, c and d, there is an additional precedence relationship that activity B should precede activity C. D
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A
C
E
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Activity A and activity B precede activities C, D and E, and activities D and E follow activity C. Only option ‘C’ fulfils this condition. 548. (d) (Latest start time) - (earliest start time)
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Float or slack time is the difference between the latest start time and the earliest start time. It is a measure for determining the criticality of an activity. An activity with more float is less critical and can be delayed in case of resource scarcity. 549. (b) The project must have a large number of interrelated or overlapping activities
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A project should not have too many interrelated or overlapping activities. Such activities make application of PERT difficult. 550. (b) 2.17 weeks Activities
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Optimistic time to
Pessimistic time tp
Most likely time tm
(t
te
Variance
6
+ 4t m + t p )
1-2
3
5
4
4
tp − to 6 0.111
1-4 2-3
3 2
5 3
4 2
4 2.167
0.111 0.028
o
2
Part A 3 5 7 4 2 6
5 7 10 6 3 9
4 5 8 5 2 8
4 5.333 8.167 5 2.167 7.833 23.333
[
0.111 0.111 0.25 0.111 0.028 0.25 0.611
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2-5 3-6 3-7 4-3 5-3 6-7 Total (Only Critical Path Activities)
Using the formula (t o + 4t m + t p ) the expected time for the activity 5-3 is 2.17 weeks (approx.). 6
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551. (a) 23.33 Refer table above 4 + 4 + 5.333 + 2.167 + 7.833 = (23.33 weeks) 552. (c) 0.611 Refer table above
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The expected time for the activities on the critical path 1-2-5-3-6-7 is
The sum of the variances of the activities on the critical path 1-2-5-3-6-7 is 0.111 + 0.111 + 0.111 + 0.028 + 0.25 = 0.611 D−E σ 2 cp
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Z=
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553. (b) 0.8023
Where, D = desired project completion date = 24, E = earliest expected project completion time = 23.333, σ2cp = Sum of variance of critical path activities = 0.61.
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From the formula, Z = (24 – 23.333) / √0.611= 0.85 ⇒ P(z ≤ 0.85)
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(From the standardized normal distribution function, F(z) table, the area under the normal curve corresponding to z = 0.85 is 0.3023.)
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Probability of completing in 24 weeks = 0.5 + P(0 ≤ z ≤ 0.85) = 0.5 + 0.3023 = 0.8023. 554. (a) 0.3336 D−E σ 2 cp
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Z=
Where, D = desired project completion date = 23, E = earliest expected project completion time = 23.333, σ2cp = Sum of variance of critical path activities = 0.61. From the formula, Z = (23 – 23.333)/ √0.611 = -0.43 ⇒ P(z ≤ – 0.43) ⇒ P(z ≥ 0.43)
(From the standardized normal distribution function, F(z) table, the area under the normal curve corresponding to z = 0.43 is 0.1664.) Probability of completing in 23 weeks = 0.5 – P(0 ≤ z ≤ 0.43) = 0.5 – 0.1664 = 0.3336. 555. (d) Effectively handles situations in which two or more projects share available resources PERT is effective in handling single project activities. But it is not useful in situations in which two or more projects share available resources. 131
Operations Management 556. (c) 1250 Time-cost ratio
(Crash cost − Normal cost ) (Normal time − Crash time)
557. (d) t
e
=
(t o + 4t m + t p )
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= (25000 – 20000) / (17 – 13) = 5000/4 = 1250
6 Expected time represents the mean of the optimistic, pessimistic and most likely times. Expected time is calculated by using the equation t
e
=
(t o + 4t m + t p )
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6 Option ‘a’ gives the formula for mean time between failures. Option ‘b’ gives the formula for the probability of completing the project within the desired completion period. Option ‘c’ represents activity time variances. 558. (b) A model with the basic product characteristics The prototype of a product is a model with basic characteristics. However, it does not exhibit such features like shape, final finishing, color, casing, etc.
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559. (b) i, ii, iii Computer Aided Design (CAD) is a technique used for designing the product and the process on a computer. Computer systems assist in the creation, modification, analysis and optimization of a design, but they cannot develop a prototype.
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560. (c) Marketing department Marketing department has direct contact with the customers and know their preferences. Hence operations managers should communicate with the marketing department regarding the quantity and quality of the products to be produced.
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561. (b) Symbols Unlike conventional systems that manipulate numbers to solve problems, artificial intelligence systems manipulate symbols. Symbols are patterns and processes that can be combined into expressions.
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562. (c) Artificial intelligence Computers, equipped with artificial intelligence (AI), have the capacity to perform tasks commonly associated with the higher intellectual process characteristics of human beings such as the ability to reason, discover meaning, generalize or learn from past experience.
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563. (a) Low level of maintenance As automated systems are complex, they require higher levels of maintenance and the cost of maintenance can be substantial. 564. (a) Computer integrated manufacturing CIM refers to a computer application that integrates various computerized systems into a single multi-functional system. For instance, budgeting, CAD/CAM, process controls, group technology systems, MRP II, financial reporting systems, etc, are linked together. In many ways, CIM represents the highest level of integration in manufacturing
565. (d) Flexible manufacturing system FMS is a form of flexible automation in which several machine tools are linked to materialhandling system. A central computer controls all aspects of this, which is effective in producing different items that have similar processing requirements. 132
Part A 566. (a) Automation Automation is used to perform tasks without human intervention based on certain programmed commands. 567. (d) Control Automation is regularly used to control, monitor and execute manufacturing activities
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568. (c) Consultancy activities
Automation can be conveniently implemented in jobs where repetitive and monotonous tasks are done. It is also widely used for tasks that involve hazardous working conditions. Consultation is more client-specific and varies across customers. 569. (c) Higher initial investment
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Organizations have realized the potential of automating their operations in terms of lower wastage, lower lead-times and higher productivity. However, the cost of automating can be very high.
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570. (d) Higher product quality
Higher product quality is an advantage of automation. Besides, organizations have realized the potential of automating their operations in terms of lower wastage, lower lead-times and higher productivity. 571. (d) None of the above
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Some of the benefits of using CAM are reliable information inputs, consistent product quality, reduction in labor costs, better control and management of equipment and materials, improvement in production rate, etc. 572. (c) FMS
573. (c) CIM
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A flexible manufacturing system contains different machining centers where several kinds of jobs are processed. They are also enabled with automatic tools changing which allows them to change the tools for the next job.
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CIM refers to a computer application that unites various computerized systems into a single multifunctional system. For instance, budgeting, CAD/CAM, process controls, group technology systems, MRP II, financial reporting systems, etc, are linked together in CIM.
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574. (b) Multi-functional system
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CIM integrates many functions into a single system and is capable of performing tasks associated with all those integrated functions. Hence, it can be termed as a multi-functional system. 575. (d) Ability to reason Computers equipped with artificial intelligence have the capacity to perform tasks that involve reasoning and decision making. 576. (a) i and ii CIM systems have so many advantages like reduced operating costs, improved quality, highly reliable delivery performance, etc. However, the proliferation of CIM systems was extremely slow due to huge implementation costs, lack of standardized interfaces between components of CIM and slow acceptance of standardized communication protocols to support the integration.
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Operations Management 577. (b) Professionals Professionals or experts give information inputs to the expert systems. Their methods, logic and analyses used in different situations are framed into rules that guide expert systems to provide solutions to problems posed by the users. 578. (d) Facility location
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Facility location is primarily concerned with deciding the location of a manufacturing plant. Robots are rarely used in this process. 579. (c) Welding activities
In materials handling, the applications of robots include transfer of materials, material loading and unloading. Spot welding is done under processing. 580. (b) Processing operations
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Processing operations involve the manipulation of a tool by a robot to perform a particular action. For instance, spray painting involves pre-programmed movements of the spray painting gun over the area to be painted. 581. (d) Tasks where contingency decision making is needed
Robots must not be used in the areas where human presence is a must, especially in non-repetitive or contingency situations. 582. (c) i, ii, and iv
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Due to the increased coordination between the departments as well as with the suppliers, the inventory can be reduced to a minimum. Customers can also track their own orders within the vendors’ system to determine the status of their orders. EDI allows organizations to cut down their inventory levels by planning for better production and shipment schedules.
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583. (c) Member countries do not lift existing quantitative restrictions
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584. (b) Labor
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Option (c) contradicts the spirit of globalization. Quantitative restrictions imply import tariffs, quotas, duties, etc. against foreign countries from whom goods are imported. Under the WTO agreement, by the year 2002, all member countries had to lift quantitative restrictions imposed on foreign countries.
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India, like other Asian countries, has low-cost skilled manpower compared to the US and Western Europe. 585. (a) Comparative advantage
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The comparative advantage of a country can be defined as its ability to produce goods and services cheaper than other countries. Organizations generally globalize their operations to take advantage of such opportunities. 586. (b) Economies of scale Economies of scale implies producing in huge quantities. It is known that as the volume of production increases, cost of operations comes down, lowering the per unit cost. When the cost of production decreases, lower price can be charged in the market. 587. (b) GM’s strategy to outsource manufacture of $7.5 billion worth of auto components Organizations operating globally can also obtain economies of scale in purchasing. Purchasing in bulk can reduce costs. GM outsourced a huge volume worth $7.5 billion of components.
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Part A 588. (c) Economies of scale in marketing Organizations can also obtain economies of scale in their marketing function. They either use the same salespeople or same promotion strategy or both for promoting their products in different markets. 589. (c) ii and iii
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Economies of scale can be achieved by making a product with minimum modifications. However, modifications whether major or minor, are hurdles to achieve economies of scale. 590. (a) Economic impediment
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When customer requirements in different national markets are vastly different, an organization’s global activities become uneconomical due to the need for customization. Differing requirements necessitate variations in cost, quality, performance, style and size of the product/service. Logistic problems and difficulties such as availability of transportation and distribution channels may also make global presence uneconomical.
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591. (d) To protect local companies from the threat of foreign companies
These impediments are put in place to protect local organizations from global competition. They are framed keeping in mind a particular nation’s interests with regard to employment, defense and regional development. 592. (b) Managerial impediment
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It can be difficult for managers to apply the same strategies and tactics to market products in different markets. This is termed as managerial impediment for companies that are interested in becoming global players. 593. (d) i, ii and iii
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Global organizations require competent managers because issues and operations in international markets are much more complex and demanding than those in the domestic market. They need to look not only for market opportunities or resource availabilities, but also for talent to design future products. In other words, global managers should strive to leverage local assets of their organizations for global advantage. Option ‘d’ is not a reason to scout for competent managers.
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594. (b) Collective efforts from both headquarters and subsidiary
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Managers at headquarters should not dictate product development and technology choice to their subsidiaries nor should they leave it entirely to the subsidiary. They should help the subsidiary in using the pool of knowledge and expertise gained by headquarters by operating in other markets, to develop a new product. Thus, a collective and cooperative effort will yield a product that will be in line with organizational goals as well as be successful in the local market. 595. (d) Technologists and managers In the case of global organizations, the concept of ‘resource allocation’ has a broad scope. The most scarce and precious resource in many global organizations are their technologists and international managers who can coordinate work for continuous improvement. 596. (b) Decentralized in nature The organizational structure adopted by most global organizations is characterized by the presence of authority at the lower levels of the hierarchy. Presence of power in the lower levels of the organizational hierarchy is a sign of decentralization.
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Operations Management 597. (b) Local people can provide better insights into the local business environment Organizations can select managers from the host country or from other parts of the world. But local candidates bring significant knowledge about the local business environment, whereas global managers provide considerable inputs due to their international experience.
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598. (c) iii and iv Though wholly-owned subsidiaries give organizations full control over the operations of their new establishments, they have to start from scratch in every aspect of the business to set up such subsidiaries. Unlike joint ventures, they cannot spread their risk as they have no partners. Further, the time taken to understand the market is greater in subsidiaries than in joint venture or through an alliance. 599. (a) i, ii, iii
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Option ‘a’ covers most of the alternatives in comparison to other options. As Tornado wants to establish a manufacturing base in India with the aim to cater to the Indian market, the export policy is not a major requisite.
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600. (d) Licensing
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When a company licenses its product to a partner in a foreign market, it has limited control over the way the partner markets the product.
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Part B: Model Tests
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The model tests are intended to test the conceptual understanding of the students. Each model test contains multiple-choice questions for a total of 100 points. Students should note that the format of the question paper may be change from time to time.
Paper I
Paper I - Model Test 1 Time: 3 Hours
Total Points: 100 Answer all the questions.
3.
a. b. c. d.
Identify the systematic approach to improve labor efficiency proposed by Frederick Taylor. Shop system Reward system Workplace efficiency system Assembly line system Name the production policy where products are produced well in advance and stored in a warehouse from where they are distributed in accordance with customer orders. Produce-to-stock policy Produce-to-order policy Assemble-to-order policy Custom-to-Order policy
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4.
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a. b. c. d.
q. r.
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Producing products at lower costs when compared to competitors Offering a variety of products under one roof Offering products of higher quality when compared to competitors Capability to produce different products within a short span of time
of
p.
a. b. c. d.
i/p, ii/q, iii/r, iv/s i/p, ii/r, iii/q, iv/s i/s, ii/p, iii/r, iv/q i/s, ii/p, iii/q, iv/r
6.
In this stage of the product life cycle, organizations focus on improving efficiency of the processes, minimizing costs, etc. Identify the stage of the product life cycle. Introduction stage Growth stage Maturity stage Decline stage
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a. b. c. d.
Scientific rules govern worker productivity and it is the prerogative of the management to study and apply these rules in their operations. Who introduced the concept of scientific management in the field of operations management? Adam Smith Frederick W. Taylor Henry Ford Elton Mayo
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a. b. c. d.
Which of the following is not an advantage of computerizing production systems? Increased productivity Better quality Lower initial investment Improved worker safety
a. b. c. d.
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Each question carries one point, unless specified otherwise.
Match the following competitive advantages with their correct explanations. i. Production flexibility ii. Low cost process iii. Product variety iv. Quality
a. b. c. d. 8.
5.
a. b. c. d.
Asahi Glass has superior technical expertise and production methodology that allow it to produce high quality float glass products that other companies cannot produce. What is this distinct advantage called? Core competence Unique selling proposition Production flexibility Cost advantage The systems which are highly flexible and can easily be modified to support other product designs are termed as _________________. Product-focused systems Process-focused systems Standardized systems None of the above
Operations Management
d.
15. Graphical method can be applied for solving linear programming problems in which _____________are involved. a. More than three decision variables b. A maximum of three decision variables c. A maximum of two decision variables d. A minimum of three constraints
16. The concept of linear programming does not consider any synergetic effects among decision variables while calculating their total value for the objective function or the constraints they are associated with. This is part of which assumption of linear programming? a. Proportionality b. Additivity c. Divisibility d. Certainty
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11. What is the value of exponential smoothing constant alpha (α)? a. It is always 0.2 b. It is always less than unity c. It always lies between 0 and 1 d. It can take any positive value
c.
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10. In the first order exponential smoothing forecast method, demand forecast for the next period is given by the equation _____________. a. Ft= αDt-1+(1-α) Ft-1 b. Ft = αDt + (1-α)Ft-1 c. Ft = αDt-1+ αFt-1 d. Ft+1 = αDt-1 + (1-α) Ft-1
a. b.
calculated. Which of the following statements about the various measures of forecasting error are not true? MAPE indicates relative error MSE is used to identify and penalize larger errors Tracking signal value nearer to zero indicates low forecast accuracy MFE for an accurate forecast will be closer to zero
of
a. b. c. d.
A forecast made by using exponential smoothing was found to be over-optimistic to the most recent trends in demand. Which of the following is the most suitable corrective action possible to make the forecast more realistic? Increase the value of α Decrease the value of α Shift to some other forecasting method Ensure that α remains constant
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9.
Only i ii and iv iii and iv ii and iii
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a. b. c. d.
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12. Which of the following helps measure the accuracy with which forecasting methods are able to predict demand? i. Nominal group technique ii. Mean forecast error iii. Tracking signal iv. Least square method
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13. Which of the following forecasting methods is not effective when there are fluctuations in demand or when the demand is seasonal? a. Simple moving average method b. Weighted moving average method c. Regression analysis d. Historical analogy 14. To determine how well forecasts from a forecasting model fit the actual demand pattern, the average error of the model is
140
17. In the graphical method of solving a linear programming problem, what is the right way of plotting constraints on the graph? a. The constraints are plotted as curves b. Constraints parallel to the axes are not considered while plotting. c. The constraints are plotted and moved either to the right or left to achieve an optimal solution d. Constraint inequalities are taken as equations and are plotted on the graph 18. In which method used to develop an initial feasible solution in transportation problems, is the difference between the least cost and the next least cost calculated in a row or column before assigning quantities to any cell? a. North-West corner method b. Least cost method
Part B
24. Which of the following types of integration determines the extent to which a product and its components are produced internally? a. Horizontal integration b. Vertical integration c. Diagonal integration d. Lateral integration
25. Which of the following is not a synonym for process-focused production? a. Intermittent production system b. Stop-and-go production c. Job shops d. Line flow production system 26. A certain product is made of parts which are produced under standardized production. But, the product as a whole is produced in moderate numbers in batches. What kind of production system would be appropriate to produce this product? a. Job shop production b. Group technology c. Product-focused production d. Process focused production
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20. The assumptions made in linear programming models are proportionality, additivity, divisibility and certainty. What does the assumption ‘certainty’ state? a. An optimal solution is possible only when coefficients of variables have certain or definite problems b. Integer programming is used to avoid fractional values for decision variables c. The total value of the objective function and each constraint is equal to the sum of the individual contributions from each decision variable d. Economy of scale does not play a role in linear programming problems
Demand Resource availability Allocation of resources Facility layout
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19. The transportation problem is a special case of linear programming. In which of the following methods are allocations made based on quantity, demand, and supply numbers, as part of determining an initial feasible solution? a. North-West corner method b. Least cost method c. Vogel’s approximation method d. Stepping stone method
a. b. c. d.
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Vogel’s approximation method Both a & b
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c. d.
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21. Which of the following provides an overall macro view of the movement of components and sub-assemblies in the production process? a. Assembly chart b. Process chart c. Gantt chart d. Flow chart
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22. In what way is a typical product focused system distinct when compared to a process focused system? a.
b. c. d.
Lower fixed costs and higher variable costs Higher fixed costs and lower variable costs Higher fixed costs and higher variable costs Lower fixed costs and lower variable costs
23. Many inputs are required to develop a process plan. Which of the following is not an input used in process planning?
27. What is the overall objective of ‘facility layout decision’ in a manufacturing unit? a. To provide smooth workflow of materials and ensure operational efficiency b. To give workers a pleasant work environment c. To arrange various facilities at the plant to improve aesthetics d. To utilize available space within the plant location to the fullest 28. A multinational company prefers to use labor intensive production processes. The company plans to expand its global presence by entering a new country. Which of the following countries should it prefer as a choice location? a. Japan b. Germany c. China d. Australia 141
Operations Management 29. Break-even analysis is a graphical and algebraic representation of relationships among volume of output, costs and revenues. What is the other commonly used term for break-even analysis? a. Quality factor analysis b. Cost-volume - profit analysis c. ABC analysis b. Value analysis
34. Match the following terms associated with the process of job design. i. Job identification ii. Job title iii. Job duties iv. Job specification
30. Layouts are differentiated by the types of work flow they entail and the work flow in turn is dictated by the nature of the product. Which type of layout is also called flow-shop layout? a. Process layout b. Product layout c. Fixed position layout d. Hybrid layout
q.
s.
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i/r, ii/q, iii/p, iv/s i/p, ii/q, iii/r, iv/s i/q, ii/s, iii/p, iv/r i/q, ii/s, iii/r, iv/p
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a. b. c. d.
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r.
Describes the duties and responsibilities associated with the job in a summarized form Reflects the number of workers needed and the reporting authority in a job Describes the required skills and qualifications for a job Describes the purpose and responsibilities of a job
35. The Job Characteristics Model developed by Richard Hackman and Greg Oldham includes five characteristics. They are skill variety, task identity, task significance, autonomy and feedback. Which of the following defines details of tasks needed to complete/perform a job? a. Task identity b. Task significance c. Autonomy d. Feedback
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31. Which of the following layout formats involves grouping similar equipment or functions in an area? a. Product layout b. Process layout c. Fixed position layout d. Grouping technology layout
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32. Which of the following conditions would arise if a steel manufacturer selects a location close to the sea port? a. Higher transportation costs of raw materials b. Better inventory management c. Greater possibility of just-in-time delivery of finished goods d. Greater ability to respond to changes in demand 33. Managers have to balance job specialization and skill variety, while designing jobs for employees. Which of the following is not an advantage of job specialization for workers in an organization? a. Ease in recruiting new workers b. Lower production time or higher productivity due to the learning curve effect c. Higher flexibility in job rotation d. Ease of supervision and training worker
142
36. The extent to which tasks can be defined differs from job to job. Defining tasks is most difficult for which of the following organizational levels? a. Assembly line workers b. Supervisors c. Middle managers d. Top management 37. Job design refers to the process through which tasks are structured to improve the efficiency and productivity of workers. Which of the following is not an objective of job design for a manager? a. To enhance self-esteem and motivate employees b. To maximize worker inputs in terms of time and physical effort
Part B
39. Name the work measurement technique that analyzes work by taking a number of random observations to see the relative frequency with which various activities are carried out. a. Standard data technique b. Predetermined motion time study c. Time study d. Work sampling
42. What is referred to as the time that is generally consumed by an average worker, working at an average speed, to perform a specific task under normal operating conditions? a. Work rate b. Work record c. Work standard d. Observation time
43. Zentech Engineering establishes work standards as part of work measurement in its plant. Which of the following cannot be a possible benefit of using work standards? a. They help schedule operations b. They help reduce machine utilization c. They provide benchmarks for evaluating workers’ performance d. They help compare efficiency of different work methods 44. Which of the following is not an optimal model used to formulate the aggregate plan? a. Linear programming b. Linear Decision Rules c. Pre-determined Motion Time Study d. Heuristic models
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40. Identify the correct definition of ‘time standard’. a. The time consumed by an average worker, working at average speed, to perform a specific task under normal operating conditions b. The time consumed by the most productive worker, working at top speed, to perform a specific task under special operating conditions c. The time consumed by the most productive worker, working at top speed, to perform a specific task under normal operating conditions d. The time consumed by the most unproductive worker, working at the lowest possible speed, to perform a specific task under normal operating conditions
d.
Job identification – observation – pace rating – computing normal time & allowances – computing standard time Job identification – pace rating – observation – computing normal time & allowances – computing standard time
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38. Job design includes skill varieties, task identity, task significance, autonomy and feedback. Which of the following is not considered a part of skill varieties of workers? a. Range of skills b. Extent of motivation needed c. Abilities and talent needed d. Level of skills
c.
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d.
To improve efficiency and productivity of workers To keep workload at a convenient level
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c.
