Master of Business Administration - MBA Semester 2 MB0044 Productions & Operations Management- 4 Credits Assignment Set- 1 (60 Marks)

) Note: Each question carries 10 Marks. Answer all the questions.

Q.1. what do you understand by Vendor-Managed Inventory (VMI)?

Definition & Explanation: Vendor-managed inventory Some firms have successfully improved their supply chain performance by implementing an approach known as Vendor Managed Inventory (VMI). With VMI, the vendor specifies delivery quantities sent to customers through the distribution channel using data obtained from EDI. Vendor Managed Inventory, Just-in-Time Distribution (JITD), and Efficient Consumer Response (ECR) all refer to similar concepts, but applied to different industries. For example, the grocery and apparel industries tend to use ECR, whereas the automobile industry tends to use VMI and JITD. Vendor-managed inventory (VMI) is a family of business models in which the buyer of a product provides certain information to a supplier of that product and the supplier takes full responsibility for maintaining an agreed inventory of the material, usually at the buyer's consumption location (usually a store). A third-party logistics provider can also be involved to make sure that the buyer has the required level of inventory by adjusting the demand and supply gaps. As a symbiotic relationship, VMI makes it less likely that a business will unintentionally become out of stock of a good and reduces inventory in the supply chain. Furthermore, vendor (supplier) representatives in a store benefit the vendor by ensuring the product is properly displayed and store staff is familiar with the features of the product line, all the while helping to clean and organize their product lines for the store. One of the keys to making VMI work is shared risk. In some cases, if the inventory does not sell, the vendor (supplier) will repurchase the product from the buyer (retailer). In other cases, the product may be in the possession of the retailer but is not owned by the retailer until the sale

takes place, meaning that the retailer simply houses (and assists with the sale of) the product in exchange for a predetermined commission or profit (sometimes referred to as consignment stock). A special form of this commission business is scan-based trading whereas VMI is usually applied but not mandatory to be used. The Vendor Managed Inventory Approach VMI reduces stock-outs and reduces inventory in the supply chain. Some features of VMI include: Shortening of the supply chain Centralized forecasting Frequent communication of inventory, stock-outs, and planned promotions. Electronic Data Interchange (EDI) linkages facilitate this communication. No manufacturer promotions Trucks are filled in a prioritized order. For example, items that are expected to stock out have top priority, then items that are furthest below targeted stock levels, then advance shipments of promotional items (promotions allowed only in transition phase), and finally, items that are least above targeted stock levels. Relationship with downstream distribution channels Result: Inventory reduction and stock-out reduction VMI Implementation Challenges VMI can be made to work, but the problem is not just one of logistics. VMI often encounters resistance from the sales force and distributors. At issue are roles and skills, trust, and power shifts. Some of the sales force concerns are: Loss of control Effect on compensation- incentive bonuses may depend on how much is sold, but sales force has less influence under VMI. Possible loss of job Skepticism that it will function well- technical problems Concern that reduced inventory will result in less shelf space and therefore loss of market share. This concern can be addressed by filling the shelf space with other stock keeping units from the same vendor. Distributors also may have concerns about vendor managed inventory, including:

 Inventory will be pushed on them No more promotions, discounts, and forward buying With less inventory, more risk of disruptions due to strikes, adverse weather, etc. The vendor enjoys the benefits while the distributor gives up its only lever of power-data on what the retailers want. Danger of being replaced- vendor may decide to forward integrate. Addressing Concerns For a VMI system to work, the concerns of distributors and the sales force must be addressed. They can be at least partially addressed by the following: Transform the sales role into one of marketing. For example, bonuses can be given based on the number of new clients. Distributor skepticism can be addressed by implementing a pilot program with vendor-owned warehouses in order to demonstrate that the system works. Introduce system in distributorowned warehouses on a pilot basis. Engage a neutral consultant in meetings among the vendor, distributor, and sales force. Allow some manufacturer promotions in the transition. Extensively simulate the system off -line before implementing. Don't exaggerate the benefits of VMI; otherwise, any delay in realizing the benefits may cause the supply chain to lose faith in the system. This is one of the successful business models used by Wal-Mart and many other big box retailers. Oil companies often use technology to manage the gasoline inventories at the service stations that they supply (see Petrolsoft Corporation). Home Depot uses the technique with larger suppliers of manufactured goods (i.e. Moen, Delta, RIDGID, Paulin). VMI helps foster a closer understanding between the supplier and manufacturer by using Electronic Data Interchange formats, EDI software and statistical methodologies to forecast and maintain correct inventory in the supply chain. Vendors benefit from more control of displays and more customer contact for their employees; retailers benefit from reduced risk, better store staff knowledge (which builds brand loyalty for both the vendor and the retailer), and reduced display maintenance outlays.