41. Identify the correct sequence of steps followed as part of time study technique. a. Observation – job identification – pace rating – computing normal time & allowances – observation – computing standard time b. Job identification – observation – pace rating – computing standard time – computing normal time & allowances
45. Operations planning activities can be longrange, medium-range, or short-range in nature. Process planning typically falls under which category? a. Long-range planning b. Medium-range planning c. Short-range planning d. Both b & c 46. As the Master Production Schedule (MPS) is based on an estimation of overall demand for the end product, the actual production output is not always equal to the actual demand. Operations managers can modify the MPS to adjust to these deviations. Which of the following is not the correct approach to adjust deviations? 143
Operations Management
c. d.
i. ii. iii. iv.
Decrease in per unit cost Decrease in fixed costs Decrease in variable costs Decrease in inventory costs
a. b. b. c.
i and ii i and iii ii and iii i, ii and iii
c. d.
O
Quantities and required delivery dates of the final product Quantities and required delivery dates of all sub-assemblies Inventory on hand for each component Scheduled receipts for all components
se
b.
BS
U
49. Operations planning activities can be longrange, medium range or short range in nature. Under which category do order scheduling and workforce scheduling typically fall? Long-range Medium-range Short-range Both a & b
Fo rI
a. b. c. d.
50. Which of the following is the basic objective of economic order quantity purchasing? a. b. c. d.
144
53. Which type of cost does a firm incur if the rate of inventory replenishment is less than demand rate? a. Stock-out costs b. Replenishment costs c. Production costs d. Direct costs
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48. A master production schedule of make-toorder organizations contains information about which of the following? a.
52. Which of the following statements correctly describe the P-System? a. Orders are placed at equal intervals of time b. Inventory is monitored continuously c. The order is placed so that total cost of maintaining inventory is less d. Lead time for replenishment is zero
of
47. When a firm achieves economies of scale, production costs reduce considerably. This results due to which of the following?
51. “Large shipments can result in reduced incoming freight costs and material handling costs.” This statement, given by manufacturing firms, refers to which type of inventory? a. Raw material inventory b. Work-in-progress inventory c. Finished products inventory d. None of the above
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b.
Allowing inventory level to increase when demand is low and vice-versa Modifying the size or composition of the product temporarily Sub-contracting additional capacity requirements Maintaining product prices to influence the demand level
Cl as s
a.
Minimizing total inventory cost Minimizing transport cost Minimizing storage cost Minimizing ordering costs
54. Which inventory model is also referred to as the reorder point system? a. P system b Q system c. EOQ d. None of the above 55. Before taking make-or-buy decisions, organizations take into account factors like availability of raw materials in the longrun, ability to monitor and control quality, etc. Which of the following is not an argument in favor of ‘buy’ decisions (outsourcing production)? a. Take advantage of suppliers know-how and expertise b. Quantity required is too low to justify inhouse production c. Helps maintain multiple supply sources d. Maintain control over supply chain activities 56. What precedes a typical make-or-buy decision?
Part B
62. A tires supplier to the Maruti assembly line prides itself on providing the required quantity and types needed for every day production. What type of competitive advantage strategy is described here? a. Differentiation strategy b. Straddling strategy c. Response strategy d. Level production strategy 63. Which of the following forecasting methods is an example for causal models? a. Simple moving average b. Weighted moving average c. Exponential smoothing d. Regression analysis
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58. Which of the following purchasing instruments authorizes suppliers to supply goods for a firm? a. Organizational document b. Purchase quotation c. Purchase requisition d. Purchase order
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57. The purchase department acts on behalf of the user departments and interacts with the suppliers to purchase materials at economic prices. This is associated with which activity of the purchase department? a. Vendor analysis and development b. Supplier selection c. Value analysis d. Contract negotiation and communication interface
61. Ingersoll Rand manufactures a limited variety of horizontal compressors and the customer has to select from the available models. What type of production policy is the company following? a. Varying workforce production b. Standardized production c. Employee focused production d. Customized production
of
Value analysis ABC analysis Break-even analysis Vendor analysis
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a. b. c. d.
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59. Identify conditions that influence a firm for a ‘buy’ decision. i. The cost of purchasing the item is less than for manufacturing it
se
ii. The company does not have required manpower to make the item in
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iii. Expected returns on investment manufacturing items are attractive
BS
iv. The demand for the item (to be manufactured) is seasonal and there is risk in storing and maintaining it. i, ii, iv ii, iii, iv i, ii, iii i, ii, iii, iv
Fo rI
a. b. c. d.
60. Which of the following studies prompted management thinkers and organizations to take up in-depth research into human behavioral aspects at work? a. b. c. d.
Moving assembly lines Hawthorne studies Operations research Scientific management
64. What is the value of the mean forecast error for an accurate forecast model that is unbiased? a. Close to unity b. Close to zero c. Negative d. Equal to one 65. What happens to the demand of the commodity when the price of the commodity is reduced, keeping other things constant? a. Increases continuously b. Decreases continuously c. Increases to a certain point d. Does not change 66. Proportionality is an assumption made in linear programming. It indicates that contribution of individual decision variables in the objective function is proportional to their numeric value. Which of the following can be derived from this assumption? 145
Operations Management
d.
67. The generalized objective function of a linear programming problem is ‘minimize Z = C1x1 + C2x2 + … + Cnxn.’ If X2 is decreased by one unit, what will the value of objective function be? a. The value will increase by C2 b. The value will decrease by C2 c. The value will increase by one unit d. The value will decrease by one unit
c. d.
72. Identify the layout using a product layout within a group of machines and a process layout between such groups of machines? a. Hybrid layout b. Functional layout c. Fixed position layout d. Grouping technology layout 73. Skills, knowledge, and abilities required to satisfy the requirements of a job are associated with which function of job design? a. b. c. d.
Job specification Job specialization Job content Job specialization
O
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68. Which of the following systems is the most appropriate for a production organization producing large volumes with very little scope for product variety? a. Process focused system b. Process focused batch production system c. Product-focused production system d. Cellular manufacturing system
b.
Layouts are permanent and do not change over time Layouts differ from plant to plant, location to location, and industry to industry Layout decisions have long-term consequences for the firm A good layout always attempts to reduce material-handling costs
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c.
a.
of
b.
Economies of scale play an important role in linear programming Economies of scale do not play any role in linear programming Finished products are not proportional to the amount of raw material consumed Does not consider any synergistic or antisynergistic effects among decision variables
Cl as s
a.
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Product expansion Forward integration Backward integration Diversification
BS
a. b. c. d.
se
69. A manufacturer decides to buy its marketing and distribution channels. What type of integration strategy is the manufacturer adopting?
Fo rI
70. The cost incurred in transporting raw materials and other components from different places must be considered while deciding on the location of a facility. Which among the following methods helps analyze these costs? a. b. c. d.
Break-even analysis Point-rate method Transportation method All of the above
71. Identify the statement that does not correctly describe plant layouts. 146
74. What does job identification describe? a. The number of workers and reporting authority in a job b. Purpose and responsibilities of a job c. Duties and responsibilities d. Skills and qualifications required 75. Which of the following is not a type of pre-determined motion time data system? a. b. c. d.
Methods time measurement Work sampling Work factors Maynard Operations Sequence Technique (MOST)
76. Some organizations may not be in a position to fulfill customer orders. They may fulfill them in the future. What is the practice of fulfilling current orders of customers at a future date called? a. Back-order strategy b. Sub-contracting c. Aggregate planning d. Capacity planning
Part B
17,550 units 19,500 units 19,550 units 21,500 units
W3
se
14
Supply
20
11
250
11
16
350
9
13
300
17
BS
F2
W2
U
F1
W1
O
Questions (79 & 80) Answer the following two questions from the given transportation problem. Factory/ Warehouse
F3
8
200
250
450
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Demand
79. Which will be the first cell to which quantity should be allocated, if Vogel’s approximation method is used? (1 point) a. b. c. d.
a. b. c. d.
Rs.15, 000 Rs.20, 000 Rs.25, 000 Rs.30, 000
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81. What is the annual ordering cost if the fixed cost per order is Rs.5000, yearly demand is one million units and 200,000 units are ordered per order? (2 points)
82. Using EOQ model, calculate the holding cost per order if the holding cost per unit is Rs.10 and order quantity is 10000 units? (2 points) a. Rs.100,000 b. Rs.75,000 c. Rs.25,000 d. Rs.50,000 (Questions 83 to 85) Cutting Tools India Ltd. (CTIL) produces different drilling tools including pneumatic power tools. The company decides to launch a new product that requires a new component. The price of this component is Rs.50 per unit and CTIL estimates the annual demand at 2,000 units. If the component has to be manufactured in-house, one-time fixed costs would be Rs.200,000 and variable cost per unit would be Rs.25. Based on this information, answer the following three questions.
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a. b. c. d.
10,100 8,400 8,300 9,400
of
78. Jumbo Auto Ltd achieved sales of 20,000 units in 2006 when the sales forecast was for 19,500 units. Estimate the sales for 2007 using a first order exponential smoothing method. The smoothing constant is 0.1. (1 point)
a. b. c. d.
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77. The graphical method for aggregate output planning is a technique used in developing and evaluating various alternative plans or a combination of alternatives. This method focuses on which of the following relationships? a. Absolute demand and absolute output capacity b. Cumulative demand and cumulative output capacity c. Absolute demand and cumulative output capacity d. Cumulative demand and absolute output capacity
F1 W 1 F2 W3 F2 W 1 F3 W 1
80. What is the initial feasible solution using the least cost method? (4 points)
83. What will be the total cost of producing the component in-house as well as the cost to buy it from vendors? (2 points) a. Rs.100,000 and Rs.250,000 b. Rs.250,000 and Rs.100,000 c. Rs.150,000 and Rs.200,000 d. Rs.200,000 and Rs.150,000 84. If it is estimated that the demand for the component will double annually, what will be the total cost to make and total cost to buy for the next three years? (3 points) a. Rs.550,000 and Rs.700,000 b. Rs.850,000 and Rs.800,000 c. Rs.800,000 and Rs.850,000 d. Rs.700,000 and Rs.550,000 147
Operations Management centers. Using the center of gravity method, identify the X and Y coordinates of the optimal location for Golden Exports to set up its processing plant. (3 points)
d.
Buy Make Buy for first two years and make for the remaining three years Cannot decide
a. b. c. d.
X
Y
Quantity (in tons)
A
5.5
7
60
B
8
12
90
C
12
6
110
D
15
11
100
7.56, 8.99 10.75, 9.06 9.06. 10.75 8.99, 7.56
Fo rI
BS
U
se
O
nl y
Cl as s
86. Golden Exports wants to set up its seafood processing plant at a location that would enable it to effectively ship the processed sea food to four distribution centers across the country. The following table gives the quantities to be shipped and the coordinates for the four distribution
Distribution Center
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a. b. c.
of
85. If the variable cost of in-house production increases to Rs.30 per unit, what decision would you take if the firm requires 25,000 units in five years? (5 points)
148
Paper I - Model Test 2 Time: 3 Hours
Total Points: 100 Answer all the questions.
b. c. d.
There are many factors that directly influence the materials handling function. Which of the following is not such a factor? Type of plant layout Type of production process used Nature of materials and material handling equipment used Quality of material
BS
3.
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a. b. c. d. 4.
Playback robots Numerical control robots Variable-sequence robots Physically operated robots
5.
Which of the following actions is not associated with a conveyance authorization card issued by a production worker from a workstation in a production facility? A material tray is filled with required material in the inventory A vendor immediately fills up the inventory with required quantity A material with filled material is sent to the production worker All of the above
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of
a. b. c. d.
a.
b. c.
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a.
The materials flow is divided into three different overlapping functions production control, inventory control, and the materials handling function. Which of the following is not a task associated with the inventory control function in materials management? Checking the quantity and quality of the incoming material and generating receiving reports Checking the quantity and quality of the products in the production process Storing and protecting finished goods Auditing finished goods inventory
O
2.
se
a. b. c. d.
A Kanban system uses different types of cards to initiate material transactions. Which of the following Kanban cards authorizes a materials handling agent to move the tray to a specified destination? Conveyance authorization card Production authorization card Vendor authorization card Dual-card Kanban system
U
1.
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Each question carries one point, unless specified otherwise.
If an operator performs a sequence of tasks using a robot, it stores the sequence in its memory and performs the same tasks in the same sequence to produce same/similar products. Which category of robots, based on the nature of their operations, is referred to here?
d. 6. a. b. c. d. 7.
a. b. c. d. 8.
Which of the following is not a characteristic of the Kanban system? The Kanban system follows the open loop system The Kanban system requires initial inventory to begin an operation In the Kanban System, cards are used to initiate transactions All inventory items are stored in single trays The Kanban system was developed by Toyota Motor Company, Japan. Which of the following factors determine the number of Kanbans? Time and cost of a set-up Demand rate of a product Number of units that can be stored Number of workstations in a production system Materials handling equipment is of two types - fixed path equipment and variable path equipment. Identify the correct combination from the following.
Operations Management
ii and iv i and iii ii, iii, iv ii and iv
9.
The components of an MRP system can be divided as inputs, processing, and outputs. Which of the following is not part of the outputs of an MRP system? Purchase commitment report Performance reports Planned orders Bill of materials
a. b. c. d.
a. b. c. d.
i and ii i, ii, iv ii, iii, iv i, ii, iii
14. Besides inadequate employee training and involvement, and use of inaccurate and obsolete data, the success of an MRP system usually depends on the product environment. What does an appropriate product environment require? i.
An organization needs to purchase many items, a majority of which are components and parts ii. The demand pattern of items should be dependent in nature iii. Demand for items should be irregular in timing iv. The lead times for purchase of these items should be inconsistent
O
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10. What basic information does a master production schedule contain? a. Required quantities and delivery dates of final products b. Required quantities and delivery dates of all sub-assemblies c. Inventory on hand for each final product d. Scheduled receipts for each final product
Cumulative lead-time requirements for activities such as procurement ii. Activity-wise time-phase requirements iii. The number of units of finished products required iv. List of materials along with the quantity required
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a. b. c. d.
i.
of
Mobile cranes : Fixed path equipment Forklift : Variable path equipment Industrial tractors : Fixed path equipment Conveyor : Fixed path equipment
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i. ii. iii. iv.
U
Master production schedule Planning report Bill of materials Inventory records file
BS
a. b. c. d.
se
11. An MRP system takes some inputs, processes them, and gives certain outputs. Which of the following is not considered an input?
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12. In which step of MRP information processing, all the parts required to produce a product are identified and the production or purchase activity of the respective parts is determined by working backwards? a. b. c. d.
Explosion Netting Offsetting Consolidation of material requirements
13. What does the Master production schedule contain? 150
a. b. c. d.
i, ii, and iii i, iii, and iv ii, iii, and iv ii and iv
15. Scheduling varies depending on the type of operation. Which type of labor-intensive scheduling allows employees to choose their work hours, but on condition that they put in a specified number of hours in a period? a. Flextime approach b. Flextour approach c. Staggered times approach d. Part-time approach 16. One of the methods that service firms can adopt to meet customer demand under situations of limited availability of service facilities is through a reservation system. Which of the following statements is not true about a reservation system?
Part B
d.
17. Which of the following scheduling activities aims at reducing costs by minimizing the idle time of the machines and reducing inventory? a. b. c. d.
Routing Loading Dispatching Backward scheduling
18. Service operations scheduling is quite different from product operations scheduling. Which of the following is not true about service operations scheduling?
c.
se
d.
BS
U
19. Many tourist resorts reduce room tariffs during the off-season to maintain the flow of visitors. Which of the following methods is the service provider using to reduce the gap between demand and supply of services? Appointment system Reservation system Strategic product pricing Routing
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a. b. c. d.
Only i i and iii ii and iv i and iv
21. Assigning specific jobs to each work center for the planning period is associated with _________. a. Loading b. Routing c. Dispatching d. Mapping
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b.
Appointment system is a scheduling method used in service operations Service operations are scheduled according to demand Service operations are scheduled according to inventory requirements Service operations are scheduled according to the first in, first serve rule
O
a.
a. b. c. d.
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c.
i. The smallest processing time on machine A should be greater than or equal to the largest processing time on machine B ii. The smallest processing time on machine C should be greater than or equal to the largest processing time on machine A iii. The smallest processing time on machine A should be less than or equal to the largest processing time on machine B iv. The smallest processing time on machine C should be less than or equal to the largest processing time on machine B
of
b.
Helps manage demand by adjusting price for services Helps meet customer demand successfully by scheduling multiple resources and facilities together Allows firms to discontinue unprofitable business operations Helps firms in situations where customer demand exceeds service capacity
Cl as s
a.
20. If there are 3 machines A, B & C, and n jobs have to be processed on these machines, which of these conditions need to be satisfied to use Johnson’s sequencing rules?
22. In which of the following personnel scheduling approaches are employees given an option to select their work hours from a list of available shifts? a. Flexitime approach b. Flextour approach c. Compressed work week d. Staggered times approach 23. Which scheduling activity is associated with the process of releasing job orders to production workers according to the planned schedule? a. Routing b. Queuing c. Dispatching d. Backward scheduling 24. a. b. c. d.
Expand SAP. Systems Analysis and Programming Strategic Analysis and Programming Systems, Application and Products Strategic Application Programming
151
Operations Management
26. The key activity of _____________ is to monitor the implementation process continuously in order to identify deviations, cost overruns, resource requirements, etc., during ERP implementation. a. Project member b. Project leader c. Project team d. Steering committee
31. Alignment is an SCM ‘enabler’. What should the management of an organization do to ensure better ‘alignment’ in the organization? a. Develop policies that reward low cost purchases and intense negotiations b. Strive for cross-functional interaction c. Set goals and objectives that support successful supplier relationships d. Set up organization-wide and continuous communication systems
i and ii ii and iii iii and iv i and iv
U
a. b. c. d.
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27. Which of the following concepts can be linked to the development of ERP? i. MRP ii. Inventory Management iii. Purchase Management iv. MRP II
30. Which of the following ‘components’ of SCM forms a blue print for supply chain operations? a. SCM leadership b. Operational planning c. SCM strategy d. Order-to-delivery process
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i, ii, iii i, ii, iv ii, iii, iv i, ii, iii, iv
Compensation and benefits Measurement Design Periodic review
of
a. b. c. d.
a. b. c. d.
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25. Why is integration of data considered most critical in ERP implementation? i. It increases data redundancy ii. It increases connectivity between departments iii. It helps in smooth flow of information between departments iv. It ensures availability of right information
Fo rI
BS
28. Process mapping helps in detailing the processes used in business transactions. Process mapping is used in which of the following stages of ERP implementation? a. Identify the needs of the ERP package b. Evaluate the ‘as–is’ situation of the business c. Evaluation of available ERP packages d. Implementation of ERP package 29. 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. Which of the following is not an SCM ‘enabler’?
152
32. Which of the following is not true about demand chains?
a.
b. c.
d.
A player in the demand chain can develop products at any point of time Meeting consumer demand in time is given paramount importance Alliances develop between channel partners who can best satisfy customer needs The players in a demand chain are different from those in the traditional supply chain
33. Electronic supply chain management (ESCM) involves business-to-business integration through the Internet. Identify the advantages of implementing ESCM for a firm. i. ii. iii. iv.
Increase in inventory levels Cost savings Reduction in cycle time Reduction in procurement costs
a. b.
i, ii, and iii i, ii, and iv
Part B
35. Which of the following characteristics is not associated with JIT? a. b. c. d.
Reduction in paperwork Purchase in small lots with frequent deliveries Many suppliers for a given part/component with short-term contracts Standardized packaging for all part types
d.
O
c.
se
b.
Workers are free to implement whatever methods they like Suggestions of workers are not collected and implemented by the management Suggestions of workers are collected, evaluated, tested, and implemented by management Top management provides suggestions that are evaluated and implemented by workers
U
a.
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BS
37. Which of the following elements help build long-term relationships between the firms practicing JIT and their suppliers? i. Trust ii. Communication iii. Product design iv. Linearity of production a. b. c. d.
c. d.
39. JIT does not focus on one of the following. Identify. a. b.
Eliminating external demand variations Reducing unreliable delivery of raw materials Reduction of inventory Reducing excessive set-up times
c. d.
40. Identify the sequence used to implement the suggestions of workers to improve quality in the organization. a.
Collection – evaluation – selection – testing – approval – implementation b. Collection – selection – evaluation – testing – approval – implementation c. Selection – collection – evaluation – testing – approval – implementation d. Selection – collection – testing – evaluation – approval – implementation 41. The cost of quality can be divided into three major categories - cost of prevention, cost of detection/appraisal, and cost of failure. Which of the following is a prevention cost? a. Disposition of defective items b. Equipment maintenance c. Quality training d. Warranty charges
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36. JIT manufacturing has an open management style. What does this mean?
b.
JIT firms select suppliers located away from the plant JIT firms need to maintain long-term relationships with suppliers Suppliers should be reliable in terms of delivery Suppliers should be paid their dues (invoice amounts) regularly without delay
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Operational planning Order-to-delivery process Business relationship management Human resources management
a.
of
34. Which of the following ‘components’ of SCM include functions like commodity planning, supplier capacity planning, planning for supplier evaluation, certification processes, etc.? a. b. c. d.
characteristic of a JIT system. Which of the following cannot be true in this scenario?
i, iii, and iv ii, iii, and iv
Cl as s
c. d.
i and ii i, ii, and iv ii, iii, and iv i, iii, and iv
38. The frequency of buying material is high for JIT firms as they stock less inventory This requires closer supplier ties, a
42. Which of the following indicates labor productivity? i. Goods produced /material consumed ii. Goods produced /man hours spent iii. Goods produced /power consumed iv. Customers handled /number of attendants a. i and ii b. ii and iii 153
Operations Management a.
iii and iv ii and iv
43. Match the following functions of quality with the appropriate description. i. ii. iii. iv.
Durability Serviceability Performance Reliability
p.
The probability of a product’s failure in a time period The operational life of a product Indicates the ability of a product’s primary operating characteristics Concerned with how readily a product can be serviced back into operational mode
s. a. b. c. d.
c.
i/q, ii/s, iii/r, iv/p i/p, ii/q, iii/r, iv/s i/p, ii/q, iii/s, iv/r i/p, ii/r, iii/q, iv/s
46. A company can compete on different quality functions. Which function of quality is measured as the mean time between failures? a. Features b. Reliability c. Durability d. Serviceability 47. To provide a clean and conducive work environment and enable efficient and effective progress of the core functions of an organization is an objective of ____________. a. b. c. d.
Quality management Facilities management Maintenance management Inventory management
se
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44. The cost of quality can be divided into different categories. Investments in machinery and vendor certification are associated with which of the following costs? a. Prevention costs b. Detection costs c. Failure costs d. Appraisal costs
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d.
of
q. r.
b.
Sample 1 is outside the control limits. Further investigation is warranted Sample 3 is outside the control limits. Further investigation is warranted Samples 1 & 3 are outside the control limits. Further investigation is warranted All samples are within limits and the packaging process is in-control
Cl as s
c. d.
Fo rI
BS
U
45. ABC Company manufactures cheese and each packet should weigh 32 gm. The quality supervisor wants to develop a process control chart. He takes five samples of six boxes each and weighs them. The upper and lower control limits for the x-bar chart are 34.34 and 33.86 respectively. The upper and lower control limits for the range are 1.00 and 0.00, respectively. Based on the following data, select the statement that best describes the situation. Sample 1 2 3 4 5
154
Mean 33.9 34.1 34.0 34.2 34.0
Range 1 0.8 1.2 0.3 0.3
48. Which of the following is a suitable strategy a firm can adopt to avoid loss of control when outsourcing facilities management activities? a. Outsource all activities to a singe vendor b. Outsource different tasks to different vendors c. Prefer outsourcing rather than out-tasking d. Outsource core activities to a single vendor 49. An oil mill contains oil extractors with many moving parts. The maintenance inspector on a routine visit finds there is leakage of lubricant in one machine. What type of maintenance will the maintenance inspector take up? a. b. c. d.