Consumers benefit from knowledgeable store staff who are in frequent and familiar contact with manufacturer (vendor) representatives when parts or service are required. Store staff have good knowledge of most product lines offered by the entire range of vendors. They can help the consumer choose from competing products for items most suited to them and offer service support being offered by the store. Q.2 Explain briefly the four classifications of scheduling strategies & its approaches. Explanation: Scheduling strategy differs from organization to organization as it depends on the quantum of production, size and type of production, companys policy, and priorities, etc. Most of these strategies are concerned with job shop production since the problems encountered is more when more than one product is produced in the same plant. Following are the classifications: Detailed scheduling Cumulative scheduling Cumulative-detailed scheduling Priority decision rules

Detailed scheduling All job orders from customers are scheduled to the last details. This may not be practical in case disruptions are there in production line like machine breakdown, absenteeism, etc. (Possible in airlines, hotels, etc) Cumulative scheduling The customer orders are pooled to form a cumulative work load and then matched with the capacity. The work load is then allocated in such a way that immediate periods get allocated to maximum capacity.

Cumulative-detailed combination This combines both the earlier strategies of firm and flexible nature of work load. Cumulative work load projections can be used to plan for capacity as needed. As changes happen during the week, the materials and capacity requirements are updated. The actual time allocated to the specified job at each work centre is as per the standard hours needed. This is tuned further with the requirements of the master schedule. Priority decision rules When a set of orders are to be executed, the question of prioritizing arises. These priority decision rules are scheduling guidelines used independently or in conjunction with any one of the above three strategies. A priority decision rules shown below are the systematic procedures for assigning priorities to waiting jobs, and determining the sequence in which jobs are required to be processed. The major criteria for applying rules are set up costs, idle time of machine and labor, in-process inventory, percentage of jobs that are late, average number of jobs waiting in queue, average time to complete job, and standard deviation of time to complete job. Classifications of priority decision rules A. Single-criteria rules B. Combined criteria rules (Johnsons rule) C. Critical ratio scheduling D. Index method of scheduling E. Critical path method A) Single-criteria rules Here the jobs are assigned to the production division by considering single and important criteria. These criterias are: First come first served (the job that comes first is served by scheduling first) Earliest due date (here the job with the earliest due date is processed)

Least slack available for production (here priority is given to the waiting job whose slack time is least. Slack time is calculated as the difference of the length of time remaining until the job is due and the length of its operation time. For example, if a job requires 6 days and time left is 8 days, then the slack for that job is 2 days.)

Shortest processing time (job requires least of shortest time is processed first) Longest processing time (job that requires the longest time is processed first) Preferred customer order (priority to orders coming from favorite customers) Random selection (Jobs are selected at random and purely a chance for any job)

B) Combined criteria rules (Johnsons rule) Johnsons rule is used to determine the sequence of order for a series of jobs to be processed on a fixed number of machines. The basis for the sequencing is that the total time required completing all the jobs should be minimum, thereby reducing the idle time of all machines. Johnsons rule is a procedure that minimizes the total cycle time in scheduling a group of jobs on two workstations and the sequence of the jobs at the two work stations should be identical and hence priority assigned to a job should be the same at both. This type of production sequence for a group of jobs to minimize the time has two advantages: 1) The group of jobs is completed in minimum time 2) Utilization of two station flow shop is maximized C) Critical ratio scheduling This establishes and maintains priority among jobs. Critical ratio greater than one means the job can be completed ahead of schedule, equal to unity means the job needs close watch, and less than unity means special measures are to be taken to complete the job on due date. Here, a quantity called as the critical ratio is calculated for each job and the jobs with lower critical ratios are given priority to be processed first. Critical Ratio = Time remaining for due date of the job/Time needed to complete the job. D) Index method of scheduling This assigns job to the best machine until its capacity is exhausted and then remaining jobs are assigned to the next best machine, etc. Here, the jobs are assigned to the best work centre till it is fully loaded to capacity and the remaining jobs are assigned to the next best if processing time is

the criterion. If the jobs can be processed in different work centers, indices are calculated for the different likely process time with the lowest index time of 1.0. E) Critical path method It is used for scheduling large and unique projects in which the relationship between the activities is quite intricate. The method overcomes the deficiencies of Gantt chart. Here a network of work centers and processing routes of each job is drawn graphically. PERT/CPM charts are made to identify the critical path. Q.3. Define production management. What are the various functions involved in production management? Production management It may be defined as: (i) The performance of the management activities with regards to selecting, designing, operating, Controlling and updating production system. (ii) It is the processes of effectively planning, coordinating and controlling the production that is the operations of that part of an enterprise, it means to say that production and operations Management is responsible for the actual transformation of raw materials into finished products. (iii) Production management is a function of Management, related to planning, coordinating and controlling the resources required for production to produce specified product by specified methods, by optimal utilization of resources. (iv) Production management is defined as management function which plans, organizes, coordinates, directs and controls the material supply and processing activities of an enterprise, so that specified products are produced by specified methods to meet an approved sales programme. These activities are being carried out in such a manner that Labor, Plant and Capital available are used to the best advantage of the organization. The objective of Production Management is to produce the desired product or specified product by specified methods so that the optimal utilization of available resources is met with. Hence the production management is responsible to produce the desired product, which has marketability at the cheapest price by proper planning, the manpower, material and processes. Production