Irregular preventive maintenance Predictive maintenance Periodic maintenance Remedial maintenance
50. What do you understand by ‘opportunity maintenance’?
Part B
d.
51. The activity of cleaning facilities to keep them neat and tidy falls under which of the following services of facilities management? a. Janitor’s services b. Reprographics c. Landscaping d. Waste management
O
i, ii, and iii ii, iii, and iv iii, iv, and i i, ii, and iv
se
a. b. c. d.
BS
U
53. Managers use many terms as part of networks in project management. In this context, what is the term used for an outcome of an activity or group of activities? a. Project b. Event c. Critical path d. Node
Fo rI
Comparative advantage Economies of scale Proprietary product knowledge All of the above
56. Which of the following formulae correctly represents the ‘expected time’? n
a.
∑ iP i =1
54. Automated systems are less customizable in terms of the number of possible products that can be manufactured when compared to manually operated systems. Which of the following overcomes this disadvantage? a. CAD b. CAM c. FMS d. JIT
i
D−E σ 2cp
b.
Z=
c.
t p − t o 6
d.
te =
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52. Identify the goals of maintenance management from the following. i. Preserve the value of the firm’s machinery ii. Use maintenance personnel and equipment efficiently iii. Minimize availability of machinery for production process iv. Eliminate accidents by regular inspection
a. b. c. d.
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c.
55. Globalization provides many new opportunities for expansion of organizations. The BPO industry is flourishing in India due to availability of low-cost English-speaking graduates. Which of the following types of global competitive advantage does India have?
of
b.
Maintenance done when a machine is running Maintenance carried out when a machine has broken down Maintenance carried out when a machine is idle and waiting for the next job Maintenance done at regular intervals of time
Cl as s
a.
2
(to + 4t m + t p ) 6
57. Which of the following is true about an FMS? a. b.
c. d.
An FMS requires very less capital to install Different products with similar components and manufacturing processes can be manufactured It has a greater response time It requires many part-time workers
58. Coca-Cola markets its products through mega advertising campaigns and event sponsorship in most of the countries it operates. This is an example of which of the following? a. b. c. d.
Economies of scale in production Economies of scale in purchase Economies of scale in marketing All of the above
59. Raw materials form a major part of costs incurred by an organization. They are classified under which of the following heads in the balance sheet of a firm? 155
Operations Management
66. Small and medium sized organizations usually purchase individual modules of the ERP package due to high costs. Which characteristic of evaluating ERP packages is discussed here? a. Target market b. Investment in R&D c. Modularity d. Ease and cost of implementation 67. Which of the following SCM ‘enablers’ discusses effective decision-making in the organization? a. Participation/involvement b. Design c. Measurement d. Periodic review
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61. The components of an MRP system can be divided into inputs, processing and outputs. Which of the following is not associated with any of these components of an MRP system? a. Bill of materials b. Inventory records file c. Master production schedule d. Layout planning
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60. Give the correct relationship between material costs and its effect on profitability of a firm. a. Profitability increases with rising material costs b. Profitability decreases with increase in material costs c. Profitability decreases with drop in material costs d. Material costs do not affect profitability
65. ERP packages are evaluated to identify the package that will provide a comprehensive solution to the given organization’s requirements. The type of industry it is designed for is one of the factors to be considered. Which of the following terms represents this factor? a. Global presence b. Modularity c. Price d. Target market
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Current assets Current liabilities Fixed assets Fixed liabilities
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62. _______________ contains the list of materials along with the quantity required to produce one unit of a product. a. Master production schedule b. Demand forecast c. Bill of materials d. Inventory records file
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63. Which of the following is not a standard measure of schedule performance to evaluate priority rules? a. Meeting due dates of customers or downstream operations b. Minimizing flow time c. Maximizing work-in-progress inventory d. Minimizing idle time of machines 64. Which of the following is an aid to monitor jobs in-process? a. First-in first-serve b. Gantt chart c. Johnson's rule d. Slack time remaining
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68. In which of the following, products don’t necessarily originate from manufacturers and any player in the supply chain can develop them at any point? a. Supply chain management b. Demand chain management c. Inventory management d. Production management 69. In which approach do people working in similar type of operations meet regularly to discuss work-related problems and ways to improve work quality? a. Quality circles b. Suggestion programs c. Project teams d. JIT purchasing 70. Under the JIT manufacturing system, firms strive to reduce inventory and wastage to the minimum possible extent. What kind of supplier relationships do firms adopting a JIT system maintain?
Part B Short-term relationship with a large number of suppliers b. Short-term relationship with a few suppliers c. Long-term relationship with a large number of suppliers d. Long-term relationship with few suppliers
75. Which of the following correctly defines a critical path of a project?
71. Which of the following is not a function of quality of a product?
d.
Features Reliability Durability Productivity
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c.
Acting as change managers in situations where existing processes or infrastructure are modified Developing good relationships with service providers Measuring the work performance of facilities management teams Reviewing techniques used to reduce costs & raising maintenance levels in facilities
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d.
74. Which of the following is not an activity under preventive maintenance? a.
Optimistic time Pessimistic time Expected time Most likely time
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77. CNC machines can perform variety of tasks based on instructions embedded in them. This technology is part of which of the following? a. b. c. d.
Flexible manufacturing system Computer aided manufacturing Computer aided design Computer integrated manufacturing
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Prevention costs Detection costs Failure costs Appraisal costs
73. Which of the following is not a duty of the facilities manager carrying out tasks inhouse? a.
c.
76. The minimum amount of time required to complete a project is termed ___________.
72. The cost of quality can be divided into different categories. Investments in machinery and vendor certification are associated with which of the following costs? a. b. c. d.
b.
It is a task which must be finished in order to complete the project It is the outcome of an activity or a group of activities It is the longest path of interrelated activities in a project with zero slack time It is the minimum amount of time in which an activity can be completed.
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a. b. c. d.
a.
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a.
Checking for safety in the work environment b. Carrying out periodical preventive maintenance c. Order replacement of broken down machines d. Allocating budgets to upgrade facilities
78. There are certain impediments to globalization that can block an organization from globalizing its activities. Which of the following examples fall under institutional impediments? a. b. c. d.
Government regulations to use locally produced components Utilizing extra capacity to make products that can be exported Necessity to produce customized products in every market Dealing with different people with varying preferences, work styles, etc.
(Questions 79 to 81) V S Rao (Rao) is the supervisor of Choudhary Iron Works, which manufactures customized windows for households. Five customers submitted orders at the beginning of the week. Using the specific scheduling data given below, answer the following three questions. 157
Operations Management Jobs (In order of arrival)
Processing Time
A
3
B
Processing Times (in minutes)
Due Date
Machine A
Machine B
Machine C
5
1
23
10
25
4
6
2
54
23
65
C
2
7
3
45
18
24
D
6
9
4
41
22
33
E
1
2
5
35
20
46
a. b. c. d.
79. Rao decides to use Earliest Due Date to sequence the jobs. Which of the following sequence will be followed to process the jobs? (1 point)
83. What is the earliest start time for the activity 5-6? (1 point)
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80. The average completion time for the sequence, E-A-B-C-D is (3 points) a. 2.4 days b. 7.8 days
(Question 83 to 88) The network diagram of a project to install an ERP system in an organization is given below. The time estimates for completing the project is also show in the diagram. Use this information to answer the following six questions.
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a. A-B-C-D-E b. E-C-A-B-D c. E-A-B-C-D d. D-C-B-A-E
1, 5, 2, 4, 3 3, 2, 4, 5, 1 3, 2, 5, 4, 1 1, 2, 4, 5, 3
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(Days hence)
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c. d.
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81. Calculate the critical ratio for Job A? (1 point) a. 0.60 b. 0.50 c. 1.67 d. 0.67 82. For the given ‘three machine and five job problem’, determine the optimum sequencing for scheduling using Johnson’s sequencing rule. (4 points)
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9
5
7 8
6 a. b. c. d.
3 weeks 9 weeks 5 weeks 7 weeks
84. What is the earliest start time for the activity 6-7? (1 point) a. b. c. d.
7 weeks 9 weeks 14 weeks 15 weeks
Part B
87. Which of the following activities has zero slack time? (1 point) a. 1-4 b. 4-5 c. 5-7 d. 5-6
D
F
C
B
G
E
A
D
E
C
B
G
F
A
D
E
C
G
B
F
A
D
F
G
B
C
E
A
c. d.
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90. Calculate the total lapsed time for the seven jobs based on the optimum sequence. (3 points) a. b. c. d.
305 minutes 330 minutes 325 minutes 315 minutes
91. What is the idle time on Machine A? (1 point)
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88. Identify the correct critical path from among the given options. (1 point) a. 1-2-5-7 b. 1-4-5-6-7 c. 1-2-3-5-6-7 d. 1-2-3-5-7
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86. For which of the following activities the latest starting time is 14 weeks? (1 point) a. 5-7 b. 2-5 c. 5-6 d. 4-5
89. Determine the optimum sequence to process these five jobs using Johnson’s sequencing rule. (1 point)
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85. For which of the following activities the latest finish time is 15 weeks? (1 point) a. 2-5 b. 4-5 c. 5-7 d. 5-6
A
B
C
D
E
F
G
Mach ine A Mach ine B
30
50
45
25
60
40
55
25
60
35
20
30
30
40
20 minutes 25 minutes 30 minutes 15 minutes
92. What is the total idle time on Machine B? (2 point) a. b. c. d.
75 minutes 80 minutes 85 minutes 90 minutes
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(Questions 89 to 92) To manufacture a type of bolt, a firm requires two machines A & B. There were seven jobs from seven different customers who ordered seven different types of bolts. The processing times (in minutes) of these jobs on machines A & B are given in the following table. Use this information to answer the following four questions.
a. b. c. d.
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Part B: Answers and Explanations
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This section contains answers and explanations for the model tests.
Paper I
Paper I - Model Test 1 Answers and Explanations
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1. (c) Lower initial investment The high cost of installation and level of maintenance for automated machines has been a major deterrent in the use of technology in the production process.
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2. (b) Frederick W. Taylor Frederick W. Taylor in his book ‘Principles of Scientific Management’ introduced the concept of scientific management in the field of operations management. Taylor proposed a systematic approach called the ‘shop system’ and implemented it in Midvale Steel Works, where he worked, to improve labor efficiency. Henry Ford later introduced scientific management concepts in the moving assembly line for production of cars. Adam Smith recognised the importance of division of labor in his book ‘The Wealth of Nations.’ Elton Mayo conducted Hawthorne stdies that highlighted the importance of human dimensions and not just planning and control of materials and machines.
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3. (a) Shop system Taylor introduced the concept of scientific management. According to this, scientific rules governed worker productivity and it was the prerogative of the management to study and apply these rules in operations. Taylor proposed a systematic approach called the ‘shop system’ and implemented it in Midvale Steel Works to improve labor efficiency.
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4. (a) Produce-to-stock policy In the produce-to-stock policy, products are produced well in advance and are stored in warehouses, from where they are distributed in accordance with customer orders.
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5. (d) i/s, ii/p, iii/q, iv/r Production flexibility is the ability of an organization to produce different products on short notice. Low cost process involves producing products at lower costs when compared to competitors. Product variety refers to an organization’s ability to produce different products to cater to different customer segments. Quality is where the company produces higher quality products when compared to its competitors.
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6. (c) Maturity stage As the sales become stagnant in the maturity stage, organizations focus on eliminating unnecessary costs and increasing efficiency in production processes. These strategies prevent the erosion of profit margins. 7. (a) Core competence Having superior engineering personnel and producing high quality products is considered a core competency. Unique selling proposition is a verbal or visual message communicated by a company, through advertising, about a specific attribute of its product absent in competitors. Producing a product at cheaper costs than competitors, and flexibility in production processes are examples of core competence. 8. (b) Process-focused systems Process-focused systems are highly flexible systems which can be easily modified to support other product designs. Therefore, by using these systems one can produce different products via different processes.
Operations Management 9. (b) Decrease the value of α Overreacting to the most recent demand implies that the demand forecasted is very optimistic. Therefore to reduce the forecasted demand, the value of α should be reduced.
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10. (a) Ft= αDt-1+(1-α) Ft-1 In first order exponential smoothing method, the demand forecast for next period is given by the equation, Ft = α Dt-1 + (1−α) Ft-1 11. (c) It always lies between 0 and 1 The value of exponential smoothing constant alpha (α) always lies between 0 and 1, which can be mathematically expressed as, 0 ≤ α ≤ 1.
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12. (a) Only i Tracking signal is a measure of accuracy that assesses the precision with which forecasting methods are able to predict demand. Determination of forecasting errors helps operations managers plan their functional activities in a way that minimizes the effect of forecasting errors. The least square method is used to generate a regression model by assigning data to a single line. Nominal group technique is a qualitative method of forecasting demand.
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13. (a) Simple moving average method The Simple Moving Average (SMA) technique forecasts demand on the basis of the average demand calculated from actual demand in the past. The SMA method is effective only when a product does not experience fluctuation in demand over a period of time and the past demand for the product is not seasonal. Historical analogy is a qualitative method and is judgmental in nature. The other two methods have in-built features to tackle the fluctuations in demand.
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14. (c) Tracking signal value nearer to zero indicates low forecast accuracy All the statements are correct except for option ‘c’. A tracking signal nearer to zero indicates that the forecast is more accurate.
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15. (c) A maximum of two decision variables The graphical method is applicable only to problems in which a maximum of two decision variables are involved. If it is more than two, the graph becomes difficult to represent and more complex and it becomes harder to identify the feasible region.
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16. (b) Additivity The objective function and constraints include several decision variables. Here, it is assumed that the total value of the objective function and each constraint is equal to the sum of individual contributions from each decision variable. It means that the model does not consider any synergistic or anti-synergistic effects among decision variables while calculating the total value for the objective function.
17. (d) Constraint inequalities are taken as equations and are plotted on the graph Constraints usually come with inequalities. To plot them on a graph, they should first be converted into equations. Two coordinates for each constraint are obtained to plot each constraint as a line on the graph. 18. (c) Vogel’s approximation method The first step in Vogel’s approximation method is to calculate the difference between least cost and the next least cost in a row or column. This difference is called penalty. Then the row or column with largest penalty value is identified and a quantity is assigned to the least cost in that row. This process is continued until demand is met.
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Part B 19. (a) North-West corner method The North-West corner method assigns the maximum possible quantity of products to the top left corner cell of the transportation problem. After the allocation, supply and demand numbers are adjusted. The other two methods, excluding the stepping stone method, are used to test the solution for optimality and focus on costs while allocating.
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20. (a) An optimal solution is possible only when coefficients of variables have certain or definite problems It is assumed that all the constants have certain values. This is because the solution for a linear programming problem can be assumed as optimal only when the coefficients of variables have certain or definite values.
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21. (a) Assembly chart Assembly charts provide a comprehensive account of the entire production process. They provide an overall view of the movement of components and sub-assemblies in the production system.
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22. (b) Higher fixed costs and lower variable costs Product focused systems need high initial costs (fixed costs); however operating variable costs remain low due to limited scope for product variety.
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23. (d) Facility layout While demand, resource availability, and allocation of resources are inputs to a process plan, facility layout is an output of the process plan, i.e. facility layout is designed based on the process plan.
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24. (b) Vertical integration Vertical integration refers to the extent to which the production and distribution functions are brought under the ownership of the organization. Hence, the degree of vertical integration determines the extent to which a product and its components are produced internally.
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25. (d) Line flow production system Product focused production is also called line-flow production system.
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26. (b) Group technology Product-focused production produces standardized products with prime focus on product rather than on processes. Process-focused production focuses on the process to produce the product. But, both these concepts are used in group technology. The product mentioned in the question uses both the types and thus, comes under group technology. Job shop production, on the other hand, involves producing customized products.
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27. (a) To provide smooth workflow of materials and ensure operational efficiency The main objective of a facility layout is to ensure smooth work flow and maximize efficiency in the production process. 28. (c) China As the company has opted for a labor intensive process requiring more manpower, it could prefer developing nations like China where it can utilize the vast manpower available at low cost. 29. (b) Cost-profit-volume analysis Break-even analysis is also called as cost-profit-volume analysis. While break-even analysis and quality factor analysis are used in location decisions, ABC analysis is used in inventory management. Value analysis is used in purchase management and product design. 165
Operations Management 30. (b) Product layout Product layouts, also called flow-shop layouts or straight-line layouts, involve arrangement of equipment or machines in the same sequence by which a product is made.
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31. (b) Process layout Process layouts, also known as functional layouts or job-shop layouts, involve grouping all similar equipment or functions. Grouping technology layout is a variant of product layout. A fixed position layout involves movement of all machines and men while the product remains stationary. 32. (a) Higher transportation costs of raw materials When a steel manufacturing facility is located near the port, a compromise has to be made on the transportation cost of raw materials. This is because iron ore mines (raw material for steel) are generally located away from the seacoast.
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33. (c) Higher flexibility in job rotation Flexibility in shifting people from one job to other is not possible as workers specialize in certain activities. In the absence of a worker, it is difficult to shift workload to other available workers as they may not possess the required skills or expertise.
34. (c) i/q, ii/s, iii/p, iv/r Job identification describes the department under which the job falls, the number of workers needed, reporting authority, etc. A job title should reflect the purpose and responsibilities of a job. Job duties include duties and responsibilities associated with the job in a summarized form. Job specification describes the skills and qualifications required to perform it competently.
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35. (a) Task identity Task identity defines clearly the tasks that are needed to complete the main job.
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36. (d) Top management The difficulty in defining jobs varies at different levels. While jobs of assembly line workers and supervisors are easy to define, it is difficult to define the other two. Of middle managers and top management, it is most difficult to define the jobs for the latter as their duties and responsibilities cannot be fixed. They need to be performed in different ways to meet the unanticipated and dynamic business situations.
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37. (b) To maximize worker inputs in terms of time and physical effort Objectives of job design are to boost employee motivation, to achieve performance standards and to match skills and abilities of each worker with job requirements. Job design refers to the process through which tasks are structured to improve efficiency and productivity of workers. It should minimize worker inputs (time and physical effort) and maximize their output.
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38. (b) Extent of motivation needed Skill varieties include range of skills, level of skills, abilities and talent of the individual for the post, etc. Motivation levels are not considered a part of skill requirement. Though not included in the skill sets for a job, workers need to be motivated to work efficiently and effectively. 39. (d) Work sampling Work sampling is a technique to analyze work by making several observations, usually taken at random, to see the relative frequency with which various activities are carried out. 40. (a) The time consumed by an average worker, working at average speed, to perform a specific task under normal operating conditions The time consumed by an average worker, working at average speed, to perform a specific task under normal operating conditions is generally referred to as time standard, work standard, or standard.
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Part B 41. (c) Job identification – observation – pace rating – computing normal time & allowances – computing standard time Time study starts with job identification. Observations are then taken, workers are pace rated and normal time is computed along with time for allowances, if any. Finally, the standard time is computed.
43. (b) They help reduce machine utilization Work standards help improve machine utilization rather than reducing it.
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42. (c) Work standard The time consumed by an average worker, working at an average speed, to perform a specific task under normal operating conditions is generally referred to as time standard, work standard, or just standard.
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44. (c) Pre-determined Motion Time Study Pre-determined Motion Time Study (PMTS) is the technique of setting work standards for work measurement. All other options are optimal models used for formulating aggregate plans.
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45. (a) Long-range planning Long-range planning focuses on a period of over one year and is generally carried out annually. Process planning and strategic capacity planning are examples of long-range planning. Mediumrange planning focuses on a period of six to 12 months. Examples of medium range planning are aggregate planning, master production scheduling, and materials requirement planning. Shortrange planning focuses on a period less than six months. Order and workforce scheduling are examples of such planning.
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46. (d) Maintaining product prices to influence the demand level Master production scheduling is generally based on the results of demand forecasts. These results are not always accurate and actual production output is not always the same as the real market demand. To accommodate imbalances, operations managers modify the master production schedule. One way is to alter (not maintain) product prices to influence the demand level.
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47. (a) i and ii When a firm achieves economies of scale, the firm’s per unit cost decreases due to reduction in fixed costs. But variable costs remain more or less the same irrespective of increase in volume. Inventory costs are not directly dependent on whether the firm has achieved economies of scale or not.
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48. (a) Quantities and required delivery dates of final products The master production schedule of make-to-order organizations deals only with end-items or final products and not components and sub-assemblies. 49. (c) Short -range Short-range planning focuses on a period of less than six months. Order and workforce scheduling are examples of such planning. 50. (a) Minimizing total inventory cost EOQ method is used to identify the order quantity to minimize the total cost i.e. the sum of ordering and carrying costs. 51. (a) Raw material inventory Large shipments of raw materials reduce incoming freight costs and material handling costs of a firm considerably. 167
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52. (a) Orders are placed at equal intervals of time In the fixed order period (P) system, the order period is fixed but order quantity varies with requirement. The quantity ordered each time depends on the current inventory level or inventory in hand and future requirements. The fixed order quantity (Q) system assumes that the demand for inventories over a period of time (i.e., usage rate of materials) is constant and lead-time for replenishment of inventories is zero (i.e., materials are received immediately after they are ordered). 53. (a) Stock-out costs Stock-out costs are penalty costs associated with delay in meeting demand or the firm's inability to make the product due to shortage of stocks.
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54. (b) Q system In Q system, order quantity (Q) is always constant and the order is placed when the level of inventory reaches the reorder point. This system is also referred to as the reorder point system.
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55. (d) Maintain control over supply chain activities Only the first three arguments favor ‘buy’ decisions. Extent of control over supply chain activities reduces if production is outsourced rather than done in-house. 56. (c) Break-even analysis Make-or-buy decisions are based on break-even analysis. While making the decisions, costs of producing in-house as well as costs of purchasing from outside are analyzed. These costs are dependent on the quantity demanded.
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57. (d) Contract negotiation and communication interface Under contract negotiation and communication interface, the purchase department negotiates with the suppliers on behalf of the indenting departments (who actually use the material) to purchase the requirements at the most economical prices.
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58. d) Purchase order Purchase order is the legal document issued by a firm that authorizes suppliers to supply goods. It represents the buyer’s obligation to buy materials against specified terms mutually agreed upon with the seller(s).
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59. (a) i, ii, iv When returns on investment in manufacturing goods are attractive, the firm can go for manufacturing instead of purchase. Thus, this is not a valid reason for the firm to purchase the product.
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60. (b) Hawthorne studies Hawthorne Studies were initially conducted to establish a relationship between the influence of the work environment (say, lighting in the work area) and worker productivity. Later studies paved the way for in-depth research on behavioral aspects of workers in the work area. 61. (b) Standardized production Standardized production is undertaken when a company manufactures a limited variety of products in large batches to reduce costs. 62. (c) Response strategy The situation mentioned here is an example of responding to daily requirements of the customer. The speed and flexibility of a supplier to respond to a customer’s requirements is a competitive advantage.