management must see that it will deliver right goods of right quantity at right place and at right price. When the above objective is achieved, we say that we have effective Production Management system. Scope of Production Management: In fact, we apply Principles of Management; and functions of Management in our day-to-day life. We all know, from morning till night, we plan our activities; we coordinate available resources and control our activities to achieve certain goals. So also any organization must follow the Principles of Management for its survival and growth. The same is applicable to production Management also. Reading and learning Production Management will enable one to be capable of solving the problems of the organization, may be an Educational Institution, Production Shop, Hospital, Departmental shop or even a barber shop. The problems a manager face in various organizations are more or less similar to that of Production department but smaller in magnitude. Hence the knowledge of Production Management will help any professional Manager to tackle the problems of his business easily. For example: The Production Management consists of Planning, selection of materials, planning of processes, Routing, Scheduling and controlling the activities etc., Take the example of an Educational Institution/University. Here also selection of raw students, Planning of the Course Work, Educating the students and conducting the examination. Therefore this knowledge will enable one to apply the principles of Production Management to any field of life without restriction. Here, we have to remember that the above is also applicable to the management of a service organization and the management of a Project. Here it is better to distinguish between product, Service and Project, so as to help the reader to know on which particular aspect of Production Management to put much emphasis, in managing a service organization or a project. (i) Product: Manufacturing system often produces standardized products in large volumes. The plant and machinery have a finite capacity. The facilities constitute fixed costs, which are allocated to the products produced. Variable costs, such as, labor cost and materials costs. While manufacturing the product use value and economic values are added to the product. Hence the product is a store of values added during manufacture. Because the input costs and output costs are measurable, the productivity can be measured with certain degree of accuracy. Product can be transported to the markets and stored physically until it is sold.

(ii) Service: Service system present more uncertainty with respect to capacity and costs. Services are produced and consumed in the presence of the customer. We cannot store the service physically. Because of this the service organizations, such as Hotels, Hospitals, Transport Organizations and many other service organizations the capacity must be sufficiently or consciously managed to accommodate a highly variable demand. Sometimes services like legal practice and medical practice involve Professional or intellectual judgments, which cannot be easily standardized. Because of this the calculation of cost and productivity is difficult. (iii) Project: Project system does not produce standardized products. The Plant, Machinery, Men and Materials are often brought to project site and the project is completed. The project is of big size and remains in the site itself after completion. As the costs can be calculated and allocated to the project with considerable accuracy, Productivity can be measured. Once the project is completed, all the resources are removed from site. Functions of Production Management Department The functions of Production Management depend upon the size of the firm. In small firms the production Manager may have to look after production planning and control along with Personnel, Marketing, Finance and Purchase functions. In medium sized firms, there may be separate managers for Personnel, marketing and Finance functions. But the production planning and control and Purchase and stores may be under the control of Production management department. In large sized firms the activities of Production Management is confined to the management of production activities only. As such, there is no hard and fast rule or guidelines to specify the function of Production Management, but in the academic interest we can mention some of the functions, which are looked after by the Production Management department. They are: (i) Materials: The selection of materials for the product. Production manager must have sound Knowledge of materials and their properties, so that he can select appropriate materials for his product. Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes. (ii) Methods: Finding the best method for the process, to search for the methods to suit the available resources, identifying the sequence of process are some of the activities of Production Management.

(iii) Machines and Equipment: Selection of suitable machinery for the process desired, designing the maintenance policy and design of layout of machines are taken care of by the Production Management department. (iv) Estimating: To fix up the Production targets and delivery dates and to keep the production costs at minimum, production management department does a thorough estimation of Production times and production costs. In competitive situation this will help the management to decide what should be done in arresting the costs at desired level. (v) Loading and Scheduling: The Production Management department has to draw the time table for various production activities, specifying when to start and when to finish the process required. It also has to draw the timings of materials movement and plan the activities of manpower.The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available. (vi) Routing: This is the most important function of Production Management department. The Routing consists of fixing the flow lines for various raw materials, components etc., from the stores to the packing of finished product, so that all concerned knows what exactly is happening on the shop floor. (vii) Despatching: The Production Management department has to prepare various documents such as Job Cards, Route sheets, Move Cards, Inspection Cards for each and every component of the product. These are prepared in a set of five copies. These documents are to be released from Production Management department to give green signal for starting the production. The activities of the shop floor will follow the instructions given in these documents. Activity of releasing the document is known as dispatching. (viii) Expediting or Follow up: Once the documents are dispatched, the management wants to know whether the activities are being carried out as per the plans or not. Expediting engineers go round the production floor along with the plans, compare the actual with the plan and feed back the progress of the work to the management. This will help the management to evaluate the plans. (ix) Inspection: Here inspection is generally concerned with the inspection activities during production, but a separate quality control department does the quality inspection, which is not under the control of Production Management. This is true because, if the quality inspection is

given to production Management, then there is a chance of qualifying the defective products also. For example Teaching and examining of students is given to the same person, and then there is a possibility of passing all the students in the first grade. To avoid this situation an external person does correction of answer scripts, so that the quality of answers is correctly judged. (x) Evaluation: The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives. This is necessary for setting up the standards for future. Whatever may be the size of the firm; Production management department alone must do Routing, Scheduling, Loading, Dispatching and expediting. This is because this department knows very well regarding materials, Methods, and available resources etc. If the firms are small, all the above-mentioned functions (i to x) are to be carried out by Production Management Department. In medium sized firms in addition to Routing, Scheduling and Loading, Dispatching and expediting, some more functions like Methods, Machines may be under the control of Production Management Department. In large firms, there will be Separate departments for Methods, Machines, Materials and others but routing, loading and scheduling are the sole functions of Production Management. All the above ten functions are categorized in three stage, that is Preplanning, Planning and control stages as shown in figure below.

Q.4

Explain the various phases in project management life cycle.

Project management life cycle has six phases: 1. Analysis and evaluation phase 2. Marketing phase 3. Design phase 4. Execution phase 5. Control inspecting, testing, and delivery phase 6. Closure and post completion analysis phase Analysis and evaluation phase Analysis and evaluation phase is the initial phase of any project. In this phase, information is collected from the customer pertaining to the project. From the collected information, the requirements of the project are analyzed. According to the customer requirement, the entire project is planned in a strategic manner. The project manager conducts the analysis of the problem and submits a detailed report to the top management.

Project manager analysis report The report should consist of: details of the project justification details on the problem methods of solving the problem list of the objectives to be achieved estimation of project budget success rate of completing the project information on the project feasibility information of the risks involved in the project

The important tasks of the project manager during the phase of analysis and evaluation include: Specification Requirements Analysis (SRA): SRA has to be conducted to determine the essential requirements of a project in order to achieve the target. Feasibility study: Feasibility study has to be conducted to analyse whether the project is technically, economically, and practically feasible to be undertaken. Trade-off analysis: Trade-off analysis has to be conducted to understand and examine the various alternatives which could be considered for solving the problem. Estimation: Before starting a project, estimation has to be conducted on the project cost, effort required for the project, and the functionality of various processes in the project. System design: According to the customer requirement, a general system design has to be chosen to fulfill the requirements. Project evaluation: The project has to be evaluated in terms of expected profit, cost, and risks involved.

Marketing phase A project proposal is prepared by a group of people including the project manager. This proposal has to contain the strategies adopted to market the product to the customers.

Design phase Design phase involves the study of inputs and outputs of the various project stages. Inputs received consist of: project feasibility study, preliminary project evaluation details, project proposal, and customer interviews. Outputs produced consist of: system design specifications, functional specifications of the project, design specifications of the project, and project plan.

Execution phase In execution phase, the project manager and the team members work on the project objectives as per the plan. At every stage during the execution, reports are prepared.

Control inspecting, testing and delivery phase During this phase, the project team works under the guidance of the project manager. The project manager has to ensure that the team is implementing the project designs accurately. The project has to be tracked or monitored through its cost, manpower, and schedule. The project manager

has to ensure ways of managing the customer and marketing the future work, as well as ways to perform quality control work. Closure and post completion analysis phase Upon satisfactory completion and delivery of the intended product or service, the staff performance has to be evaluated. The project manager has to document the lessons from the project. Reports on project feedback get prepared and analyzed. A project execution report is prepared. Q.5 Explain the ingredients of a business process. Explain Physical Modeling.

Ingredients of a business process The ingredients that might be used in a business process can be briefly outlined as follows: The data which accomplishes the desired business objective Acquisition, storage, distribution, and control of data which undertakes the process across tasks Persons, teams, and organizational units which helps to perform and achieve the tasks Decisions which enhance the value of data during the process

We also have some behavioral aspects of the business process, mainly the decision making process where humans are involved. Decision failures are common and research has shown that, the failure of decisions is due to: biases in perception and fallacies in reasoning tendency to act on assumptions, even when data are available easily for verification and/or confirmation tendency to bring out of memory the facts that reinforce our assumptions and biased evaluation tendency to accept evidence or fact as absolute which support our hypothesis

These listed factors result in faulty decision making. Being aware and avoiding them consciously improves the processes of the business.

Physical Modeling The transition from logical to physical database design marks a change in focus and in the skills required. To this point, our goal has been to develop a set of data structures independent of any particular DBMS, without explicit regard for performance. Now our attention shifts to making those structures perform on a particular hardware platform using the facilities of our selected DBMS. Instead of business and generic data structuring skills, we require a detailed knowledge of general performance tuning techniques and of the facilities provided by the DBMS. Frequently this means that a different, more technical, person will take on the role of database design. In this case, the data modelers role will be essentially to advice on the impact of changes to tables and columns, which may be required as a last resort to achieve performance goals. An enduring myth about database design is that the response time for data retrieval from a normalized set of tables and columns will be longer than acceptable. As with all myths there is a grain of truth in the assertion. Certainly, if a large amount of data is to be retrieved, or if the database itself is very large and either the query is unduly complex or the data has not been appropriately indexed, a slow response time may result. However, there is a lot that can be done in tuning the database and in careful crafting of queries, before renormalization or other modification of the tables and columns defined in a logical data model becomes necessary. This has become increasingly true as overall computer performance has improved and DBMS designers have continued to develop the capabilities of their optimizers (the built-in software within a DBMS that selects the most efficient means of executing each query). The data modelers focus will be on the tables and columns (and the views based on them). He or she will typically refer to the tables and columns delivered by the physical database design process as the Physical Data Model to distinguish it from the Logical Data Model. The database designer will be interested not only in the tables and columns but also in the infrastructure components indexes and physical storage mechanisms that support data management and performance requirements. Since program logic depends only on tables and columns (and views based on them), that set of components is often referred to as the Logical Schema1 while the remainder may be referred to as the Physical Schema. One of the key actors in getting good outcomes in physical database design is the level of communication and respect between the database designer and the data modeler. That means understanding what the other party does and how they do it. Good architects maintain an up-to-date knowledge of building materials. On the other hand, if you are responsible for physical database design, you need to recognize that this chapter merely