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Part B 63. (d) Regression analysis Regression is a causal method where the relationship between different variables (influencing the demand of a product) and their influence on each other is evaluated. It is based on the concept that forecast is influenced by the occurrence of other events. Data is used to establish the functional relationship between variables, which is then used to forecast dependent variable values.
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64. (b) Close to Zero The value of a mean forecast error for an unbiased forecast model will be close to zero.
65. (c) Increases to a certain point When the price of a commodity is reduced, keeping other things constant, the demand for that commodity increases up to certain level and then remains constant.
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66. (b) Economies of scale do not play any role in linear programming In linear programming problems, it is assumed that the contribution of individual decision variables in the objective function is proportional to their numeric value. Suppose variable Xj represents the number of units of product j produced and Cj is the quantity of raw material utilized in producing a unit of the product, then producing 10 units of product j consumes 10 times the raw material quantity Cj. In other words, the raw material consumption per unit product produced is constant. This means economies of scale do not play a role in linear programming problems. 67. (b) The value will decrease by C2 Consider C2x2. If C2 = 10 and x2 = 3, then C2x2 = 30. It X2 is reduced by one unit (i.e. 3-1=2) then C2x2 = 20. Hence, when x2 is decreased by one unit, the objective function will decrease by C2.
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68. (c) Product-focused production system Product focused production systems are generally used for mass production where the scope for product variety is limited.
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69. (b) Forward integration Forward integration is the expansion of ownership of production to the distribution chain and the market. Backward integration expands the ownership of the production and distribution chain backwards, i.e., towards the source of supplies.
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70. (c) Transportation method The transportation method of linear programming analyses costs involved in transporting supplies from different sources and compares such costs for two or more locations. This helps select the location that gives the least costs.
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71. (a) Layouts are permanent and do not change over time No layout is permanent as they are subject to modifications with changes in product design, process design, introduction of new products, etc.
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72. (d) Grouping technology layout In a grouping technology layout (also called cellular manufacturing layout), dissimilar machines are grouped into cells. Each cell functions like a product layout within a larger job shop or process layout. 73. (a) Job specification Job description describes the tasks, duties and responsibilities of a job. It includes information regarding job content, job requirements in terms of necessary and desirable qualifications, work experience, mental and physical effort involved, scope of responsibilities, nature of reporting relationships and so on. The qualification mentioned in the job description is called job specification. Job content is the central aspect of job design. It defines the set of activities to be performed on the job. Job specialization involves assigning employees to positions that require specific skill sets. 169
Operations Management 74. (a) The number of workers and reporting authority in a job Job identification describes the department under which the job comes, number of workers needed, reporting authority, etc.
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75. (b) Work sampling Work sampling is another work measurement technique similar to pre-determined motion time data system. The different techniques used in work measurement are time study, historical analysis, standard data, work sampling and predetermined motion time data systems.
76. (a) Back-order strategy To maintain smooth operations, organizations use the back-order strategy, in which current order commitments are fulfilled in the future. Back-order strategy assumes that customers are willing to wait for delivery at a later date.
78. (c) 19,550 units We use the formula: F2007
= αD2006 + (1−α) F2006
F2007
= 0.1 x 20,000 + (1-0.1) x 19,500 = 2,000 + 17,550 = 19,550 units
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77. (b) Cumulative demand and cumulative output capacity Graphical method for aggregate output planning is a two-dimensional model used to relate cumulative demand to cumulative output capacity.
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80. (a) 10,100 Factory/Warehouse
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79. (d) F3 W1 The penalty for column W1 is 6, which is the highest. In this column 8 is the least cost (in cell F3 W1). Hence F3 W1 would be first cell to which quantity should be allocated.
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W2 20
17
11 150
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Supply 250
16
350
13
300
200
8 200
Demand
W3 250
F2
F3
W1 14
9 100
200
250
450
Step 1: First, we consider the cell where the unit cost of transportation is the least; i.e. the cell (F3, W1) with a cost of Rs. 8.
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Step 2: The possible number of goods that can be assigned to the cell (F3, W1) is 200.
Step 3: Next, we move to the cell where the next higher unit cost of transportation exists and assign the possible number of goods. Step 4: The process is continued till the entire goods are assigned. The number of occupied cells is 5, that is equal to the value of (m+n-1), i.e. (3+3-1). So, the solution obtained is a feasible solution. Therefore, the cost associated with the solution is = (8x200) + (9x100) + (11x150) + (11x250) + (16x200) = 1,600 + 900 + 1,650 + 2,750 + 3,200 = Rs.10,100
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Part B 81. (c) Rs.25,000 Annual order cost
= fixed cost per order (Co) x number of orders in the year = Co x (annual demand/units ordered per order) = 5,000 x (1,000,000 /200,000) = 5,000 x 5
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= Rs. 25,000. 82. (d) Rs.50,000
Holding cost per order is calculated as the product of holding cost per unit and average inventory. Average inventory is the average of lowest inventory level and highest inventory level. Lowest inventory level in EOQ model is zero and highest is quantity order (Q). = holding cost per unit x [(Q+0)/2]
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Holding cost per order
= 10 x (10,000/2) = Rs.50,000 83. (b) Rs.250,000 and Rs.100,000
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= 10 x 5,000
Total cost of making the product is equal to the unit variable cost (V) times the number of units demanded (Q) plus the fixed costs. Total Cost make = Variable cost + Fixed cost = VQ + F = Rs. 250,000
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= 25 x 2,000 + 200,000
Total cost of buying is the product of price per unit (P) and the number of units procured (Q), i.e.
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Total Cost buy = P × Q = 50 x 2,000
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= Rs. 100,000 84. (a) Rs.550,000 and Rs.700,000
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Demand at the end of first year = 2,000 units Demand at the end of second year = 4,000 units
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Demand at the end of third year = 8,000 units Total demand for the next three years = 2,000 + 4,000 + 8,000 = 14,000 units
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Total cost of making the product is equal to the unit variable cost (V) times the number of units demanded (Q) plus the fixed costs. Total Cost make = Variable cost + Fixed cost = VQ + F Total cost to make 14000 units
= (25 x 14,000) + 200,000 = Rs.550,000
Total cost of buying is the product of price per unit (P) and the number of units procured (Q), i.e. Total Cost buy = P × Q. Total cost to buy 14000 units
= 14,000 x 50 = Rs. 700,000
Hence, it is profitable to make this component in-house in the long run. 171
Operations Management 85. (b) Make Option A: Buy the components for all the five years The cost incurred for buying the components = 25,000 × 50 = Rs.1,250,000 Option B: Make the components in-house for all the five years
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The cost incurred in making the components in-house = (25,000 × 30) + 200,000 = 750,000 + 200,000 = Rs.950,000. Option C: Buy the components for the first two years and make for the remaining three years The given situation can also be represented algebraically as follows:
Let n be the demand for the first two years during which the company has decided to buy the components. Then, the number of units for the remaining 3 years would be (25,000-n) units.
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The total cost would be = One-time Fixed Cost + Variable Cost of buying n units + Variable Cost of producing (25,000-n) units i.e., Total Cost = 200,000 + (n × 50) + [(25,000 – n) × 30] = 200,000 + 50n + 750,000 – 30n
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= Rs.950,000 + 20n
Therefore, the total cost of (Rs.950,000 + 20n) is more than the cost of making the components inhouse which is Rs.950,000. Option D (cannot decide) is irrelevant in the given context as one can calculate the costs under different conditions and select the best one.
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Conclusion:
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In the given situation, the fixed cost is a one-time fixed cost, which would be incurred even if one unit of the component is made in-house. Once this fixed cost is incurred, every unit that is bought with a variable cost of Rs.50 per unit adds (Rs.50 – Rs.30) = Rs.20 to the total cost, as compared to the option of making that unit in-house. So, there is no benefit in switching to in-house production at any interim point of time.
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Over the five-year period, it is clear that Option B costs less than Option A or Option C. Hence, making the components in-house is the best decision.
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86. (b) 10.75, 9.06
X
Y
Quantity (in tons) (Q)
QX
QY
A
5.5
7
60
330
420
B
8
12
90
720
1080
C
12
6
110
1320
660
D
15
11
100
1500
1100
Total
360
3870
3260
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Distribution Center
Xc = ∑QX/∑Q = 3870/360 = 10.75 Yc = ∑QY/∑Q = 3260/360 = 9.06
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Paper I - Model Test 2 Answers and Explanations
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1. (a) Conveyance authorization card A Kanban system uses three types of cards to initiate material transactions: production authorization card, vendor authorization card, and conveyance authorization card. A conveyance authorization card authorizes a materials handling agent to move the tray to a specified destination. This specifies the product’s name, its identification number, and delivery destination. (a) Checking the quantity and quality of the incoming material and generating receiving reports Checking the quantity and quality of the incoming material and generating receiving reports is a function of the purchasing/receiving department which falls under the production control. The other three options are associated with inventory control. Inventory control is used to minimize the overall cost of production.
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2.
3. (d) Quality of material Some factors that influence the materials handling function are - type of plant layout, type of production process used, nature of materials and the material handling equipment used. Quality of material used can be a factor affecting the quality of finished product but it does not directly influence the material handling function.
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4. (a) Playback robots Playback robots can store a sequence of operations in the memory. Initially, an operator performs operations using a robot. The robot stores all those activities (in the same sequence) in its memory and repeats them to produce similar types of products on its own subsequently.
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5. (b) A vendor immediately fills up the inventory with the required quantity A conveyance card only authorizes the material handling agents to fill material trays with required material from the inventory and bring it back to the production worker. It does not authorize the vendor to replenish inventory. A vendor authorization card is used to signal the vendor to replenish inventory.
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6. (a) The Kanban system follows the open loop system Kanbans operate in closed loops and they continue to operate until the materials manager withdraws them.
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7. (b) Demand rate of a product The number of Kanbans can be altered according to the estimated demand for a product. If the demand for the product increases, a larger number of Kanbans are used to meet the increased demand. Similarly, the number of Kanbans can be reduced if the demand for the product decreases. 8. (a) ii and iv Trucks, forklifts, mobile cranes, and industrial tractors are examples of variable-path materialshandling equipment. A conveyor is an example of fixed path equipment. 9. (d) Bill of materials Bill of materials is associated with the inputs of an MRP system.
Operations Management 10. (a) Required quantities and delivery dates of final products The Master Production Schedule (MPS) file contains information about when and how many units of finished products are required. It also gives the available cumulative lead-time for purchasing, receiving, fabricating, and assembling.
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11. (b) Planning report While master production schedule, bill of materials, and inventory records file are inputs to a MRP system, planning report is an output.
12. (a) Explosion The first step in the MRP information processing is explosion where the end product is disassembled into components. Explosion starts from the time a product is required and proceeds backward to determine each production or purchasing activity that is necessary to make each higher-level item in the product structure chart.
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13. (d) i, ii, iii The list of materials along with the quantity required to produce one unit of a product is part of the Bill of Materials (BOM). The other three alternatives are part of the master production schedule. 14. (a) i, ii, and iii The success of an MRP system usually depends on the product environment. The system is useful only when an organization needs to purchase many items, a majority of which are components and parts. The demand pattern of these items should be dependent in nature and irregular in timing. Moreover, the lead times for purchase of these items should be consistent (not inconsistent).
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15. (a) Flextime approach Under the flextime approach, employees are given the option of choosing their work timings, provided a specific number of hours are completed in a time period, say a week.
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16. (a) Helps manage demand by adjusting the price for services Flexibility in setting price for services is not a characteristic of reservation systems. Strategic product pricing is a scheduling approach that helps a firm respond to shifts in demand.
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17. (b) Loading The activity of loading aims at minimizing costs by reducing machine idle time, the amount of work-in-process inventory, etc. Loading includes the task of sequencing jobs so that the machine idle times are minimized and jobs are completed within the least time possible.
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18. (c) Service operations are scheduled according to inventory requirements Service operations are scheduled according to demand rather than inventory requirements. Hence, they follow the first in, first serve rule of scheduling. The appointment system is one such method using this rule.
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19. (c) Strategic product pricing Strategic product pricing is a method that helps firms adjust to shifts in demand. The reservation system allows many customers to use the service at a time by dedicating multiple resources to provide the service. Appointment systems are used to control customer flow at the individual level. Routing is a scheduling activity that explains the sequence of operations and processes to be followed to produce a particular product. 20. (a) Only i In an n-job and three-machine sequencing problem, three machines; A, B and C, are involved, and each job is processed in the order ABC. In this procedure, we should ensure that -- the smallest processing time on machine A should be greater than or equal to the largest processing time on machine B or the smallest processing time on machine C should be greater than or equal to the largest processing time on machine B.
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Part B 21. (a) Loading Loading is the process of assigning specific jobs to each work center depending on its capacities. 22. (d) Staggered times approach Staggered times indicate that employees can choose their work hours from a list of available shifts. 23. (c) Dispatching
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Dispatching is the process of releasing job orders to workers to go ahead with the production process. In this activity, an operations manager releases job orders in accordance with the planned sequence. 24. (c) Systems, Application and Products
The expansion of SAP is Systems, Application and Products in data processing.
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25. (c) ii, iii, iv
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Integration of data across departments helps in better connectivity and smooth flow of information. It reduces data redundancy and ensures availability of right information to the concerned department or personnel. 26. (d) Steering committee
The key activity of the steering committee is to monitor the implementation process continuously in order to identify deviations, cost overruns, resource requirements, etc, during ERP implementation.
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27. (d) i and iv
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ERP extends the functionality of MRP and MRP II systems to provide complete business solutions. MRP systems are used in manufacturing to automate inventory management and production processes. MRP II is an extension of MRP providing an interface with other functional domains. As a result, it is able to achieve a high degree of integration with other automated processes.
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28. (b) Evaluate the ‘as–is’ situation of the business
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The listing of processes in business transactions is done while evaluating the ‘as-is’ situation of the business. Hence, process mapping is done in this stage of ERP implementation. 29. (a) Compensation and benefits
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The six enablers of SCM are: Customer-supplier participation/involvement, periodic review, and alignment.
focus,
design,
measurement,
30. (c) SCM strategy
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SCM strategy forms a blueprint for supply chain operations that support and are consistent with the manufacturing and marketing objectives of the organization. 31. (a) Develop policies that reward low cost purchases and intense negotiations
Good alignment is achieved through effective planning and execution in conjunction with crossfunctional interaction, effective information systems and organization-wide continuous communication systems. Besides, 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, it might hamper the development of long-term relationships or partnerships with suppliers.
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Operations Management 32. (d) The players in a demand chain are different from those in the traditional supply chain In a demand chain, meeting customer demand in time is given paramount importance. Alliances are made between demand chain partners who can best meet customer requirements. The players in today’s emerging demand chains are the same as those in traditional chains, but their respective roles and responsibilities have changed.
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33. (d) ii, iii, and iv The advantages of ESCM are many, including timely order-processing, improved inventory tracking and management, more accuracy in order fulfillment, support for JIT manufacturing, cost savings, reduction in cycle time, reduction in procurement costs, etc. ESCM results in an “extended organization” that encapsulates suppliers’ activities. The extended organization structure provides instant information about the status of inventory levels to suppliers. Therefore, there is no need to carry high inventory.
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34. (a) Operational planning The operational planning component defines the operational requirements for maintaining a supply chain. These requirements are specified in terms of tasks, resource requirements and measurements. The functions under operational planning include commodity planning, supplier capacity planning, planning for supplier evaluation, certification processes, etc. 35. (c) Many suppliers for a given part/component with short-term contracts JIT encourages a firm to maintain fewer suppliers with long-term relationships
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36. (c) Suggestions of workers are collected, evaluated, tested, and implemented by the management The open management style should not imply that workers are free to implement whatever methods they like. Instead, existing procedures should be continued until a better way is suggested, tested and approved. Suggestions by workers to improve processes are first collected and evaluated by the management. The selected suggestions are tested practically to determine how much better they are compared to the existing process. If the suggested process proves better than the existing one, the management approves it for implementation.
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37. (b) i, ii, and iv Building effective partnerships in a JIT system depends on four elements - trust, communication, linearity of production, and time to make changes. The design of a product has no direct bearing on the extent of relationship with the suppliers.
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38. (a) JIT firms select suppliers located away from the plant Firms practicing JIT systems should have suppliers at close proximity. This enables easy transportation and consistent delivery in the face of frequent purchases of material. 39. (a) Eliminating external demand variations External demand variations cannot be eliminated by using the JIT system. By using JIT principles, firms can reduce wastage that arises during the production process such as the waste of overproduction, of time spent in waiting, in transportation and movement, in processing, in keeping excess inventory and in defective parts. 40. (a) Collection – evaluation – selection – testing – approval – implementation Suggestions made by workers for improving processes are first collected and evaluated by a firm’s management. The suggestions selected are tested practically to determine how much better the new process is, compared to the existing process. If the suggested process proves better than the existing one, the management approves it for implementation. 176
Part B 41. (c) Quality training Prevention costs include investments made in machinery, technology and education/training programs to reduce defects. It also includes costs to administer the firm’s quality program, data collection and analysis, and vendor certification. Equipment maintenance is a detection or appraisal cost. Disposition of defective items is an internal failure cost and warranty charges are an external failure cost.
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42. (d) ii and iv ‘Goods produced /man hours spent’ indicate the number of goods produced by a worker in an hour, which is a measure of labor productivity in manufacturing concerns. Similarly ‘customer’s handled /number of attendants’ indicates average number of customers handled per attendant, which is a measure of labor productivity in service industries.
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43. (a) i/q, ii/s, iii/r, iv/p Durability is the operational life of a product. Serviceability is concerned with how readily a product can be serviced back into operational mode. Performance indicates the ability of a product’s primary operating characteristics. Reliability is the probability of a product failing in a time period.
44. (a) Prevention costs Prevention costs are costs incurred by a company to prevent defective goods and services from being produced and/or delivered to customers. This category includes investments made in machinery, technology, and education/training programs to reduce defects. It also includes costs to administer the firm’s quality program, data collection and analysis, and vendor certification.
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45. (b) Sample 3 is outside the control limits. Further investigation is warranted Range of Sample 3 is 1.2, which is more than the upper control limit of 1.00. Hence, sample 3 is outside the upper limit and requires further investigation.
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46. (b) Reliability Reliability is usually measured as the mean time between failures (MTBF) or the failure rate per unit of time or any other measure of use.
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47. (b) Facilities management The primary objective of facilities management is to provide a clean and conducive work environment and enable efficient and effective progress of the core functions of an organization, be it manufacturing, distribution, or research. Maintenance management is a primary function associated with facilities management.
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48. (b) Outsource different tasks to different vendors It is important to outsource as well as out-task activities to retain control over vendors. Total dependence on a single vendor is not advised. The basic objective of outsourcing is to enable a company to focus on core competencies. 49. (a) Irregular preventive maintenance Irregular preventive maintenance includes tasks like repairs, overhauls, and cleaning of spills. These activities are carried out when a casual inspection of a machine reveals the need for servicing before the next periodic preventive maintenance. 50. (c) Maintenance carried out when a machine is idle and waiting for the next job Opportunity maintenance is carried out when the equipment is idle or it has been stopped. These maintenance activities are not scheduled beforehand. If the equipment is idle, it is inspected, and requisite repair or maintenance tasks are carried out. 177
Operations Management 51. (a) Janitor’s services Janitor’s services involve housekeeping in the interior and exterior of buildings and manufacturing facilities.
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52. (d) i, ii, and iv The functions of maintenance management are: preserve the value of the firm’s machinery and other assets, use maintenance personnel and equipment efficiently, maximize the availability of machinery for production process, eliminate or reduce accidents by regular inspection and plan and schedule maintenance work to reduce breakdowns. 53. (b) Event An event is the outcome of an activity or group of activities. It represents the completion of some activities and the beginning of some others in the network.
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54. (c) FMS FMS (flexible manufacturing system) is a form of flexible automation in which several machine tools are linked to a material-handling system. A central computer controls all aspects of the system which is effective in producing different items that have similar processing requirements.
56. (d) t
e
=
(t o + 4t m + t p )
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55. (a) Comparative advantage The comparative advantage of a country can be defined as its ability to produce goods and services cheaper than other countries. Organizations generally globalize their operations to take advantage of these opportunities.
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6 Expected time represents the mean activity time of the optimistic, pessimistic, and most likely times. Expected time is calculated by using the equation, t
e
=
(t o + 4t m + t p ) 6
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Option ‘a’ gives the formula for mean time between failures. Option ‘b’ gives the formula for the probability of completing the project within the desired completion period. Option ‘c’ represents activity time variances.
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57. (b) Different products with similar components and manufacturing processes can be manufactured In comparison with traditional automated systems, the flexible manufacturing system (FMS) offers many advantages such as reduced direct labor, shorter response time, consistent product and better control over manufacturing processes. It also helps a firm manufacture different products having similar components and manufacturing processes. 58. (c) Economies of scale in marketing Organizations can also obtain economy of scale in their marketing function. Here, the company either uses the same salespeople or same promotion strategy or both for promoting its products in different markets. 59. (a) Current assets Raw materials fall under current assets because they are converted into finished products within a short span of time after their purchase. They do not remain in the same form for long periods of time. Further, the raw materials can be liquidated quickly.
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Part B 60. (b) Profitability decreases with increase in material costs As material costs are variable costs, a small decrease in these costs will lead to an increase in profitability and a small increase will lead to a decrease in profitability. 61. (d) Layout planning Layout planning is not a component of MRP. It is associated with facility layout planning.
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62. (c) Bill of materials A bill of materials lists out all the materials used to manufacture a product. It also specifies the number of different materials required to produce one unit of the end product.
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63. (c) Maximizing work-in-progress inventory Maximizing work-in-progress inventory falls under inventory control and cannot be taken as a metric for evaluating job priority rules.
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64. (b) Gantt chart A Gantt schedule chart describes the progress of jobs in equal intervals of time. Johnson’s rule helps firms sequence jobs so as to minimize processing time. The other two options are types of dispatching rules associated with scheduling activities.
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65. (d) Target market When selecting an ERP package, the type of industry – process or discrete – it is designed for, should also be considered. If the package is designed for a particular target market and the organization falls under that market, it reduces the customization efforts as it is likely that the ERP package will already have several industry-specific features.
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66. (c) Modularity Many organizations, especially small and medium-sized ones, may not want to purchase a complete package in one instance. They may prefer to implement the package in modules. In such cases, the modularity of the package, i.e., the availability of the package in separate modules should be examined.
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67. (a) Participation/involvement Participation/involvement is an SCM enabler, which discusses the participation of all stakeholders of the organization in the decision-making process. The knowledge of employees and suppliers should also be considered while arriving at decisions. This makes the decision-making process more effective.