scratches the surface of the many features and facilities available to you in a modern DBMS. Many of these are DBMS-specific, and accordingly better covered in vendor manuals or guides for the specific product. Specialist physical database designers generally focus on one (or a limited number) of DBMSs, in contrast to modelers whose specialization is more likely to be in a specific business domain. Q.6 Define the term quality. Explain the concept of quality at source. Quality

Definition :

Quality in business, engineering and manufacturing has a pragmatic interpretation as the noninferiority or superiority of something; it is also defined as fitness for purpose. Quality is a perceptual, conditional and somewhat subjective attribute and may be understood differently by different people. Consumers may focus on the specification quality of a product/service, or how it compares to competitors in the marketplace. Producers might measure the conformance quality, or degree to which the product/service was produced correctly. Support personnel may measure quality in the degree that a product is reliable, maintainable, or sustainable. There are five aspects of quality in a business context: 1. Producing - providing something. 2. Checking - confirming that something has been done correctly. 3. Quality Control - controlling a process to ensure that the outcomes are predictable. 4. Quality Management directing an organisation so that it optimises its performance through analysis and improvement. 5. Quality Assurance obtaining confidence that a product or service will be satisfactory. (Normally performed by a purchaser) Quality applied in these forms was mainly developed by the procurement directorates of NASA, the military and nuclear industries from the 1960's and this is why so much emphasis was placed on Quality Assurance. The original versions of Quality Management System Standards (eventually merged to ISO 9001) were designed to contract manufacturers to produce better products, consistently and were focussed on Producing, Checking and Quality Control. The subsequent move of the Quality sector towards management systems can be clearly seen by the aggregation of the product quality requirements into one eighth of the current version of ISO

9001. This increased focus on Quality Management has promoted a general perception that quality is about procedures and documentation. Similar experiences can be seen in the areas of Safety Management Systems and Environmental Management Systems. The emergence of tools like Asset Optimisation and 6 sigma is an interesting development in the application of quality principles in business. Managing quality is fundamental to any activity and having a clear understanding of the five aspects, measuring performance and taking action to improve is essential to an organisations survival and growth. The common element of the business definitions is that the quality of a product or service refers to the perception of the degree to which the product or service meets the customer's expectations. Quality has no specific meaning unless related to a specific function and/or object. Quality is a perceptual, conditional and somewhat subjective attribute. The business meanings of quality have developed over time. Various interpretations are given below: 1. American Society for Quality: "A combination of quantitative and qualitative perspectives for which each person has his or her own definition; examples of which include, "Meeting the requirements and expectations in service or product that were committed to" and "Pursuit of optimal solutions contributing to confirmed successes, fulfilling accountabilities". In technical usage, quality can have two meanings: a. The characteristics of a product or service that bear on its ability to satisfy stated or implied needs; b. A product or service free of deficiencies." 2. Subir Chowdhury: "Quality combines people power and process power." 3. Philip B. Crosby: "Conformance to requirements." The requirements may not fully represent customer expectations; Crosby treats this as a separate problem. 4. W. Edwards Deming: concentrating on "the efficient production of the quality that the market expects," and he linked quality and management: "Costs go down and productivity

goes up as improvement of quality is accomplished by better management of design, engineering, testing and by improvement of processes." 5. Peter Drucker: "Quality in a product or service is not what the supplier puts in. It is what the customer gets out and is willing to pay for." 6. ISO 9000: "Degree to which a set of inherent characteristics fulfills requirements." The standard defines requirement as need or expectation. 7. Joseph M. Juran: "Fitness for use." Fitness is defined by the customer. 8. Noriaki Kano and others, present a two-dimensional model of quality: "must-be quality" and "attractive quality." The former is near to "fitness for use" and the latter is what the customer would love, but has not yet thought about. Supporters characterize this model more succinctly as: "Products and services that meet or exceed customers' expectations." 9. Robert Pirsig: "The result of care." 10. Six Sigma: "Number of defects per million opportunities." 11. Genichi Taguchi, with two definitions: a. "Uniformity around a target value." The idea is to lower the standard deviation in outcomes, and to keep the range of outcomes to a certain number of standard deviations, with rare exceptions. b. "The loss a product imposes on society after it is shipped." This definition of quality is based on a more comprehensive view of the production system. 12. Gerald M. Weinberg: "Value to some person". Concept of quality at source Quality at the source is a lean manufacturing principle which defines that quality output is not only measured at the end of the production line but at every step of the productive process and being the responsibility of each individual who contributes to the production or on time delivery of a product or service. In a practical sense it would involve each operator checking his or her own work before the part/component or product is sent to the next step in the process. This practice when first implemented within the workforce will be a challenging change to company culture but will highlight the relevance of the product's or service's conformance to customer requirements and standards, thus also imparting the importance of quality standards and customer satisfaction within the workforce.