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68. (b) Demand chain management In a demand chain, products don’t necessarily originate from manufacturers. Any player in the supply chain can develop them at any point. The products developed are based on consumer research and information gathered by any supply chain partner. 69. (a) Quality circles There are about 6 to 10 people in a quality circle who work in similar types of operations in a manufacturing facility. The members of quality circles are generally shop floor workers or supervisors. They gather at regular intervals to discuss ways to improve quality of work and help each other gain knowledge. 70. (d) Long-term relationship with few suppliers Firms that practice JIT production systems require reliable suppliers who can supply high-quality components and materials in the required quantities. Therefore, JIT firms maintain long-term business relationships with a few select suppliers 179
Operations Management 71. (d) Productivity Productivity is not a function of quality. It is a measure of operational or employee effectiveness. A company can compete on eight different quality functions: (1) Performance, (2) Features, (3) Reliability, (4) Conformity, (5) Durability, (6) Serviceability, (7) Aesthetics, and (8) Perceived quality.
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72. (a) Prevention costs Prevention costs are costs incurred by a company to prevent defective goods and services from being produced and/or delivered to customers. This category includes investments made in machinery, technology and education/training programs to reduce defects. It also includes costs to administer the firm’s quality program, data collection and analysis and vendor certification.
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73. (b) Developing good relationships with service providers When facilities management is done in-house, external vendors do not come into the picture and so there is no need to manage contracts with vendors
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74. (c) Order replacement of broken down machines Fixing up and/or replacement of broken down machines is part of break-down maintenance and not of preventive maintenance. 75. (c) It is the longest path of interrelated activities in a project with zero slack time The critical path is the longest path of interrelated activities with zero slack time. The critical path consists of all those activities, which if delayed will result in the delay of project completion.
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76. (a) Optimistic time Optimistic time is the minimum amount of time required for an activity to be completed. It is possible to complete a project within the optimistic time only when all the project conditions are satisfactory.
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77. (b) Computer aided manufacturing Computer Numeric Controlled (CNC) machines store operation instructions in their on-board computers which in turn control their operations. These machines can perform variety of tasks based on instructions embedded in them.
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78. (a) Government regulations to use locally produced components Some institutional impediments are: tariffs and duties, which may limit the benefits achieved by economies of scale in production, quantitative quotas and other similar restrictions, preferential procurement from local organizations by government and quasi-government entities, government pressure to use locally produced components or to engage in local R&D, preferential tax treatment and labor policies and corporate laws, tax laws or other policies of the local government.
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79. c) E-A-B-C-D E has the earliest due date of 2 days. A follows with 5 days, B with 6 days, C with 7 days, and D with 9 days. 80. (a) 2.4 days Jobs (In order of arrival) E A B C D
Processing Time (Days)
Due Date (Days hence)
1 3 4 2 6
2 5 6 7 9
Average completion time = (0+0+2+3+7) /5 = 12/5 = 2.4 days. 180
Flow Time
Delay
0+1=1
1–2=0
1+3=4 4+4=8 8 + 2 = 10 10 + 6 = 16
4–5=0 8–6=2 10 – 7 = 3 16 – 9 = 7
Part B 81. (c) 1.67 Critical ratio for Job A = Actual Time Remaining/Work Remaining = 5/3 = 1.67 82. (a) 1, 5, 2, 4, 3 As the least time on machine A is greater than or equal to greatest time on machine B, Johnson’s sequencing rule can be applied to this problem.
Processing Times (in minutes) Hi = Bi + Ci
1
33
35
2
77
88
3
63
42
4
63
5
55
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Gi = Ai + Bi
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Job
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Now, we simplify the machine problem into a two machine problem using two fictitious machines G and H where Gi = Ai + Bi and Hi = Bi + Ci. (i represents job number).
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Job 1 has the least processing time on machine G (33 minutes). It is placed at the beginning of the sequence. The job with least processing time on machine H is placed at the end of the sequence. Here too, job 1 has the least processing time of 35 minutes. As it is already placed at the beginning, the next job with least processing on machine H is taken (job 3 with 42 minutes) and is placed at the end of the sequence. Again, on machine G, the job with least processing time from the remaining available jobs (job 5 with 55 minutes) is selected and placed at the beginning as the second job in the optimum sequence. Now only jobs 2 and 4 are remaining. Of these, on machine H, job 4 has the least processing time (55 minutes) and it is placed just before job 3. Thus, the remaining job is job 2 and it is placed in the middle of the sequence. (working table)
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1-2 1-4 2-3 2-35 2-5 3-5 4-5 53-6 53-7 4-3 5-3 6-7
Earliest Starting Time (E)
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Duration (weeks) (D)
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Activities
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Hence the optimum sequence is 1, 5, 2, 4, 3
3 3 4 2 4 2 5 6 9 5 2 8
0 0 3 3 3 7 3 9 9 3 7 15
Earliest Latest Finish Latest Float Finish Time Starting Time (L-D)-E Time (E+D) (L) (L-D) 3 3 7 5 7 9 8 15 18 8 9 23
3 4 7 9 7 9 9 15 23 9 9 23
0 1 3 7 3 7 4 9 14 4 7 15
0 1 0 4 0 0 1 0 5 1 0 0 181
Operations Management The earliest time can be calculated by using forward pass computation. The earliest start time for an event is given by the earliest starting time plus activity duration of the preceding activity. (The earliest start time for an activity (a-b) is given by the earliest expected occurrence time of the event a). For instance, earliest start time for the activity 1-2 would be earliest expected occurrence time for event 1. The earliest event time for the starting event is taken as zero. Therefore, the earliest start time for the first activity is 0 or E1 = 0.
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(working diagram) E4 = 7 L4 = 7
3 2
4
2 E3 =3 L3 = 3
3
9
5
7
6
5
8
6
E6 = 15 L6 =15
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E2 = 3 L2 = 4
4
2
E7 = 23 L7 = 23
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3
1
E5 = 9 L5 = 9
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E1 = 0 L1 = 0
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Step 1: In the given network diagram, the first event is followed by two events – 2 and 4. Using forward pass computation: E2 = E1+D1-4 = 0+3 = 3, E3 = E1+D1-2 = 0+3 = 3. In this way, we can compute the earliest start time for the remaining activities. The earliest finish times can be calculated by adding the duration of each activity to the respective earliest start times. Therefore, earliest finish time of the activity 1-2 is 0 + 3 = 3 weeks. In this way we obtain earliest finish times for all the activities. If two or more activities converge into the succeeding activity, the greatest value among them is taken as the earliest start time for the activity. For example, in the network diagram, three activities converge at event 5 and the possible values of earliest start time are 9 (from activity 3-5), 5 (from activity 2-5), and 8 (from activity 4-5). As 9 is the largest value, the earliest start time for event 5 is taken as 9 (E5 = 9). Step 2: Computation of latest finish times can be done by using backward pass computation. Backward pass begins from the end node, and proceeds towards the first node. The latest finish time for the last activity is equal to the earliest finish time of the last activity. Therefore, L7 = E7 = 23, L6 = L7 – D6-7 = 23 - 8 = 15. If there are more than two activities originating from an event, then the lowest value of the latest finishing times should be considered. In case of event 5 from the diagram, the possible latest finishing times (L5) can be 14 and 9. As 9 is smaller than 14, we take L5 = 9. Similarly, for event 1, the possble L1 values are 0 and 1. 0 is taken as L1 as it is smaller than 1. (If zero does not figure in the possible values, then there is a error in the problem). Step 3: Critical paths can be identified by calculating the float or slack values, as shown in the working table. The float value of each activity can be calculated by using either starting time or finish time. In the working table the float values are the difference between latest start time (L-D) and earliest start time (E). All the activities which have float as zero are part of the critical path. Hence, in this problem, the critical path is 1-2-3-5-6-7. 83. (b) 9 weeks The earliest start time for the activity 5-6 is 9 weeks. (Refer the working table and diagram followed by the explanation).
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Part B 84. (d) 15 weeks The earliest start time for the activity 6-7 is 15 weeks. (Refer the working table and diagram followed by the explanation).
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85. (d) 5-6 The latest finish time is 15 weeks for activity 5-6. (Refer the working table and diagram followed by the explanation). 86. (a) 5-7 The latest start time is 14 weeks for activity 3-7. (Refer the working table and diagram followed by the explanation).
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87. (d) 5-6 Activity 5-6 has zero slack time. Activities 1-4, 4-5, 5-7 have a slack time of 1, 1, and 5 respectively. (Refer the working table and diagram followed by the explanation).
89. (a) D
F
C
B
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88. (c) 1-2-3-5-6-7 The critical path is the longest path in the network with zero slack time. Here 1-2-3-5-6-7is the critical path. (Refer the working table and diagram followed by the explanation). G
E
A
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The least processing time on machine A is for job D (25 minutes). It is placed at the beginning of the sequence. The job with least processing time on machine B is placed at the end of the sequence. Here job A has the least processing time of 25 minutes and is placed at the end of the sequence. (Though job D has a lower processing time of 20 minutes, it cannot be taken as it is already placed at the beginning of the sequence). This process is continued to get the optimum sequence.
Time in
Machine 2 Processing Time
Time out
0
25
25
25
20
45
25
40
65
65
30
95
C
65
45
110
110
35
145
B
110
50
160
160
60
220
G
160
55
215
220
40
260
E
215
60
275
275
30
305
A
275
30
305
305
25
330
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F
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D
Machine 1 Time in Processing Time out Time
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Optimum Jobsequence
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90. (b) 330 minutes
Total lapsed time at the end of seven jobs is 330 minutes.
91. (b) 25 minutes Total idle time on machine A is the difference between the time when the last job in the optimum sequence is completed on machine B and the time when the last job is completed on machine A. It is 330 – 305 = 25 minutes 183
Operations Management
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= 25 + [(65-45) + (110-95) + (160-145) + (220-220) + (275-260) + (305-305)] = 25 + [20 + 15 +15 + 0 +15 + 0] = 90 minutes
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92. (d) 90 minutes Total idle time on machine B = (Time taken by Machine A to complete the first job in the optimum sequence) + Σ [(time when kth job starts on machine B) – (time when (k-1) th job finishes on machine B)].
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Part B: Model Tests
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Paper II
Paper II - Model Test 1 Time: 3 Hours
Total Points: 100 Answer all the questions.
3.
Many technologies have been developed to support the production process and increase efficiencies. Identify the one that has minimized worker involvement in the production process during manufacturing. Manufacturing information systems Computer-aided manufacturing Linear Programming Automated storage and retrieval systems
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a. b. c. d.
Availability of raw materials and nearness to markets are some of the factors that are considered while making decisions regarding plant location. Which component of operations strategy deals with decisions such as plant location? Allocation of resources to strategic alternatives Technology selection and process development Product design and development Facility planning
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a.
b. c. d.
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a. b. c. d.
State Bank of India has the biggest network of branches and ATMs across India. This can lead to which type of competitive advantage for SBI? Low cost production process Product variety and facility size Convenience and location All of the above
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6. a. b. c. d. 7.
Which of the following products are generally produced under the produce-toorder policy? Refrigerators Ballpoint pens Aircraft Television Identify the relationship between the net present value (NPV) and profitability of a project. The greater the NPV, the greater will be the profitability The greater the NPV, the lesser will be the profitability Profitability cannot be judged with NPV The lesser the NPV, the greater will be the profitability
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a. b. c. d.
_________ is a computer controlled warehouse system that automates inflow and outflow of materials from the warehouse and shop floor on the basis of production requirements. AS/RS CAD FMS CAM
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a. b. c. d.
Decisions on scheduling weekly production of products can be categorized under which type of decisions of operations managers? Strategic decisions Tactical decisions Operational decisions All of the above
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Each question carries one point, unless specified otherwise.
a.
b. c. d. 8.
a. b. c. d. 9.
a. b. c. d.
Time series data may help forecasters identify various demand characteristics of a product except one of the following. Identify it. Random variations Seasonality Trend Maximization Qualitative methods are subjective and judgmental in nature. Which of the following is a qualitative method of forecasting? Simple moving average Regression analysis Delphi method Exponential smoothing
Operations Management
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only iii only ii iii and iv i and iv
16. Which among the following is not a method used in developing an initial feasible solution for a transportation problem? a. North-West corner method b. Least cost method c. Vogel’s approximation method d. Stepping stone method
17. Which among the following is not a major component of a constrained optimization model? a. Decision variables b. Objective functions c. Constraints d. Optimal solution
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12. For any product, there are six major forecast components: base demand, seasonal factors, trends, cyclical factors, promotions and the irregular component. Which component gives the long-term pattern of movement of demand over a period of time? a. Trend component b. Seasonal component c. Cyclical component d. Base demand
a. b. c. d.
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11. A relationship exists between dependent and independent variables of demand. Which of the following techniques is appropriate when such relationships exist? a. Qualitative methods b. Moving average method c. Causal methods d. Least squares method
15. Linear programming is used to arrive at decisions on product mix, transportation, allocation of resources, etc. What are the possible constraints for a transportation decision in linear programming? i. Market ii. Destination requirements iii. Inventory space iv. Capacity
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10. The value of the tracking signal explains the nature of demand. Which of the following statements correctly states this relationship? a. A positive tracking signal indicates that demand is overestimated b. A positive tracking signal indicates that demand is underestimated c. A negative tracking signal indicates that estimated demand is equal to actual demand d. A negative tracking signal indicates that demand is underestimated
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13. Time series methods are divided into static and adaptive methods. Identify the odd one out. a. Simple moving average method b. Weighted moving average method c. Basic time series forecasting method d. Exponential smoothing method 14. The simplex method can be applied to problems where the number of decision variables is more than two. However, inequalities in the constraint equation are converted to equalities. How is this done? a. Introduce objective functions b. Introduce slack variables c. Introduce decision variables d. Introduce constraints
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18. What should be the possible action if production capacity is more than the requirement (demand) in a transportation problem, to balance it? a. An existing warehouse is subtracted b. A dummy warehouse is added c. An existing origin is subtracted d. A dummy origin is added 19. Which among the following methods does not consider either least cost or penalties for assigning products to the cells in the table of a transportation problem? a. Least cost method b. North-West corner method c. Vogel’s approximation method d. Both a & c 20. Which of the following is a disadvantage of process-focused production system?
Part B Highly skilled employees Greater flexibility Lower initial investments Use of general purpose equipment
(∆) (D) (⇒) (
)
a. b. c. d.
i/p, ii/q, iii/r, iv/s i/p, ii/q, iii/s, iv/r i/q, ii/p, iii/r, iv/s i/p, ii/r, iii/s, iv/q
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21. Non-productive activities like storage, delay, transport, input etc, are also included in the process chart. Match the following activities with the appropriate symbols. i. Storage ii. Delay iii. Transport iv. Input
24. Product/service flexibility refers to the ability of the production system to shift quickly from producing one product to another. Which of the following is not a characteristic of a production system with product/service flexibility? a. It uses general purpose equipment b. It requires a multi-skilled workforce c. Employees have to be trained to perform different jobs d. Employ part-time workers to meet the demand 25. Product-focused systems are characterized by product design and batch size. Which of the following statements correctly explains these two aspects? a. High diversity in product design and large batch size b. High diversity in product design and small batch size c. Low diversity in product design and large batch size d. Low diversity in product design and small batch size 26. Which of the following types of layout is used when the product manufactured is bulky, heavy, or fragile? a. Product layout b. Process layout c. Fixed position layout d. Group technology layout
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a. b. c. d.
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22. There are various types of process designs that are generally used by organizations. In which type of process design, products or services tend to flow along linear paths without backtracking or side tracking? a. Product-focused systems b. Process-focused systems c. Group technology d. All the above
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23. Logan Rubber manufactures synthesized rubber caps that are used by many companies as a component in their products. When Logan Rubber wanted to add a new rubber-based product to their product mix, they realized that the present machinery could not be used to produce it. As a result, they decided to install new machinery. What production system did Logan have that prevented it from using the existing machinery for the new product? a. Job shop production system b. Cellular manufacturing system c. Batch production system d. Product-focused system
27. A majority of the companies manufacturing fire crackers are manufactured in and around Sivakasi in Tamil Nadu. Which factor would have affected the selection of Sivakasi as an ideal location for manufacturing fire crackers? a. Proximity of markets b. Availability of transportation facilities c. Arid and dry climate with minimal rainfall d. Availability of services 28. Highly skilled workers are required for which of the following layouts? a. Process layout b. Product layout c. Fixed position layout d. Hybrid layout 189
Operations Management
Identify the correct statement? Job description is part of job evaluation Job description is part of job identification Job specification is part of job description All of the above
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35. a. b. c. d.
36. Which of the following work measurement techniques use statistical tools to arrive at the standard time to perform a task? a. Time study b. Employee self timing c. Historical analysis d. Work sampling 37. Which of the following work measurement techniques uses a stop-watch to measure time and establish a time standard? a. Time study b. Pre-determined motion time study c. Work sampling d. Standard data
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31. Two dimensional scaled down drawings of equipment and machinery is used to determine the best layout for a facility. This is a feature of which model used to develop a layout? a. Graphic and schematic analysis b. CRAFT model c. Load distance model d. Line balancing
Technical feasibility Economical feasibility Behavioral feasibility Political feasibility
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30. In which of the following methods used for selection of a location, are different factors assigned weightages? a. Break-even analysis b. Point-rate method c. Transportation method d. None of the above
a. b. c. d.
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29. Center of Gravity method is used to evaluate and find the optimal location for a distribution center. What is the basic aim of this method? a. To reduce procurement costs b. To reduce production costs c. To reduce transportation costs d. To reduce inventory costs
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32. ___________ investigates job content, the physical conditions in which the job is carried out, and the qualifications necessary to carry out job responsibilities. a. Job description b. Job analysis c. Job profile d. Job specification
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33. The Job Characteristics Model developed by Richard Hackman and Greg Oldham includes five characteristics. They are skill variety, task identity, task significance, autonomy, and feedback. Flexibility and discretion is related to which of the following? a. Task identity b. Task significance c. Autonomy d. Feed back 34. The self-esteem of an employee is enhanced when an important responsibility is delegated. This is associated with which type of feasibility?
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38. Developing a good job design is not sufficient to achieve objectives. Certain pre-requisites need to be satisfied for the job design to be successful. Which of the following is not such a pre-requisite? a. Machinery and equipment to be in good working condition b. Sufficient buffer stock of material and components c. Good working conditions d. High motivation 39. Which of the following statements correctly describes the relationship between tasks to be performed and skills acquired by an employee in an organization? a. Fewer the number of specific tasks performed, higher the skill proficiency and efficiency of the employee b. Greater the number of tasks performed, higher the skill proficiency and efficiency of the employee
Part B
45. Which of the following is a type of heuristic model used for aggregate planning? a. Management coefficient model b. Linear programming c. Computer simulation model d. Linear decision rules 46. The term ‘rolling through time’ is associated with which of the following activities in operations management? a. Location decisions b. Master production schedule c. Inventory management d. Job design
47. Which of the following does not directly signify the service capacity of an organization? a. Total beds in a hospital b. Total seats in an aircraft c. Total rooms in a hotel d. Total drafts issued by a bank in a day
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41. One of the primary applications of work sampling is to find the percentage of time an employee or equipment was occupied, or left idle. What is the name given to this application of work sampling? a. Ratio delay b. Performance measurement c. Time standards d. Employee self-timing
Capacity planning Aggregate planning Scheduling Demand forecasting
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40. Which of the following work measurement techniques are extensively used to measure worker performance in ‘indirect labor jobs’ (jobs involving machine or automation)? a. Historical analysis b. Work sampling c. Pre-determined Motion Time Study d. Standard data
a. b. c. d.
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d.
Fewer the number of tasks performed, lower the skill proficiency and efficiency of the employee There is no relationship between the number of tasks performed and the skill proficiency and efficiency of the employee
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42. Which of the following is an assumption taken for back-order strategy used in aggregate planning? a. Customers are willing to pay more for product delivery b. Customers are willing to wait for product delivery c. Customers are not willing to pay in case of delay in product delivery d. None of the above
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43. Which of the following is not associated with aggregate planning? a. Making best use of resources to meet market demand b. Minimizing production costs c. Making appropriate changes in production rates and workforce levels to improve profits d. Expanding plant capacity to meet future demand 44. It is important to determine adequate production capacity to meet forecast demand levels and to determine whether or not sub-contracting and/or overtime has to be used. This activity is associated with which of the following?
48. Inventories can be direct or indirect. Identify indirect inventory from the following. i. Raw material ii. Stationery iii. Work-in-progress iv. Lubricants a. b. c. d.
i and ii iii and iv i and iii ii and iv
49. In the EOQ model, reorder level is set to the number of units used in the lead time. What is the formula for reorder point? a. Reorder point = Annual demand x Lead time b. Reorder point = Lead time x Total costs c. Reorder point = Lead time x Average daily demand d. Reorder point = Lead time x Ordering costs 191
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51. In which of the following types of inventory classification are items classified based on their importance in the production process? a. b. c. d.
ABC VED FSND Both a & c
52. Purchase indents for raw materials usually originate in which department of a manufacturing organization? Purchase Finance Production Marketing
53. Identify the correct sequence of steps in the supplier selection process.
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b.
Request for quotations – Evaluation of suppliers – Develop a list of suppliers – Supplier selection Develop a list of suppliers – Evaluation of suppliers – Request for quotations – Supplier selection Develop a list of suppliers – Request for quotations – Evaluation of suppliers – Supplier selection Develop a list of suppliers – Request for quotations – Supplier selection – Evaluation of suppliers
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54. Most organizations develop a set of rules and guidelines to ensure that purchasing personnel conduct business ethically. Which of the following statements is not to be considered a purchasing rule by a firm? a. b.
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a. b. c. d.
i, ii, and iii ii, iii, and iv i, iii, and iv i, ii, iii, iv
56. Operations management involves the functions of planning, organizing, controlling, directing, and coordinating in production systems, which help in converting the resource inputs into products or services. Activities that compare work progress to schedule, and inventory level to targets fall under which function of operations management? a. Planning b. Directing c. Coordinating d. Controlling
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55. Which of the following activities are performed by people involved in making purchase decisions? i. Price negotiation ii. Giving feedback to sales personnel of suppliers iii Building long-term relationships iv. Giving indents to concerned departments
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Turnover Consumption value Importance in usage All of the above
d.
All purchasing activities should be conducted honestly and truthfully All purchasing commitments (payments of bills, etc) should be completed on time
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a. b. c. d.
c.
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50. FSND is a type of classification of inventory. On what basis are items classified under FSND?
The organization’s interest should be kept in mind while purchasing Selection of suppliers should be based on individual discretion
57. What does the ratio between the quantity of output produced and the quantity of input used in an organization indicate? a. Product quality b. Productivity c. Product variety d. Profitability 58. What do you understand by the term production flexibility? a. Ability to produce large quantities of products b. Ability to produce different varieties of products c. Ability to produce a single product d. None of the above 59. Identify the qualitative forecasting method in which the member experts are allowed to discuss and arrive at a consensus.
Part B
a. The greater the time period, the greater the b. c. d.
accuracy The lesser the time period, greater the accuracy Accuracy of demand is independent of time period The greater the time period, the lesser the accuracy
52.33 54.00 53.33 55.00
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Allocating resources to the production process Minimizing production costs Minimizing transportation costs Maximizing capacity
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62. Which of the following can be an objective of a transportation problem? a.
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63. Under what condition can one say that a transportation problem is balanced? a. b. c. d.
a. b. c. d.
i and ii ii and iv i, ii, and iv i, ii, and iii
65. What is the ‘Line flow production system’ also referred to as? a. b. c. d.
Product-focused systems Process-focused systems Group technology None of the above
66. If in an assembly line more than a single product is to be made, which model can be used to study workflow in terms of different workstation sizes, task variations, etc?
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61. The demand of Product A for six consecutive months is given as 50, 53, 54, 55, 53, and 52. Calculate the demand for Product A for the seventh month using the simple moving averages method. Assume the time period to be a three month moving average.
Employ additional workforce on part-time basis ii. Make existing employees work overtime iii. Recall the workforce laid-off previously iv. Employ multi-skilled employees
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60. What is the relationship between the time frame and accuracy of demand forecast in simple moving average technique?
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Delphi method Nominal group technique Brainstorming Executive committee consensus
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a. b. c. d.
Supply should be greater than demand Supply should be equal to demand Supply should be less than demand There is no condition
64. If an ice cream factory plans to meet the peak demand during summer season, which of the following steps could it possibly take?
a. b. c. d.
Line balancing Mixed-model line balancing Load distance model CRAFT model
67. Which of the following location-evaluation methods uses expert panels, namely strategic panel, forecasting panel and coordinating panel, while deciding on optimal plant location? a. b. c. d.
Point rate method Center of gravity method Analytic Delphi method Break-even analysis
68. Break-even analysis is a graphical and algebraic representation of relationships among volume of output, costs and revenues. What is the other commonly used term for break-even analysis? a. b. c. d.
Quality factor analysis Cost-volume-profit analysis ABC analysis Value analysis 193
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74. What is the optimum criterion for selecting the best economic order quantity? a. Annual ordering costs are minimum b. Annual carrying costs are minimum c. Total annual costs are minimum d. Annual inventory costs are minimum 75. Stock-out costs are assumed to be absent in which of the following inventory systems? a. b. c. d.
Q system P system EOQ Fixed Order Quantity system
76. a. b. c. d.
Who generally issues a purchase indent? User department Purchase department Vendor Top management
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71. Rajdhani Enterprises Ltd. asks its employees to fill up a time sheet for different tasks undertaken and respective time spent on each task in a given period. Which of the following methods of work measurement has the company implemented? a. Work sampling b. Time study c. Employee self-timing d. Pre-determined Motion Time Study
Inventory plan Aggregate plan Capacity plan Material requirement plan
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70. The Job Characteristics Model developed by Richard Hackman and Greg Oldham includes five characteristics. They are skill variety, task identity, task significance, autonomy, and feedback. Which of the following defines details of tasks needed to complete/perform a job? a. Task identity b. Task significance c. Autonomy d. Feed back
a. b. c. d.
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69. Many factors have to be considered as part of job design. The basic question ‘Where is the job performed?’ describes one of the following. Identify. a. The tasks to be performed b. The geographic location of the job c. Method of performing the job d. Qualities of workers who perform the job
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72. What term is used to signify maximum output that can be produced in a given production system in a given time period? a. Productivity b. Capacity c. Quality d. Inventory 73. Which of the following types of plans helps define how resources can be used in the best way to meet the market demand for a product, minimize the production costs, make appropriate changes in production rates and workforce levels to improve profits, improved customer service, and utilization of resources?
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77. Which of the following is not mentioned in a quotation? a. b. c. d.
Price per unit Delivery schedule Terms and conditions Name of the user department
78. What precedes a typical make-or-buy decision? a. b. c. d.
Value analysis ABC analysis Break-even analysis Vendor analysis
(Questions 79 to 81) The desired daily output for an assembly line is 1000 units. The assembly line operates for a period of 480 minutes a day. The process involves the tasks as shown in the figure. Answer the following three questions.
Part B 11 sec
9 sec F
B
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A
6 sec
79. a. b. c. d.
9 sec
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16 sec
Calculate the cycle time. 4.8 seconds 28.8 seconds 0.48 seconds 2.88 seconds
(1 point)
9 sec
Answer the following five questions from the above information. 82. For which of the given months, the production capacity exceeds demand? (1 point) a. June b. July c. August d. September
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80. Calculate the number of workstations that are theoretically required? (2 points) a. 7 b. 6 c. 4 d. 5
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50 sec
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81. If the actual number of work stations required is 6 in number, then what is the efficiency of the assembly line? (1 point) a. 0.93 b. 0.95 c. 0.98 d. 0.94
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(Question 82 to 86) In a production facility, a worker is capable of producing 4 metal frames per day. Assume the time taken for producing each metal frame is the same. Given: Hiring costs = Rs. 2000, Layoff costs = Rs. 2500, Current employee strength = 50 Aggregate demand for next four months is given in the following table. Jun
Jul
Aug
Sep
Demand
5150
5000
4800
4660
Working Days
24
25
23
24
83. How many extra workers are required to meet the demand for the month of June (1 point) a. 1 b. 2 c. 3 d. 4
84. What is the total cost incurred by the organisation for hiring/laying off workers in the month of June? (1 point) a. 2000 b. 4000 c. 6000 d. 8000 85. Calculate the total cost incurred by the organisation for hiring/laying off workers in August to meet the demand during the month without any shortage. (2 points) a. 2,000 b. 6,000 c. 4,000 d. 8,000 195
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88. Using
87. The extent of sales of a product depends on many variables. Assume that sales of a bulldozer increases with increase in the sales promotion expenditure. Given below are the sales figures over a period of six months along with the sales promotion expenditure incurred by a distributor of heavy equipment. 33
35
40
30
32
30
7
5
14
8
9
6
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Calculate the sales promotion expenditure needed to achieve sales of 40 units using the least square method. (5 points)
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10.83 33.33 11.97 15.67
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a. b. c. d.
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1000 2236 5000 2000
this data calculate the EOQ (1 point)
89. What is the reorder point for Alpha Stabilizers? (2 points) a. 100 units b. 133 units c. 33 units d. 150 units 90. The profit before tax of SP Chemicals was Rs.25 million for 2006, which is 10% of the overall sales. Cost of materials accounted for 40% of the sales. What would be the change in profit if the cost of materials decreased by 5%.? (3 points)
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Sales (in units) Sales promotion expenses (in Rs. lakhs)
a. b. c. d.
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6000 8000 7500 8500
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(Questions 88 & 89) Alpha Stabilizers Ltd purchases electrical switches at Rs.20 per unit. Annual demand for this component is 10000 units. The ordering costs and carrying costs per unit are Rs.250 and Rs.5 respectively and lead time for inventory replenishment is 4 days. Assume the number of working days in a year as 300. Answer the following two questions.
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86. What is the layoff cost incurred by the organisation in the month of September assuming number of workers available to be 52? (2 points)
a. b. c. d.
20% increase 25% increase 20% decrease 25% decrease
Paper II - Model Test 2 Time: 3 Hours
Total Points: 100 Answer all the questions.
3.
a. b. c. b.
Which of the following applications performed by robots are more relevant in materials management? Processing Pick-and-place Inventory stocking and picking Both b & c Which of the following Kanban cards specifies quantity of material ordered? Vendor authorization card Product authorization card Conveyance card Both b & c
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5.
i.
ii. iii. iv.
6.
Materials managers use several techniques to carry out their tasks. Which among the following is not a technique used by materials managers in the movement of materials? Kanban Systems JIT System Value Analysis ABC Analysis
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i and ii i, ii, and iii i, ii, and iv i, ii, iii, iv
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Which of the following is not a task performed by the purchase department? Processing requisitions for materials Identifying and selecting suppliers Negotiating with suppliers Maintain inventory of the purchased material till usage
a. b. c. d.
a. b. c. d. 7.
What is the relationship between the number of Kanban cards used and the demand for a product? Number of cards decrease with increase in demand for a product Number of cards increase with rise in demand for a product Number of cards increase with decrease in demand for a product There is no relationship between the number of cards and demand for a product
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Which of the following is not true about a single card Kanban system? Only the conveyance card is used Some initial inventory is available The number of trays used are dependant on the lot size of production The system is useful in execution of repetitive operations
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Each question carries one point, unless specified otherwise.
Which of the following statements describes the limitations of a Kanban system? Excessive dependence on people involved in the process The failure of a vendor to supply the required amount of materials Reduction of work-in-process A missing Kanban card
a.
b. c. d. 8. a. b. c. d. 9.
a. b.
Which of the following is not true about the MRP system? Planning and implementation time for MRP systems can take years Data entry requirements and file maintenance are time consuming The set up time is low Over dependence on forecasts and estimated lead time An MRP system works based on the demand for the end product. Which of the following is not true about MRP? It is a backward scheduling process It helps coordinate orders from external and internal sources
Operations Management
11. An output of MRP system that specifies the quantity of inventory that is required in a specific time bracket is called __________. a. Planned orders b. Order releases c. Exception reports d. Performance reports
15. Which of the following is not true about backward scheduling? a. b. c. d.
Backward scheduling is calculated from earliest start time forward Jobs are assigned the latest time slots Backward scheduling is done when demand can be anticipated beforehand Work-in-process inventory is low as they are used within a short time
16. Which of the following dispatching rules do firm use when they want to maximize the number of completed jobs and reduce the number of jobs in waiting? a. b. c. d.
Longest processing time Shortest processing time First in, first serve Slack time remaining
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12. Identify the input to the MRP system that contains information about whether a particular item is produced internally or purchased from external sources. a. Master production schedule b. Demand forecast c. Bill of materials d. Inventory records file
d.
Jobs are assigned according to the latest available time slot at a work center Mostly used in operations in which customized products are manufactured
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10. In which of the following each type of material held by the firm is recorded with detailed specifications of the availability at the beginning of a time period along with expected arrivals during the time period? a. Bill of materials b. Primary report c. Inventory records file d. Secondary report
c.
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It is responsible for the purchase of required material It generates a schedule of all items required for production
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13. Netting in MRP information processing is used to calculate net product requirement. Identify the correct formula to calculate this. a. Net Requirement = Gross Requirement + On hand inventory − Quantity on order b. Net Requirement = Gross Requirement + On hand inventory + Quantity on order c. Net Requirement = Gross Requirement − On hand inventory − Quantity on order d. Net Requirement = Gross Requirement − On hand inventory + Quantity on order 14. Which of the following is not true about the forward scheduling method? a. Actual production activities start after receiving a job order b. Work-in-process inventory level is high in this method
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17. Service firms can adopt various methods to meet customer demand under situations of limited availability of service facilities. Which system is used by an operations manager to control customer arrival timings so that the firm’s resources can be utilized to the fullest extent? a. b. c. d.
Appointment system Reservation system Strategic product pricing Routing
18. Identify the statements that correctly describe the characteristics of Gantt charts? i. They are useful only when work centers are less in number ii. It considers break-down in production iii. It does not consider human performance iv. It does not provide clarity in communicating job information a. b. c. d.
i and ii ii and iii iii and iv i and iii
Part B
20. Scheduling of operations is different for different types of operation. Which of the following operations is used to produce goods and services in low volumes? a. Job operations b. Repetitive operations c. Labor-intensive operations d. Service operations
24. Gap analysis helps identify the areas that are not handled by the standard system. Which of the following gaps can be dealt with by a project team? a. Gaps that can be eliminated with minimal programming b. Gaps that require extensive rework and additional resources c. Gaps that cannot be handled by the system d. All of the above
i and ii i and iii ii and iv iv and i
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21. Gantt charts are simple bar charts that can be used to schedule any type of operation. Identify the different types of Gantt charts from the following. i. Workload charts ii. Scheduling charts iii. X-chart iv. R-chart
23. Identify the correct definition of a ‘business process.’ a. A set of unrelated tasks performed to achieve a defined business outcome b. A set of logically related tasks performed to achieve an unknown outcome c. A set of logically related tasks performed to achieve a defined business outcome d. A set of unrelated tasks performed to achieve an unknown business outcome
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Only i i and ii i and iii Only iv
2, 3, 5, 4, 1 3, 2, 5, 4, 1 3, 2, 4, 5, 1 Cannot be determined
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a. b. c. d.
a. b. c. d.
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19. Several methods are used for scheduling operations in an organization. Based on which factors are scheduling methods selected? i. Volume of production ii. Nature of operations iii. Inventory in store iv. All of the above
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22. A firm is involved in five types of jobs. Each must be processed on three machines, A, B and C in the order ABC. The processing time of each job (in hours) on the three machines is given below. Identify the optimum sequence using Johnson’s rule. Processing Times Job A B C 1
23
10
25
2
54
25
65
3
45
18
24
4
41
22
33
5
35
20
46
25. Which dimension of quality talks about a product’s primary operating characteristics? a. Performance b. Reliability c. Durability d. Conformance 26. Proper communication optimizes the implementation process, but overstating or understating the functionalities of the ERP package do not fetch desired results. Which of the following can be a consequence of overstating functionalities? a. Unrealistic expectations from employees about the benefits of ERP b. Employees would be unprepared for the changes required for ERP implementation c. Employees will be aware of the effects of ERP implementation on their jobs d. All of the above 27. Four key ‘drivers’ help determine not only responsiveness and effectiveness, but also the strategic fit of the supply chain. Which of the following is not one among them? 199
Operations Management c. d.
a. b. c. d.
Only i i and ii i, ii, and iii i, ii, iii, and iv
34. Which of the following is not an advantage gained by a firm implementing JIT? a. Minimal inventory storage and maintenance costs b. Reduction in production cycle time c. Reduction in formal paper work d. Steady and continuous demand for material
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29. What does the SCM enabler ‘period review’ focus on? a. Evaluation of performance of processes, programs, and systems b. Involvement of suppliers in decisionmaking c. To understand and react to customer requirements fast d. Develop products, services, and business processes that satisfy the requirements of both customers and suppliers
33. JIT manufacturing focuses on which of the following conditions? i. Continuous improvement ii. High performance levels in all operational areas iii. Maintaining consistent quality iv. High volumes of output
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28. ‘Enablers’ are responsible for overall performance of the SCM. Which of the following enablers emphasize that the goals of various business units of an organization should match corporate goals? a. Customer-supplier focus b. Design c. Alignment d. Measurement
Wholesaler All of the above
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30. ESCM or electronic supply chain management involves business-to-business integration through the Internet. Which of the following is not an advantage of ESCM? a. Increase in cost savings b. Increase in cycle time c. Reduction in inventory levels d. Reduction in procurement costs
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31. Which of the following SCM ‘enablers’ discusses effective decision-making in the organization? a. Participation/involvement b. Design c. Measurement d. Periodic review 32. According to the demand chain concept, which member(s) assume the role of monitoring changes in consumer preferences? a. Retailer b. Manufacturer
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35. Sheetal Plastic Company adopts the JIT manufacturing system and maintains smaller lot sizes of inventory. Identify the advantages of maintaining smaller lots over larger lots. i. Increases set-up frequency ii. Reduces lead times iii. Achieves uniform loads iv. Reduces cycle inventory a. b. c. d.
i and ii i, ii, and iii ii, iii, and iv iv, i, and ii
36. Many JIT firms follow group technology layouts where several types of machines are placed in distinct cells with each machine in a cell performing a single operation repeatedly. Which of the following is not a benefit of group technology layouts? a. Movement of material is minimized b. Reduced need for material handling equipment
Part B
not
a
42. Match the following control charts with their respective utilities. i. X-chart ii. R-chart iii. P-chart iv. C-chart p. q. r.
Illustrates the central tendency of inspected samples Shows variability in terms of precision and accuracy of a process in manufacturing Helps find the proportion of defective items in a selected sample Illustrates the total number of defects in an item
s.
a. b. c. d.
i/p, ii/q, iii/r, iv/s i/p, ii/r, iii/q, iv/s i/q, ii/p, iii/r, iv/s i/q, ii/r, iii/p, iv/s
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38. The break-down of one machine in a JIT manufacturing system can lead to stoppage of the entire production line, which proves to be very costly for the firm. To avoid such situations, the firm has to regularly take up preventive maintenance. Which of following does not assist in easy preventive maintenance measures in a JIT production unit? a. Complex equipment design and nonstandardized replacement parts b. Collection of information about frequency and causes of machine failure c. Replacement of worn-out parts regularly during frequent checks d. Purchase of spare parts required for maintenance beforehand
d.
After the commencement of irreversible processes After finished products are ready for delivery
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37. Which of the following is characteristic of the JIT system? a. Uniform workstation loads b. Large lot sizes c. Quick and economic set-ups d. Flexible facilities
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Reduced total materials handling costs Reduced speed of production
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39. Which of the following is not a measure of an input to produce an output? a. Tons of coal consumed b. Kilowatt of power consumed c. Number of personnel worked d. Meters of cloth produced
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40. Identify the function of quality directly related to the reputation of the firm. a. Conformity b. Aesthetics c. Serviceability d. Perceived quality 41. For most products and services, it is not possible to test final outputs. In this scenario, to improve efficiency of inspections, they should be carried out at different stages of production. Which among the following is not an ideal time to carry out such an inspection? a. Before commencement of operations that can cover up defects b. After commencement of operations that are likely to provide outputs with defects
43. A firm has to incur costs as part of quality control. The costs include cost of inspection and the cost of an undetected fault. Which of the following is not a cost arising due to undetected faults? a. Customer complaints b. Product replacement costs c. Cost of product recall programs d. Inspection labor costs 44. Each type of control chart is used for a different purpose. Which type of control chart details the central tendency of inspected samples? a. X-chart b. R-chart c. P-chart d. C-c hart 45. Companies outsource the facilities management function due to many reasons. Which among the following is not a valid reason for this? a. To reduce costs b. To improve the control of tasks c. To focus on core competency d. To improve quality of tasks performed 201
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a. b. c. d.
i and ii ii and iii i and iii ii and iv
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51. _________________ is the amount of time that an activity can be delayed beyond its earliest start time without extending the project duration. a. Latest start time b. Expected start time c. Slack time d. Most likely time 52. Match the following systems used in production with their respective features. i. CNC machines ii. CIM iii. FMS iv. AI p. q. r.
A flexible system capable of producing different types of products Performs a variety of tasks based on the instructions fed to the onboard computer Computer systems capable of reasoning and decision making Integrates designing, manufacturing, and controlling functions
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48. In which of the following stages of a bathtub curve is the failure rate constant and to some extent predictable? a. Early failure stage b. Adult stage c. Wear out stage d. Both a & c
Wear out stage Useful life stage
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47. What are the other names for remedial maintenance? i. Breakdown maintenance ii Irregular maintenance iii Corrective maintenance iv. Condition monitoring
c. d.
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46. Compressors in a certain manufacturing plant have to be serviced after every 200 hours of operation. This is an example of ___________. a. Irregular preventive maintenance b. Predictive maintenance c. Periodic maintenance d. Remedial maintenance
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49. Bharti Engineering Ltd takes up preventive maintenance for its machinery every 2 months though the service manual advices maintenance once in 3 months for effective performance. What can be the possible negative consequences of such a practice for Bharti? i. Preventive maintenance costs increase ii. Down time of machinery can decrease iii. Frequent stalling of work iv. Productivity can increase a. b. c. d.
i and iii ii, iii, and iv iii, iv, and i i and iv
50. Which stage in a “Bathtub Curve” is also known as burn-in stage? a. b. 202
Early failure stage Adult stage
s.
a. b. c. d.
i/q, ii/r, iii/p, iv/s i/p, ii/q, iii/r, iv/s i/q, ii/s, iii/p, iv/r i/q, ii/p, iii/s, iv/r
53. There are certain impediments to globalization that can block an organization from globalizing its activities. Restrictions through tariffs and duties to control MNCs operating in a country come under which type of impediments? a. Economic impediment b. Managerial impediment c. Institutional impediment d. None of the above 54. Which category of robots, based on the nature of their operations, is capable of perceiving the environmental conditions of the workplace and making suitable decisions using onboard computers? a. Playback robots b. Numerical control robots c. Variable-sequence robots d. Intelligent robots
Part B iii. X-chart iv. R-chart i and ii i and iii ii and iv iv and i
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a. b. c. d.
i, ii and iii i, iii and iv ii, iii and iv i, ii, iii, iv
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60. Identify problems encountered during a typical ERP implementation process? i. Executing complex tasks ii. Setting several milestones iii. Communication breakdown iv. Rushed deadlines
61. Which of the following statements are true about Business Process Reengineering (BPR)? i. It advocates the complete overhaul of business processes in an organization ii. It advocates the complete overhaul of processes in the manufacturing department of an organization iii. It reduces costs and improves business practices iv. It helps increase productivity
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55. Which of the following combinations of cards are used in a dual Kanban system? a. Vendor authorization card and conveyance authorization card b. Product authorization card and conveyance authorization card c. Vendor authorization card and product authorization card d. Product authorization card, vendor authorization card and conveyance authorization card 56. What should a manufacturing firm producing three different products that require the same raw materials for two of them do while planning? a. Develop a materials requirement plan for each product b. Develop a consolidated materials requirement plan for products using same type of materials c. Avoid developing any materials requirement plan for products using same type of materials d. Develop a materials requirement plan only for the product using raw materials that are not common 57. Which of the following outputs of MRP system authorizes the purchase department to go ahead with the purchase of material as planned? a. Planned orders b. Order releases c. Exception reports d. Planning reports
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58. Forward scheduling is a scheduling method. Which of the following is not a feature of forward scheduling? a. Production activities start when the job order is received b. Scheduling is done from the date of production c. Start & finish times are determined by using earliest time slots d. Work-in-process inventory is very low 59. Gantt charts are simple bar charts that can be used to schedule any type of operation. Identify the different types of Gantt charts. i. Workload charts ii. Scheduling charts
a. b. c. d.
i and iv iii and iv ii, iii, iv i, iii, iv
62. What dimension of quality measures the degree to which a product is manufactured to the pre-specified specifications? a. Reliability b. Serviceability c. Aesthetics d. Conformance 63. Which of the following is not a benefit of JIT purchasing? a. Increased responsiveness and flexibility b. Reduction in product design time c. Reduction in cost of scrapped inventory d. Administrative efficiency 203
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70. Maintenance of material handling equipment falls under which of the following? a. Mechanical maintenance b. Civil maintenance c. Electrical maintenance d. Preventive maintenance
71. What are the other names for remedial maintenance? i. Breakdown maintenance ii Irregular maintenance iii Corrective maintenance iv. Condition monitoring
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65. The maximum average outgoing quality for any acceptance plan is the average outgoing quality limit (AOQL), which indicates the point at which the AOQ reaches the critical level. Identify the true statement pertaining to the AOQ. a. Products above the AOQL are shipped to suppliers b. Products above the AOQL are not shipped to customers c. The entire lot of products is accepted when defects exceed the critical point d. Extent of inspection decreases when AOQ crosses the AOQL
69. Which of the following is not a consequence of poor maintenance of machinery? a. Productivity of the firm would be affected b. Production costs would decrease c. Safety would be adversely affected, leading to more accidents d. Quality of output would come down
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64. Which of the following statements best describes total quality control? a. Quality of the product is a concern of the quality control department b. Only the quality control department is responsible for improving product quality c. Quality can be increased by changing product design rather than meeting customer requirements d. Quality can be enhanced through collective efforts of all departments
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66. What action does a firm take when average outgoing quality (AOQ) of a product crosses average outgoing quality level (AOQL)? a. Products are shipped to customers b. Products are retained and inspected c. Products are sent to production department for changes d. Products are shipped to suppliers
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67. What is a Type I error in quality control? a. Probability of rejecting the lot at AQL b. Customers face the risk of receiving a lot with minor defects c. A risk that a bad lot will be rejected d. Probability of accepting the lot at AQL 68. Identify the service under facilities management that involves duplication of printed material. a. Housekeeping b. Plumbing c. Reprographics d. Horticulture
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a. b. c. d.
i and ii ii and iii i and iii ii and iv
72. Which of the following reasons has led to the initial stage of the bathtub curve gradually losing importance? a. Firms use new equipment b. Failure rates in the first stage are accurately measured c. Zero failures in the first stage have become common d. Equipment manufacturers dispatch equipment only after the burn-in period is over 73. The process of reducing the time of the project by reducing the scheduled time of some of the activities is called project crashing. Which among the following is not a crash strategy? a. Reducing the workforce b. Additional capacity installation c. Subcontracting d. Overtime
Part B
d.