Master of Business Administration - MBA Semester 2 MB0044 Productions & Operations Management - 4 Credits Assignment Set- 2 (60 Marks)

Note: Each question carries 10 Marks. Answer all the questions.

Q.1.What is value engineering? Explain the steps involved in Value analysis.

Value engineering Explanation: Value Engineering (VE) or Value Analysis is a methodology by which we try to find substitutes for a product or an operation. Value engineering (VE) is a systematic method to improve the "value" of goods or products and services by using an examination of function. Value, as defined, is the ratio of function to cost. Value can therefore be increased by either improving the function or reducing the cost. It is a primary tenet of value engineering that basic functions be preserved and not be reduced as a consequence of pursuing value improvements. In the United States, value engineering is specifically spelled out in Public Law 104-106, which states Each executive agency shall establish and maintain cost-effective value engineering procedures and processes." Value engineering is sometimes taught within the project management or industrial engineering body of knowledge as a technique in which the value of a systems outputs is optimized by crafting a mix of performance (function) and costs. In most cases this practice identifies and removes unnecessary expenditures, thereby increasing the value for the manufacturer and/or their customers. VE follows a structured thought process that is based exclusively on "function", i.e. what something "does" not what it is. For example a screw driver that is being used to stir a can of

paint has a "function" of mixing the contents of a paint can and not the original connotation of securing a screw into a screw-hole. In value engineering "functions" are always described in a two word abridgment consisting of an active verb and measurable noun (what is being done - the verb - and what it is being done to - the noun) and to do so in the most non-prescriptive way possible. In the screw driver and can of paint example, the most basic function would be "blend liquid" which is less prescriptive than "stir paint" which can be seen to limit the action (by stirring) and to limit the application (only considers paint.) This is the basis of what value engineering refers to as "function analysis".[3] Value engineering uses rational logic (a unique "how" - "why" questioning technique) and the analysis of function to identify relationships that increase value. It is considered a quantitative method similar to the scientific method, which focuses on hypothesis-conclusion approaches to test relationships, and operations research, which uses model building to identify predictive relationships. Value engineering is also referred to as "value management" or "value methodology" (VM), and "value analysis" (VA). VE is above all a structured problem solving process based on function analysisunderstanding something with such clarity that it can be described in two words, the active verb and measurable noun abridgement. For example, the function of a pencil is to "make marks". This then facilitates considering what else can make marks. From a spray can, lipstick, a diamond on glass to a stick in the sand, one can then clearly decide upon which alternative solution is most appropriate.
The concept of value engineering originated during the Second World War. It was developed by the General Electric Corporations (GEC). Value Engineering has gained popularity due to its potential for gaining high Returns on Investment (ROI). This methodology is widely used in business re-engineering, government projects, automakers, transportation and distribution, industrial equipment, construction, assembling and machining processes, health care and environmental engineering, and many others. Value engineering process calls for a deep study of a product and the purpose for which it is used, such as, the raw materials used; the processes of transformation; the equipment needed, and many others. It also questions whether what is being used is the most appropriate and economical. This applies to all aspects of the product. Simplification of processes reduces the cost of manufacturing. Every piece of material and the process should add value to the product so as to render the best performance. Thus, there is an opportunity at every stage of the manufacturing and delivery process to find alternatives which will increase the functionality or reduce cost in terms of material, process, and time. The different aspects of value engineering can be encapsulated into a sequence of steps known as a Job Plan.

Value Engineering in organizations helps to identify: The problem or situation that needs to be changed / improved All that is good about the existing situation The improvements required in the situation The functions to be performed The ways of performing each function The best ways among the selected functions The steps to be followed to implement the function The person who executes the function

It should be remembered that we are not seeking a cost reduction sacrificing quality. It has been found that there will be an improvement in quality when systematic value analysis principles are employed.