75. Which one of the networking method? a. b. c. d.
following
is
a
Center of gravity method Critical path method Graphical method of linear programming Economic order quantity method
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i and ii ii and iii iii and iv i and iv
78. The difference in approaches between national and global goals and management necessitates changes in several key strategic operational decisions. Which of the following strategic decisions basically involves scanning of macro-economic factors, information on market size, and capability of the subsidiary? a. b. c. d.
Selection of markets Product development Allocation of resources Choice of technology
79. Preferential procurement from local organizations by government and quasigovernment entities comes under which of the following impediments to globalization? a. Economic impediment b. Managerial impediment c. Institutional impediment d. Both a & c
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76. Automated systems are less customizable in terms of the number of possible products that can be manufactured when compared to manually operated systems. Which of the following overcomes this disadvantage?
a. b. c. d.
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c.
(Crash cost − Normal cost ) (Normal time − Crash time) (Crash time − Normal time ) (Crash cost − Normal cost ) (Normal cost − Crash cost ) (Crash time − Normal time )
Numeric control Computer Aided Manufacturing Computer Integrated Manufacturing Teleoperator
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i. ii. iii. iv.
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74. Identify the correct formula to calculate the time-cost ratio in project crashing. (Normal cost − Crash cost ) a. (Normal time − Crash time)
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77. Robotics is an automation technology based on two related technologies. What are they?
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(Question 80 to 82) Bill of materials for product A is given below showing the lead times and required quantities. Use this information to answer the following three questions.
B (4) LT = 1
A LT = 2
C (1) LT = 2
D (4) LT = 4
E (3) LT = 2 205
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81. How many units of E are required to produce 5 units of Product A? (1 point) a. b. c. d.
15 units 60 units 70 units 120 units
82. If a time-phased product structure is drawn, how many weeks will be required to produce the product A? (2 points) a. b. c. d.
3 weeks 4 weeks 5 weeks 6 weeks
C
E
c. D
C
B
d. D
B
E
B
A
E
A
C
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85. Calculate the total elapsed time for the jobs using the optimum sequence D-C-EB-A. (5 points) a. 300 minutes b. 330 minutes c. 355 minutes d. 335 minutes
86. What is the total time idle time on photocopying machine? (1 point) a. 40 minutes b. 25 minutes c. 50 minutes d. 55 minutes
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83. The unit price of a product is Rs 150, the unit variable cost Rs 125, and the fixed cost Rs 50,000. What should be the demand for the product so that the manufacturer can reach break-even point? (1 point) a. 2000 units b. 1500 units c. 4000 units d. 2750 units
b. D
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5 units 10 units 20 units 30 units
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84. Determine the optimum sequence to process these five jobs using Johnson’s sequencing rules. (2 point) a. D E C B A
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80. How many units of D are required to produce 5 units of Product A? (1 point)
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(Question 84 to 87) Standard Binders is a photocopying and binding firm. It undertakes photocopying and binding works in large quantities. The firm got five orders on a certain day and their processing times in the photocopying and binding machines respectively (in minutes) are as given below. Use this information to answer the following four questions. Job
Photocopying machine Binding machine
A
B
C
D
E
40
100
50
30
90
25
60
45
30
40
87. What is the total idle time on binding machine? (2 points) a. 135 minutes b. 155 minutes c. 100 minutes d. 125 minutes (Questions 88 to 90) P-Chart is used to control the proportion of defective items being made by a production process. Use the data to answer the following three questions. The table gives the number of defects in 5 samples where each sample contains 20 items. 1 2 3 4 5 Sample Number of defects
4
3
6
5
4
88. What is the average proportion of defective items for the given data? (2 points) a. 0.154 b. 0.144 c. 0.220 d. 0.166
Part B 90. Calculate the lower limit for the same P-chart. (2 points) 0.22 0.334 0 0.565
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a. b. c. d.
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89. What is the upper control limit for the Pchart to be developed using this data? (2 points) a. 0.642 b. 0.4978 c. 0.625 d. 0.674
207
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Part B: Answers and Explanations
Paper II
Paper II - Model Test 1 Answers and Explanations
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1. (c) Operational decisions Operational decisions are short-term decisions and have a time-frame of a few days or a week. They address problems and requirements at the operational level, which include scheduling weekly production and assigning jobs/responsibilities to workers, etc.
3.
(b) Computer Aided Manufacturing
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2. (a) AS/RS AS/RS is a computer controlled warehouse system that automates inflow and outflow of materials from the warehouse and shop floor on the basis of production requirements. CAD is a specialized software used for designing products and processes. FMS relates to flexible manufacturing where large quantities of products with similar processing requirements can be produced. Computeraided manufacturing (CAM) is a specialized computer system, which translates CAD information into instructions for numerically controlled automated machines.
4.
(d) Facility planning
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Computer-aided manufacturing (CAM) is a specialized computer system, which translates CAD (Computer Aided Design) information into instruction for numerically controlled automated machines. The use of CAM in manufacturing has minimized worker involvement in production. Manufacturing information systems were used for planning and controlling operations. These provided comprehensive information regarding production (such as demand forecasts, purchasing, inventories, etc.) to operations managers. Automated storage and retrieval system (AS/RS) is a computer-controlled warehouse system that automates inflow and outflow of materials from the warehouse and shop floor on the basis of production requirements. Linear programming is an operations research technique.
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Facility planning deals with location of the facility and its layout. Decisions regarding facility location are based on the accessibility to raw materials and nearness to markets. Allocation of resources deals with the allotment of existing resources like men, machines, material, etc, to different strategic alternatives. Technology selection and process development deals with selection of the most suitable technology for producing products and product design and development is used to develop new products.
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5. (c) Convenience and location If SBI offers the facility of easy accessibility for customers (especially in services industry), this is a competitive advantage and offers convenient service delivery. Low cost production process involves lowering costs of production to values smaller than those incurred by competitors. Product variety and facility size implies a wide product mix covering customer needs in all market segments. 6.
(c) Aircraft
Aircraft are manufactured after taking orders from customers. This is because different airline customers require different type of interior and exterior finish. 7.
(a) The greater the NPV, the greater will be the profitability
The greater the NPV value of the project, the better is its profitability. In cases where multiple projects are compared, the project with the largest NPV is selected.
Operations Management 8. (d) Maximization Time series data can reveal random variations, seasonality changes, and trends in demand for a product. However, since time series analysis depends on past data, it can only extrapolate that data to the future. Hence, the data cannot tell when there is maximum demand.
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9. (c) Delphi method 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. The other three options are types of quantitative methods. (Simple moving average and exponential smoothing are part of time series methods while regression analysis is a causal method).
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10. (b) A positive tracking signal indicates that demand is underestimated A positive tracking signal indicates that demand is underestimated while a negative tracking signal indicates that demand is overestimated.
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11. (c) Causal methods If a relationship exists between the different variables under review, causal methods (such as regression analysis) are used. 12. (a) Trend component The trend component gives long-term pattern of movement of demand over a period of time. The trend may be positive, negative, or neutral.
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13. (c) Basic time series forecasting method While simple moving average, weighted moving average and exponential smoothing are adaptive forecasting techniques. Static forecasting methods are also called as basic time series forecasting techniques.
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14. (b) Introduce slack variables Slack variables are introduced in each constraint equation as an idle source to convert inequalities to equalities.
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15. (b) ii only Market, capacity, and inventory space are constraints associated with production plan decisions. Destination requirements are a constraint for transportation decisions.
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16. (d) Stepping stone method While methods mentioned in options (a), (b), and (c) can be used to develop the initial feasible solution, the stepping stone method is used to test the solution for optimality.
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17. (d) Optimal solution A constrained optimization model consists of three major components – decision variables, objective function, and constraints. All these are used to find an optimal solution for the model. 18. (b) A dummy warehouse is added In an unbalanced problem, a dummy warehouse is added if production capacity is more than the requirement. A dummy origin is added if production capacity is less than the requirement, with desired quantity to make it a balanced problem. 19. (b) North-West corner method In the North-West Corner Method, allocation of products starts at the north-west corner (or the top left corner) of the transportation table. Here, least cost or penalties are not considered while allocating products.
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Part B 20. (a) Highly skilled employees Unlike product-focused production systems, process-focused production systems need highly skilled employees. 21. (a) i/p, ii/q, iii/r, iv/s
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The symbols for non-productive activities in the process chart are storage (∆), delay (D), transport (⇒), and input (
) respectively. 22. (a) Product-focused systems
In this type of process design, products or services tend to flow along linear paths without backtracking or side tracking. Items follow a similar production sequence, which can be anything from a pipeline (for oil) to an assembly line (for televisions or radios).
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23. (d) Product-focused system
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A product-focused production system is appropriate for a non-differentiated product. However, it is inflexible and impractical to alter the equipment to make it possible to produce other products. Thus, Logan was using a product-focused system. 24. d) Employ part-time workers to meet the demand
The characteristics of a production system with product/service flexibility include use of generalpurpose equipment and multi-skilled employees. The employees have to be trained so that they can perform different types of jobs. Employing part-time workers to meet the additional demand requirements is characteristic of a production system having volume flexibility.
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25. (c) Low diversity in product design and large batch size
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Sivakasi has an arid and dry climate. Therefore the material used to manufacture fire crackers does not absorb moisture and become damp. Besides, a dry climate helps easy storage of finished products as production is carried out round the year and maximum consumption is during the festival season. 28. (a) Process layout Workers in process layouts must be highly skilled as they need to handle a variety of jobs to produce a variety of products. 29. (c) To reduce transportation costs The center of gravity method is used to find optimal location for a distribution center that minimizes total transportation costs. This method takes into account factors like markets, cost of goods, and cost of transportation. The center of gravity method aims at minimizing total shipping cost, i.e., cost incurred for shipping from distribution centers to different shipping points.
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Operations Management 30. (b) Point-rate method Under the point-rate method, weightages are allotted to different factors under consideration. Companies have several objectives of various importance levels while selecting a site or location. Companies assign weightage to these objectives in the form of points. Potential sites are evaluated with respect to every factor a company is seeking and points are allotted accordingly to each factor. The superior site is the one that finishes with more points.
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31. (a) Graphic and schematic analysis In graphic and schematic analysis, templates and two-dimensional cutouts of equipment drawn to scale are used as layout-planning tools. Templates are moved about within a scaled model of the walls and columns of a facility to identify the best layout through trial and error.
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32. (b) Job analysis Job analysis investigates job content, physical conditions in which the job is done, and qualifications necessary to carry out the job responsibilities.
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33. (c) Autonomy The autonomy in a job indicates flexibility, independence, and discretion available to employees performing the job.
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34. (c) Behavioral feasibility Behavioral feasibility considers employees’ perceptions about themselves and about others in the work environment. Hence, when an employee is delegated an important responsibility, it has a positive effect on self esteem. 35. (c) Job specification is part of job description Job identification, job specification, and job evaluation are components of job description.
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36. (c) Historical analysis Historical analysis uses statistical tools like arithmetic mean and others to find the standard time from the given historical data.
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37. (a) Time study Time study is used to identify time standards for a particular job performed by a competent worker under standard conditions. To record time taken by each worker to finish the job, a stop-watch is used.
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38. (d) High motivation Machinery and equipment in good running condition, sufficient stock of material for production, good working conditions for employees are some pre-requisites for the success of any job design. Improved productivity and motivation are a consequence of job design. 39. (a) Fewer the number of specific tasks performed, higher the skill proficiency and efficiency of the employee The lower the number of tasks an employee performs, the greater will be the skill proficiency and efficiency of the employee. This is because the individual becomes a specialist in performing these tasks. 40. (b) Work sampling Work sampling technique is used extensively to measure the performance of workers involved in indirect labor jobs (like driving a pay loader to feed raw materials). It can also be adopted in service organizations like schools and hospitals. 214
Part B 41. a) Ratio delay Ratio delay, performance measurement, and time standards are primary applications of work sampling. Ratio delay refers to the activity time percentage for an employee or equipment. Ratio delay shows the percentage of time an employee or equipment was occupied or idle.
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42. (b) Customers are willing to wait for product delivery Back-order strategy assumes that customers are willing to wait for product delivery.
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43. (d) Expanding plant capacity to meet future demand Aggregate plans define how resources can be best employed to meet market demand for the given products. The objective of an aggregate plan is to minimize production costs, make appropriate changes in production rates and workforce levels, and to improve profits, customer service, and resource utilization. Expansion of plant capacity is a separate long-term operations plan, which does not come under aggregate planning, a medium-term plan.
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44. (a) Capacity planning Capacity planning is important to determine adequate production capacity to meet the forecasted demand levels. Capacity planning is also used by organizations when deciding on issues like whether or not to use sub-contracting or overtime to achieve production goals. 45. (a) Management coefficient model The management coefficient model is a heuristic model which uses the regression method to identify capacity requirements based on the management’s past decisions. The other three are types of optimal models used for aggregate planning are similar to the heuristic model.
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46. (b) Master production schedule Forecasted demand and actual demand for a product may differ significantly due to unexpected events. Transactions, records and reports developed as part of MPS are updated and reviewed continuously to accommodate differences. This process of continuous reviewing and updating is called ‘rolling through time’.
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47. (d) Total drafts issued by a bank in a day Service capacity can be measured in terms of number of beds in hospital, number of seats an aircraft has, or number of clients an executive can service in a day. But, the number of total drafts issued by a bank in a day does not directly signify service capacity. It is rather dependant on the number of customers demanding that particular service.
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48. (d) ii and iv Inventories can be direct or indirect. Direct inventories include goods that play an important role in manufacturing of a product and become part of the finished product. Direct inventories include raw material, work-in-progress goods, etc. Indirect inventories include goods necessary to run the production process but do not become part of the end product. For example, lubricants, grease, oils, stationery, etc.
49. (c) Reorder point = Lead time x average daily demand Lead time is defined as the product of demand per unit time and lead-time. Unit time and lead-time are expressed in the same units. Reorder Point = d × LT, where d = Average daily demand, and LT = Lead time. 50. (a) Turnover Under FSND classification, goods are classified on the basis of turnover. F items are fast moving, S items are slow moving items, N items are non-moving items and D items are dead items or the items that have not been issued for a few years. 215
Operations Management 51. (b) VED VED classification is based on the importance of a particular item in the production process. Under VED, items critical for production are classified as V (vital). Items important in the production process but not critical are classified as E (essential) and items, not essential and not influencing the production process are classified as D (desirable).
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52. (c) Production The production department primarily issues purchase indents as and when the need for more raw material arises. 53. (c) Develop a list of suppliers – Request for quotations – Evaluation of suppliers – Supplier selection
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In the supplier selection process, the first step is to prepare a list of probable suppliers and then ask them to submit quotations for products that the firm intends to purchase. When quotations are submitted, they are evaluated and analyzed in detail. Finally, the actual supplier(s) is/are selected.
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54. (b) Selection of suppliers should be based on individual discretion
No undue favor should be taken from or given to suppliers. Selection of suppliers should be based solely on merit and not on individual discretion. 55. (a) i, ii, and iii
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The duties of purchase department members involved in making purchase decisions include negotiating with suppliers, building long term relationships with them and providing feedback to sales representatives. Accepting indents from user departments (not issuing indents) is also an activity handled by the purchase department. 56. (d) Controlling
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Controlling refers to comparing actual results with set standards or benchmarks. Activities part of controlling include comparing work progress to schedule, actual labor hours to standards, costs to budget, inventory level to targets, and inspection of quality levels. 57. (b) Productivity
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Productivity is the ratio of output produced to input consumed. 58. (b) Ability to produce different varieties of products
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Production flexibility refers to the production of different varieties of products. A production system which is flexible can utilize its machinery and equipment to produce another product at short notice (usually a day or two or a week) and is referred to as flexible production system.
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59. (b) Nominal group technique Under nominal group technique, experts are allowed to meet, give their opinions and/or ideas, and discuss and debate on the issue to come to a consensus. In Delphi method, experts do not meet with each other while giving opinions/ideas. In executive committee consensus method, line managers use the information and suggestions given by the staff to arrive at a consensus regarding the forecast. Brainstorming generally involves employee participation at all levels without invitation only for experts. 60. (a) The greater the time period, the greater the accuracy The greater the moving average period the forecast value is less vulnerable to random variations. A larger moving average period is taken when fluctuations in demand are minimal. This is done to erase the random variations in demand to the maximum extent possible. 216
Part B
50
Month 2
53
Month 3
54
Month 4
55
52.33
Month 5
53
54.00
Month 6
52
54.00
Month 7
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53.33
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Month 1
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61. (c) 53.33 In the three-month simple moving average technique, the forecast for the fourth month will be the average of the preceding three months. Thus, the forecast for month 4 is the average demand for the product A during month 1, 2 & 3. Similarly, the forecast for month 5, 6 and 7 can be calculated. Thus, by using moving averages for three months, we obtain the demand for the month 7 as 53.33 as given in the table.
62. (c) Minimizing transportation costs In its most general form, the transportation problem has a number of origins and a number of destinations. A certain quantity of a commodity is produced or manufactured at each origin and transported to destinations, each with specific requirements. The objective of a transportation problem is to meet the requirements of customers at the destination with supply from the origin, while ensuring that transportation costs are minimal.
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63. (b) Supply should be equal to demand A transportation problem can be either balanced or unbalanced. It is said to be balanced if the quantity of goods produced (supply) is equal to total requirement (demand) of all warehouses. Otherwise, the problem is said to be unbalanced.
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64. (d) i, ii and iii The ice cream factory needs to have volume flexibility in the production system. The extra workforce that is required to increase production can be obtained from outside subcontractors, by paying overtime allowance to the existing workforce, by temporary recruitment of part-time workers, or by recalling the workforce previously laid off. Employing multi-skilled employees is necessary to gain product/service flexibility in the production system. .
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65. (a) Product-focused systems Product-focused systems are also called as ‘Line flow production systems.’ They are used mostly in production departments that are organized according to the type of product or service being produced. 66. b) Mixed-model line balancing Line balancing and mixed-model line balancing are used in developing a product layout. Load distance and CRAFT model are used to develop a process layout. Line balancing is considered for only a single product in an assembly line. For multiple products, manufacturers consider mixedmodel line balancing. Mixed model lines involve multiple lot sizes, lot sequencing, different set up times for each lot, differing workstation sizes along the line and task variations that make it very difficult to design. 67. (c) Analytical Delphi method Analytic Delphi Method helps managers take complex multi-location decisions. This method requires participation of a coordinating panel, forecasting panel, and strategic panel. 217
Operations Management 68. (b) Cost-volume-profit analysis Break-even analysis is also called as cost-profit-volume analysis. While break-even analysis and quality factor analysis are used in location decisions, ABC analysis is used in inventory management. Value analysis is used in purchase management and product design.
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69. (b) The geographic location of the job The question ‘Where the job has to be performed?’ helps clarify the location of a particular job i.e., whether it is in a particular department, division or geographic location. 70. (a) Task identity Task identity defines clearly the identifiable tasks needed to complete the main task.
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71. (c) Employee self-timing Employee self-timing is a technique used by managements where employees are asked to record the time taken to perform different activities or tasks. This is a simple and cost effective way of work measurement.
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72. (b) Capacity Capacity indicates the maximum output that can be produced in a given production system. If a factory is said to have production capacity of 100 units per hour, it means that under optimal conditions, the factory will be able to produce a maximum of 100 units per hour.
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73. (b) Aggregate plan Aggregate plans define how resources can be best employed to meet market demand for the given products. The objective of an aggregate plan is to minimize production costs, make appropriate changes in production rates and workforce levels and to improve profits, customer service, and utilization of resources.
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74. (c) Total annual costs are minimum Operations managers compute total annual costs for various order quantities and then select the economic order quantity where total annual cost is minimum. Ordering and carrying costs are components of total costs.
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75. (c) EOQ Under the EOQ model, inventory is assumed to be replenished about the time it becomes zero. Hence, there would be no shortage of materials on a continuing basis. Costs will be minimal. As shortage of materials is not allowed, stock-out costs of inventory have a role to play in the computation of EOQ.
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76. (a) User department The user department that utilizes material or goods issues purchase indents. They are issued to the purchase department, which requests for quotations from vendors for the materials. 77. (d) Name of the user department The name of the user department is present in the purchase indent or requisition and not in the supplier’s quotation. The latter usually contains price per unit, delivery schedule, mode of transportation, special terms and conditions, etc. 78. (c) Break-even analysis Make-or-buy decisions are based on break-even analysis, where costs of producing in-house as well as costs of purchasing from outside are analyzed. These costs are dependent on the quantity demanded.
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Part B 79. (b) 28.8 seconds Cycle time =
Operation time per day =(480 x 60)/1000= 28.8 seconds Output per day
80. (b) 6 Nt = T / Cycle time = 170/28.8 = 5.9 Theoretically, 6 workstations are required at the minimum.
Efficiency of the assembly line workstations x cycle time)
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81. (c) 0.98
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Total time required for all the tasks (T) = 45 + 11 + 6 + 9 + 50 + 15 + 16 + 9 + 9 = 170 seconds
= Sum of the tasks of the processes / (Actual number of
82. (d) September Production capacity from the given details are:
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= 170 / (6 x 28.8) = 0.98
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June - 50 x 4 x 24 = 4800, July - 50 x 4 x 25 = 5000, August = 50 x 4 x 23 = 4600, September - 50 x 4 x 24 = 4800. Hence, the production capacity for September of 4800 is more than the estimated demand at 4660 units. 83. (d) 4
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If 50 workers can produce 4800 units in 24 days, then to produce 5150 units in the same period the number of workers required are (5150 x 50)/4800 = 53.65 = 54
84. (d) 8000
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Extra workers required = 54 – 50 = 4
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If 50 workers can produce 4800 units in 24 days, then to produce 5150 units in the same period, the number of workers required are (5150 x 50)/4800 = 53.65 = 54. Extra workers required are 54 – 50 = 4. As 4 extra workers were hired to meet the demand and hiring costs for each worker is Rs.2000, total cost incurred by the organization is, 4 x 2000 = Rs.8,000. 85. (b) 6,000
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50 workers in 23 days can produce 4600 units (50x4x23). But the demand is 4800 units which means that additional workers are required to produce the extra 200 units. The number of additional workers required are (50 x 200) / 4600 = 2.17 To meet the demand completely (without any shortage), 3 workers are required. Hence, hiring costs = 3 x 2000 = Rs.6,000 86. (c) 7500
52 workers in 24 days can produce 4992 units which implies a surplus of 332 units. Hence number of workers to be laid-off is (52 x 332)/4992 = 3.45 (3 workers approx) Hence, cost of lay-off = 3 x 2,500 = Rs.7500
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Operations Management 87. (c) 11.97 Sales promotion expenses (Y) 7 5 14 8 9 6 49
The linear equation is Y = a + bX.