Examples of Value Engineering

Russian liquid-fuel rocket motors are intentionally designed to permit ugly (though leak-free) welding. This reduces costs by eliminating grinding and finishing operations that do not help the motor function better. Some Japanese disk brakes have parts tolerance to three millimeters, an easy-to-meet precision. When combined with crude statistical process controls, this assures that less than one in a million parts will fail to fit. Many vehicle manufacturers have active programs to reduce the numbers and types of fasteners in their product, to reduce inventory, tooling and assembly costs. Often a premium forming process (like near net shape forming) can eliminate hundreds of lowprecision machining or drilling steps. Precision transfer stamping can quickly produce hundreds of high quality parts from generic rolls of steel and aluminum. Die casting is used to produce metal parts from aluminum or sturdy tin alloys (theyre often about as strong as mild steels). Plastic injection molding is a powerful technique; especially if the parts special properties are supplemented with inserts of brass or steel. When a product incorporates a computer, it replaces many parts with software that fits into a single light-weight, low-power memory part or microcontroller. As computers grow faster, digital signal processing software is beginning to replace many analog electronic circuits for audio and sometimes radio frequency processing. On some printed circuit boards (itself a producibility technique), the conductors are intentionally sized to act as delay lines, resistors and inductors to reduce the parts count. An important recent innovation was to eliminate the leads of surface mounted components. At one stroke, this eliminated the need to drill most holes in a printed circuit board, as well as clip off the leads after soldering. In Japan (the land where manufacturing engineers are most valued), it is a standard process to design printed circuit boards of inexpensive phenol resin and paper, and reduce the number of copper layers to one or two to lower costs without harming specifications.

Steps involved in Value analysis Process of Value Analysis The process of value analysis can be divided into the following four steps: 1. Data gathering 2. Analysis and valuation of functions 3. Idea generation and evaluation of substitutes 4. Implementation and regulation Step 1: Data gathering All relevant information concerned with the product and the parts that go to make it are collected. The concerns at this stage are the raw materials used, its dimensions, characteristics, availability, lead time, price, mode of transport, storage, and the rate of consumption. All questions regarding each of them are asked. The available information is recorded and when information is not available, tags can be attached for information gathering at a later date. No information should be considered unimportant or irrelevant. It will be advantageous to record the source of information. Phase objective Key questions Data gathering Gather information about the product Techniques What is the product? Who is best able to gather information? What must be known to gather information? Whom to ask for the information? Solicit ideas Identify low/value/high cost areas Record available information Tag non-available information Allocate resources

Tasks

Select product List the product parts Classify relevant information Question to gather information Record the available information Submit to the management

Step 2: Analysis and valuation of functions The function of each part is listed. They are categorized as basic functions and secondary functions. The description should be cryptic two or three words. If there are many functions that any part has to perform weight age may be given to each of them. Considered with the cost of the part and the weight, each function gets a value attached to it. Table depicts a brief about the key questions, techniques, and tasks that need to be performed in step 2. Phase objective Key questions Analysis and valuation of functions Analyze function and costs Techniques Tasks What is the worth of the basic function? What is the worth of secondary functions? What are high cost areas? Can any function be eliminated? Evaluate by comparison Put costs on specifications and requirements Put costs on key tolerances and finishes Put costs on key standards Analyze costs Analyze functions Evaluate value of function/cost Evaluate project potential Select specific study areas

Step 3: Idea Generation and Evaluation of Substitutes Having collected the data and analyzed them and knowing the relative importance of the functions, the next step is to identify the material or process that is amenable to the application of value engineering. Since there are a number of factors to be considered and to break away from the conventional thinking, brain storming is preferred. Ideas are allowed to be submitted to the group for discussion. A few of them will turn out to be worth more detailed evaluation. Debates about suitability or disadvantage of any particular change envisaged are conducted. Facts are analyzed and consensus arrived as to what can be attempted. Many times, the existing material or process will be ideal and nothing needs to be done. But a discussion and decision about this confirms that the maximum value is being derived. Table depicts a brief about the key questions, techniques, and tasks that need to be performed in step 3. Phase objective Key questions Evaluation Evaluate alternatives How might each idea work? What might be the cost? Will each idea perform the basic function well? Techniques Tasks Choose evaluation criteria Refine ideas Put approximate probable cost on each main idea Evaluate by comparison Speculate on evaluation criteria Evaluate alternatives Select the best alternative

Step 4: Implementation and Regularization The decision taken after evaluation is conveyed to the top management and clearances are obtained for implementation. Teams are formed for each implementation and concerned persons

are involved and educated about the impending change. Their cooperation is necessary for the change to be effective. If any small changes are necessary when a few trials are taken, they should be considered. After successful implementation, the change material change or the process change becomes the new norm or standard for further operations. The methodology adopted is on the lines of continuous improvement. Table depicts a brief about the key questions, techniques, and tasks that need to be performed in step 4. Phase objective Key questions Implementation Implement alternatives Techniques Who is to implement change? How to amend present plans/contracts? Have all resources been allocated? Translate plan into action Overcome problems Monitor project

Tasks

Develop change document Implement approved alternatives Evaluate process

Q.2.Describe dimensions of quality. Which are the quality control tools?