To calculate ‘a’, the formula is
∑Y
and X =
n
Y = 49/6 = 8.17 X = 200/6 = 33.33
1089 1225 1600 900 1024 900 6738
=
6(1674) – (200)(49)) / 6(6738) – 40000)
=
(10044 – 9800) / (40428 – 40000)
=
244 / 428
=
0.57
=
Y − bX
∑X n
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Where Y =
231 175 560 240 288 180 1674
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n( ∑ XY) − ( ∑ X)( ∑ Y) n ( ∑ X 2 ) - ( ∑ X) 2
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b=
XY
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Bulldozer sales in units (X) 33 35 40 30 32 30 200
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Hence, a = 8.17 – (0.57 x 33.33) = 8.17 – 19 = -10.83 Substituting ‘a’ and ‘b’ in Y = a + bX Y = -10.83 + 0.57(40) = 22.8 – 10.83 = 11.97 Hence to achieve sales of 40 bulldozers the distributor has to spend Rs.11.97 lakhs on sales promotion. 88. (a) 1000
2C o D Ch
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EOQ =
Where, Co is the ordering cost D is the demand Ch is the carrying cost
By substituting the respective values,
2(250 )(10000 ) 5 we get EOQ as 1000 units.
EOQ =
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Part B 89. (b) 133 units Reorder point = daily demand x lead time Daily demand
= yearly demand / number of working days = 10000/300
Reorder point
= 33.33 x 4 = 133 units (approx)
90. (a) 20% increase Sales = Rs.250 million (10% of sales is the profit of Rs.25 million) Material cost = 40% of sales (250 million) = Rs.100 million
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5% of Rs.100 crores = Rs.5 million.
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= 33.33
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If the material costs decreases by Rs.5million, the same amount would add to the profit before tax i.e. the profit would be Rs.30 million. The change in profit before tax would be (5/25) x 100 = 20 %. Thus, a 5% reduction in material costs would increase the profit before tax by 20%.
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Paper II - Model Test 2 Answers and Explanations
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1. (c) The number of trays used is dependant on the lot size of production The single card Kanban system is more useful in executing repetitive operations. Also, trays used in this system should be standardized to the lot size in production. For example, if a firm produces one television at a time, a tray should contain only the parts required to manufacture one television. If it produces ten televisions at a time, the tray should contain materials required to produce ten televisions.
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2. (d) Maintain inventory of the purchased material till usage Maintain inventory of the purchased material is the task of raw material inventory department and not that of the purchase department.
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3. (b) Pick-and-place The two basic types of applications where robots are used are ‘processing’ and ‘pick-and-place’. In a processing application, the robot works as a tool by performing a job on a product (cutting, screwing, etc.) that moves to the robot. In a pick-and-place application, the robot moves the product (e.g. loading and unloading of materials). The pick-and-place application is more relevant in materials management.
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4. (a) Vendor authorization card A vendor authorization card specifies the product name, vendor name and quantity of material ordered. When this card is issued, it authorizes a vendor to supply the required materials in the specified quantity.
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5. (c) i, ii, and iv The limitation of the Kanban system is that it depends excessively on the people involved. The failure of a vendor to supply the required amount of materials and missing a Kanban are serious threats to the success of the system. Reduction of work-in-process and raw materials stores is a benefit derived through the effective use of Kanban system.
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6. (c) Value analysis Value analysis is a technique used by purchase managers to identify and rank components based on the level of importance in operations during the purchase of materials and components.
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7. (b) Number of cards increase with increase in demand for a product The number of cards can be altered according to the estimated demand for a product. If the demand for the product increases, a larger number of Kanban cards are used to meet it. Similarly, the number of Kanbans can be decreased with less demand for the product. 8. (c) The set up time is low MRP Systems require longer set up times.
9. (c) It is responsible for the purchase of required material An MRP is a backward scheduling process which generates a schedule of all the items required for production of the end product. It helps in coordinating orders from external and internal sources. External sources are purchase orders and internal sources are jobs. However, it is not in the scope of MRP to oversee the purchase process of these materials.
Part B 10. (c) Inventory records file The inventory records file is computerized with a complete record of each material held in the inventory. It contains information about inventory levels i.e., levels at the beginning of the planning horizon and the details of the expected arrivals of inventory during that period.
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11. (a) Planned orders Planned orders specify the quantity of inventory required in a time bracket. It includes information about all inventory requirements during the planning period. Planned orders and order releases are part of primary report outputs. Exception and performance reports come under secondary report outputs. 12. (c) Bill of materials
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Bill of materials contains information about whether a particular item is produced internally or purchased from external sources. The purchase or production lead-time to acquire the item is also mentioned in the bill of materials. 13. (c) Net Requirement = Gross Requirement - On hand inventory - Quantity on order
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In netting, the net product requirements are calculated by subtracting the available units of item and the quantity on order from gross product requirement. Net Requirement = Gross Requirement - On hand inventory - Quantity on order. 14. (c) Jobs are assigned according to the latest available time slot at a work center
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Using forward scheduling, the operations manager determines the start and finish times for jobs to be done by assigning them to the earliest available time slots at the work center. 15. (a) Backward scheduling is calculated from earliest start time forward
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Backward scheduling starts from due date of the order and works backwards. Jobs are assigned the latest time slots and as a job is finished, the material is immediately sent to the next workstation for process. Thus, work-in-process inventory is reduced. Backward scheduling is done for goods and services whose demand can be forecast or anticipated beforehand.
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16. (b) Shortest processing time
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Here, jobs are processed in the shortest time. Under this rule, jobs with shorter processing times get completed earlier than jobs with longer processing time. This rule ensures that minimum number of jobs are left for processing.
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17. (a) Appointment system
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Appointment systems are used to control customer flow at the individual level. The system works only when the service is provided to a single individual or few individuals at a time. Reservation system is used to provide service to a large number of individuals at a time. Routing explains the sequence of operations and processes to be followed to produce a particular product. 18. (d) i and iii
Gantt charts provide ease and clarity in communicating important job information, but they do not take into account hurdles like production breakdown and human performance. They are useful only when the number of work centers is limited, job times are long, and job routings are short. 19. (b) i and ii Selection of the scheduling method depends mainly on production volume and the nature of the operation. While scheduling is done, it is assumed that required inventory is already present in store so that a stock-out situation does not arise and hinder the production process. 223
Operations Management 20. (a) Job operations Job operations are used to produce goods and services on the basis of customer orders while repetitive operations, also known as continuous operations, are used to mass produce goods and services. Labor intensive operations involve using a large number of workers to produce high volumes. In general, service operations are done on the first in-first serve principle.
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21. (a) i and ii Gantt charts are simple bar charts used to schedule any kind of operation. Workload charts and scheduling charts are two types of Gantt charts. X-chart and R-chart are used in quality control.
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22. (d) Cannot be determined For a 3 machine and n job problem, Johnson’s sequencing rule is applicable only when one of the following two conditions are satisfied: (i) Smallest time on Machine A should be greater than or equal to greatest time on Machine B or (ii) Smallest time on Machine C should be greater than or equal to greatest time on Machine B. In this problem, both conditions are not satisfied. Hence, Johnson’s sequencing rule cannot be applied for determining the optimum sequence.
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23. (c) A set of logically related tasks performed to achieve a defined business outcome According to Davenport and Short, a business process is a set of logically related tasks performed to achieve a defined business outcome
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24. (a) Gaps that can be eliminated with minimal programming Gaps that can be eliminated with minimal programming fall under the purview of project teams and they can take corrective action to fill those gaps. However, gaps that require extensive rework and gaps that cannot be handled by the system are dealt with by the steering committee. 25. (a) Performance A product’s primary operating characteristics relates to its basic performance.
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26. (a) Unrealistic expectations from employees about the benefits of ERP Communication should not overstate or understate the functionalities of the system. Overstating functionalities would raise employees’ expectations unrealistically, while understating them might leave employees unprepared for the changes required for ERP implementation.
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27. (b) Decision-making Four key drivers of supply chain performance are inventory, transportation, facilities and information. They help in overall decision making in the supply chain management.
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28. (c) Alignment Alignment here refers to the matching of corporate and business unit goals. It also includes consistency in processes, actions, and decisions across business units to support the supply chain management processes.
29. (a) Evaluation of performance of processes, programs, and systems Periodic review involves measurement of performance at periodic intervals. It focuses on evaluation of performance of processes, programs, and systems periodically and contributes to continuous improvement. The basic objective of the customer-supplier focus is to prepare an organization’s processes to understand and react to customer requirements fast. Decision-making is covered by the participation/involvement enabler and process design is covered by the design enabler. 30. (b) Increase in cycle time Under ESCM, cycle time is actually reduced. Other advantages of ESCM include increase in cost savings, reduction in inventory levels, and reduction in procurement costs.
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Part B 31. (a) Participation/involvement Participation/involvement is an SCM enabler, which discusses the participation of all stakeholders of the organization in the decision-making process. The knowledge of employees and suppliers should also be considered while arriving at decisions. This makes the decision- making process more effective.
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32. (d) All of the above In a demand chain, every member should monitor consumer preferences. Due to growth in technologies like the Internet, consumers have begun to use multiple channels to procure goods and services. Due to marketing practices like direct marketing, tele-marketing, etc, consumers are now interacting with different entities in the purchasing process. So, every member of the demand chain, whether they design, manufacture, market, sell, or transport a specific product, needs to monitor consumer needs and wants.
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33. (c) i, ii, and iii Just-in-time manufacturing focuses on continuous improvement in all processes, and maintains consistent performance (in terms of quality) in operations. JIT manufacturing does not focus on producing large volumes of output, but on reducing inventory levels as well as wastage in production facilities while making products.
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34. (d) Steady and continuous demand for material Firms practicing JIT enjoy certain advantages. The inventory is reduced to almost zero, reducing the maintenance costs of inventory. Long-term relationship with suppliers enables firms to get the required materials just-in-time for production. The cycle time also comes down. The long-term relationship also reduces the otherwise considerable amount of paperwork and provides steady supply of materials. Steady and continuous demand for the material is an advantage for suppliers of the firm but not for the firm implementing JIT.
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35. (c) ii, iii, and iv While reduced lead times, achieving uniform loads and reduced cycle inventory are advantages, increased set-up frequency is a disadvantage. Due to maintenance of small lot sizes, purchase orders should be placed frequently and inventory should be regularly replenished.
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36. (d) Reduced speed of production Grouping of machinery into cells reduces material movement and the need for material handling equipment, which in turn cuts overall the materials handling costs. This will lead to speedy production and quicker deliveries.
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37. (b) Large lot sizes Firms that follow JIT type of manufacturing system maintain inventory in the smallest possible lot sizes. This is required as small lot sizes reduce cycle inventory (the excess of inventory, above the safety stock, that is carried between two orders), cut lead times and also help in achieving a uniform workload. JIT manufacturing systems follow uniform workstation loads where material is fed to the workstation uniformly and uniform output is produced across different workstations. Besides, these firms have flexible facilities and quick and economic set-ups.
38. (a) Complex equipment design and non-standardized replacement parts Simple design equipment and standardized replacement parts make the work of preventive maintenance easier, while complex designs delay maintenance. Non-standardized parts can increase delays in terms of procurement and usage. 39. (d) Meters of cloth produced While options (a), (b), and (c) are examples of inputs, option (d) is an example of output. 225
Operations Management 40. (d) 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 firm’s reputation and past performance of its products when attaching a value to its new products.
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41. (c) After the commencement of irreversible processes It is not possible to inspect products that are in the middle of an irreversible process. To improve the efficiency of inspections they should be carried out: after operations most likely to produce faulty items, before costly operations commence, before operations that can mask defects, when the finished product is ready for delivery, and before undertaking assembly operations that cannot be undone.
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42. (a) i/p, ii/q, iii/r, iv/s X-Chart illustrates the central tendency of inspected samples. R-Charts show the variability of the process. A process is said to be in control when both accuracy (mean) and precision are in control. P-Chart is employed to find proportion of defective items in a selected sample. C-Chart is used to illustrate the total number of defects in an item when it may have more than one defect. 43. (d) Inspection labor costs The first three options are costs of undetected faults while the last is an inspection cost.
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44. (a) X-chart X-chart and R-chart come under control charts for variables. X-chart illustrates the central tendency of inspected samples while R-chart (range chart) shows process variability.
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45. (b) To improve the control of tasks The facilities management function is outsourced to focus on core competencies, reduce costs, improve the efficiency and quality of tasks. Loss of control is one of the costs associated with outsourcing.
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46. (c) Periodic maintenance Periodic maintenance implies servicing equipment at regular intervals of time or at regular usage intervals. The given case falls under the latter.
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47. (c) i and iii Remedial maintenance is also called corrective or breakdown maintenance.
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48. (b) Adult stage In the adult or useful life stage, failure rate is constant, and to some extent, predictable. Proper maintenance of equipment can ensure longevity of this stage. Most causes of failure during this stage are attributed to external causes or accidents, for example, a mistake by an operator or usage of improper materials. 49. (a) i and iii Taking up preventive maintenance activities over and above the required number of times can cause delays in production and increase maintenance costs. Down time of machines will rise, leading to stalling of work, and decrease in productivity. 50. (a) Early failure stage The early failure stage is characterized by more equipment failure. This can be due to faulty design or improper installation. This stage is also called as burn-in stage.
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Part B 51. (c) Slack time Slack time refers to the amount of time by which an activity can be delayed beyond its earliest start time without extending the project duration, provided that the activity and other activities take their estimated durations. It is a measure for determining the criticality of an activity.
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52. (c) i/q, ii/s, iii/p, iv/r Computer Numeric Controlled (CNC) machines can perform a variety of tasks based on the instructions fed to the onboard computer. Computer Integrated Manufacturing (CIM) systems integrate design, manufacture and control functions. Flexible Manufacturing System (FMS) is a flexible production system capable of producing different types of products. Artificial intelligence (AI) allows computer systems with capabilities of reasoning and decision making.
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53. (c) Institutional impediment Impediments to globalization can be economic, managerial, or institutional. Some institutional impediments are: tariffs and duties which may limit benefits achieved by economy of scale in production, quantitative quotas and other similar restrictions, preferential procurement from local organizations by government and quasi-government entities, governmental pressure to use locally produced components or insistence on local R&D, preferential tax treatment and labor policies and corporate laws, tax laws or other policies of the local government.
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54. (d) Intelligent robots Intelligent robots are capable of perceiving environmental conditions of the workplace through tactile or visual perception (or both) and can make necessary and suitable decisions by using the on-board computers they are equipped with.
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55. (a) Vendor authorization card and conveyance authorization card A dual Kanban system uses two Kanbans and they include Vendor authorization card and Conveyance authorization card.
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56. (b) Develop a consolidated materials requirement plan for products using same type of materials Manufacturing firms that produce multiple products and have common material requirements for two or more products must consolidate the individual material requirements and form a single master material requirements plan for the two products.
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57. (b) Order releases Order release documents empower the purchase department to procure a specific quantity of inventory items required within a specified period.
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58. (d) Work-in-process inventory is very low In forward scheduling, production activities start when job orders are received and scheduling is done from the date of production. Start and finish times of each job is determined by assigning the earliest possible time slots for the jobs. As a result, jobs get finished before the requirement at their respective work stations. They get accumulated as work-in-process inventory. Hence, work-inprocess inventory is high in forward scheduling. 59. (a) i and ii Gantt charts are simple bar charts used to schedule any kind of operation. Workload charts and scheduling charts are two types of Gantt charts. X-chart and R-chart are used in quality control. 60. (d) i, ii, iii, iv As typical implementation of a ERP project exceeds one year, experts suggest having several ‘deliverables’ or milestones. A single milestone leads to problems in ERP implementation. 227
Operations Management 61. (d) i, iii, iv Business Process Reengineering (BPR) advocates the complete overhaul of the existing systems and processes in the entire organization (irrespective of departments) in order to increase productivity, reduce costs and improve business practices. 62. (d) Conformance
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Conformance is defined as that dimension of quality which is measured as the degree to which a product is manufactured to the pre-specified specifications. 63. (b) Reduction in product design time
Reduction in product design time is not a benefit of JIT purchasing. This mainly focuses on inventory management-related issues leading to increase responsiveness and supply flexibility. It also improves administrative efficiency.
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64. (d) Quality can be enhanced through collective efforts of all departments
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It is not just the firm’s quality control department that is responsible for ensuring product quality. High quality can be attained only through the collective and coordinated efforts of all departments of the firm. 65. (b) Products above the AOQL are not shipped to customers
Products are rejected if the AOQ crosses the AOQL. They are retained and not sent to customers. Such rejected lots of products would be inspected completely and defects removed. 66. (b) Products are retained and inspected
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Products are rejected if the AOQ crosses the AOQL. They are retained and not sent to the customers. Such rejected lots of products would be inspected 100% and the defects removed completely.
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67. (a) Probability of rejecting the lot at AQL In any sampling plan, there is always a risk that a good lot will be rejected - this is the producer’s risk. This is termed as Type I error. 68. (c) Reprographics
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69. (b) Production costs would decrease
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The probable consequences of poor maintenance of facilities are: productivity of the firm would be affected and reduced, production costs would rise, safety would be hit, leading to more accidents, and output quality would come down. 70. (a) Mechanical maintenance Mechanical maintenance includes maintenance of the firm's machines and equipment such as furnaces, boilers, compressors, material handling equipment, transport vehicles, etc. Civil maintenance includes building construction and maintenance; maintenance of service facilities like water filters, air conditioning, plumbing, etc. Electrical maintenance covers electrical and electronic equipment such as generators, motors, electrical installations, lighting, telephone systems, etc. Preventive maintenance is a type of maintenance operation. 71. (c) i and iii Remedial maintenance is also called corrective or breakdown maintenance. 228
Part B 72. (d) Equipment manufacturers dispatch equipment only after the burn-in period is over The bathtub curve may not always be an effective indicator of the failure rate of equipment. For example, present day manufacturers dispatch equipment only after the ‘burn in’ period is over, so that they can identify and rectify problems before it reaches end-users. So, the initial stage of the bathtub curve will not be applicable to such machines.
74. (b)
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73. (a) Reducing the workforce To crash a project, one needs to utilize the services of additional resources and/or maximize the services of existing resources. Hence instead of reducing the workforce, it can be increased to reduce the expected time of project completion.
(Crash cost − Normal cost ) (Normal time − Crash time)
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Time-cost ratio helps in identifying those activities which are to be crashed in a project. The activities with smallest time-cost ratio on the critical path have to be identified and crashed.
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75. (b) Critical path method Networking methods/techniques are used in project management in scheduling operations such that wastage in terms of time and material is minimized. Popular networking methods include Critical Path Method (CPM) and Project Evaluation and Review Technique (PERT).
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76. (c) FMS FMS (flexible manufacturing system) is a form of flexible automation in which several machine tools are linked to a material-handling system. A central computer controls all aspects of the system which is effective in producing different items that have similar processing requirements.
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77. (d) i and iv Robotics is an automation technology that has received considerable attention since 1960s. It is based on two related technologies: numerical control and teleoperators. Numerical control (NC) is a method of controlling machines by means of numbers coded on punched paper, tape or other media. Teleoperator is a mechanical manipulator that is controlled by an individual from a remote location.
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78. (a) Selection of markets When a global organization decides to select a new market (which can be a new country or a new area in an existing country), it has to analyze the macro-economic factors, market information, capabilities of the subsidiary with which it is tying up, etc.
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79. (c) Institutional impediment Rules and regulations framed by different national governments hinder the process of globalization. They come under institutional impediments. Preferential procurement from local organizations by government and quasi-government entities is one type of rules and regulations that might be framed by governments to hinder the expansion of global corporations. 80. (c) 20 units 4 units of D are required to produce 1 unit of A. It implies that 20 units (5 x 4) of D will be required to produce 5 units of A. 81. (b) 60 units 3 units of E are required to produce 1unit of B and 4 units of B are required to produce 1 unit of A. Hence to produce 5units of A, 60 units (3 x 4 x 5) of E are required. 229
Operations Management 82. (d) 6 weeks Lead time of E is 2 weeks, but lead time of D is 4 weeks. Hence, at the end of 4 weeks, products B ( 3 weeks), and product C & D ( 4 weeks) will be ready to produce A. It takes 2 weeks to produce A using B, C and D. Therefore the total time to produce A will be 6 weeks (4 + 2).
= 50000 / (150-125) = 2000 units 84. (c) D
C
B
E
A
20 09
83. (a) 2000 units BEP (in number of units) = fixed cost / (unit price – variable cost per unit)
85. (d) 335 minutes
Cl as s
of
From the given data, least processing time on the photocopying machine is for job D and on the binding machine for job A. Using Johnson’s sequencing rules, place job D at the beginning and job A at the end of the sequence. Repeat the process with the remaining jobs. The optimum sequence is D-C-B-E-A.
Job Photocopying Machine Sequence Time in Processing Time out Time 0
30
30
C
30
50
80
B
80
100
E
180
90
A
270
30
30
60
80
45
125
180
180
60
240
270
270
40
310
310
25
335
O
nl y
D
Binding Machine Time in Processing Time out Time
40
310
se
The total elapsed time is 335 minutes. 86. (b) 25 minutes
BS
U
Total idle time on photocopying machine is the difference between the time when the last job in the optimum sequence is completed on binding machine and the time when the last job is completed on photocopying machine. = 335 – 310 = 25 minutes
87. (a) 135 minutes
Fo rI
Total idle time on binding machine = (Time taken by photocopying machine to complete the first job in the optimum sequence) + Σ [(time when kth job starts on binding machine) – (time when (k-1)th job finishes on binding machine)]. = 30 + [(80-60) + (180-125) + (270-240) + (310-310)] = 30 + [20 + 55 + 30] = 135 minutes
88. (c) 0.220 Fraction defective for each sample is given by p = c /n (number of defectives /sample size) 230
Part B Fraction defective for Sample 1 = 4/20 = 0.2 Fraction defective for Sample 2 = 3/20 = 0.15 Similarly, calculate the fraction defective for all five samples as given in the following table. Fraction Defective
1 2 3 4 5 Total
0.20 0.15 0.30 0.25 0.20 1.10
89. (b) 0.4978
Cl as s
P (1 − P )
UCL= P +3
of
Average = 1.10/5 = 0.220
20 09
Sample
n
where P is the average proportion of defects, and n the number of samples. 0.22(1 − 0.22) 20
nl y
UCL = 0.22 + 3
UCL = 0.22 + 3(0.0926)
O
UCL = 0.4978 90. (c) 0
U
n
se
P (1 − P )
LCL= P - 3
where P is the average proportion of defects and n the number of samples. 0.22(1 − 0.22)
BS
LCL = 0.22 - 3
20
LCL = 0.22 - 3 (0.0926)
Fo rI
LCL = - 0.0578
As negative value cannot be considered while counting defects, LCL is assumed to be zero.
231
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