Explanation: Dimensions of quality Eight dimensions can be used at a strategic level to analyze quality characteristics. The concept was defined by David Garvin. Some of the dimensions are mutually reinforcing, whereas others are notimprovement in one may be at the expense of others. Understanding the trade-offs desired by customers among these dimensions can help build a competitive advantage. Garvin's eight dimensions can be summarized as follows:

1. Performance: Performance refers to a product's primary operating characteristics. This dimension of quality involves measurable attributes; brands can usually be ranked objectively on individual aspects of performance. 2. Features: Features are additional characteristics that enhance the appeal of the product or service to the user. 3. Reliability: Reliability is the likelihood that a product will not fail within a specific time period. This is a key element for users who need the product to work without fail. 4. Conformance: Conformance is the precision with which the product or service meets the specified standards. 5. Durability: Durability measures the length of a products life. When the product can be repaired, estimating durability is more complicated. The item will be used until it is no longer economical to operate it. This happens when the repair rate and the associated costs increase significantly. 6. Serviceability: Serviceability is the speed with which the product can be put into service when it breaks down, as well as the competence and the behavior of the serviceperson. 7. Aesthetics: Aesthetics is the subjective dimension indicating the kind of response a user has to a product. It represents the individuals personal preference. 8. Perceived Quality: Perceived Quality is the quality attributed to a good or service based on indirect measures. Quality control tools The Seven Basic Tools of Quality is a designation given to a fixed set of graphical techniques identified as being most helpful in troubleshooting issues related to quality. They are called basic because they are suitable for people with little formal training in statistics and because they can be used to solve the vast majority of quality-related issues. Seven basic tools of quality includes Ishikawa (fishbone) diagram, Check sheet, Control chart, Histogram, Pareto chart, Scatter diagram and Stratified sampling. Ishikawa diagram Ishikawa diagrams (also called fishbone diagrams, herringbone diagrams, cause-and-effect diagrams, or Fishikawa) are causal diagrams created by Kaoru Ishikawa (1968) that show the causes of a specific event. Common uses of the Ishikawa diagram are product design and quality defect prevention, to identify potential factors causing an overall effect. Each cause or reason for

imperfection is a source of variation. Causes are usually grouped into major categories to identify these sources of variation. The categories typically include:

People: Anyone involved with the process Methods: How the process is performed and the specific requirements for doing it, such as policies, procedures, rules, regulations and laws Machines: Any equipment, computers, tools, etc. required to accomplish the job Materials: Raw materials, parts, pens, paper, etc. used to produce the final product Measurements: Data generated from the process that are used to evaluate its quality Environment: The conditions, such as location, time, temperature, and culture in which the process operates

Check sheet The check sheet is a form (document) used to collect data in real time at the location where the data are generated. The data it captures can be quantitative or qualitative. When the information is quantitative, the check sheet is sometimes called a tally sheet. The defining characteristic of a check sheet is that data are recorded by making marks ("checks") on it. A typical check sheet is divided into regions, and marks made in different regions have different significance. Data are read by observing the location and number of marks on the sheet. Check sheets typically employ a heading that answers the Five Ws:

Who filled out the check sheet What was collected (what each check represents, an identifying batch or lot number) Where the collection took place (facility, room, apparatus) When the collection took place (hour, shift, day of the week) Why the data were collected

Control chart Control charts, also known as Shewhart charts or process-behavior charts, in statistical process control are tools used to determine if a manufacturing or business process is in a state of statistical control.

f analysis of the control chart indicates that the process is currently under control (i.e., is stable, with variation only coming from sources common to the process), then no corrections or changes to process control parameters are needed or desired. In addition, data from the process can be used to predict the future performance of the process. If the chart indicates that the monitored process is not in control, analysis of the chart can help determine the sources of variation, as this will result in degraded process performance. A process that is stable but operating outside of desired limits (e.g., scrap rates may be in statistical control but above desired limits) needs to be improved through a deliberate effort to understand the causes of current performance and fundamentally improve the process. The control chart is one of the seven basic tools of quality control. Typically control charts are used for time-series data, though they can be used for data that have logical comparability (i.e. you want to compare samples that were taken all at the same time, or the performance of different individuals), however the type of chart used to do this requires consideration. Histogram In statistics, a histogram is a graphical representation showing a visual impression of the distribution of data. It is an estimate of the probability distribution of a continuous variable and was first introduced by Karl Pearson. A histogram consists of tabular frequencies, shown as adjacent rectangles, erected over discrete intervals (bins), with an area equal to the frequency of the observations in the interval. The height of a rectangle is also equal to the frequency density of the interval, i.e., the frequency divided by the width of the interval. The total area of the histogram is equal to the number of data. A histogram may also be normalized displaying relative frequencies. It then shows the proportion of cases that fall into each of several categories, with the total area equaling 1. The categories are usually specified as consecutive, non-overlapping intervals of a variable. The categories (intervals) must be adjacent, and often are chosen to be of the same size. The rectangles of a histogram are drawn so that they touch each other to indicate that the original variable is continuous. Histograms are used to plot density of data, and often for density estimation: estimating the probability density function of the underlying variable. The total area of a histogram used for probability density is always normalized to 1. If the length of the intervals on the x-axis is all 1, then a histogram is identical to a relative frequency plot.

An alternative to the histogram is kernel density estimation, which uses a kernel to smooth samples. This will construct a smooth probability density function, which will in general more accurately reflect the underlying variable. Pareto chart A Pareto chart, named after Vilfredo Pareto, is a type of chart that contains both bars and a line graph, where individual values are represented in descending order by bars, and the cumulative total is represented by the line. The left vertical axis is the frequency of occurrence, but it can alternatively represent cost or another important unit of measure. The right vertical axis is the cumulative percentage of the total number of occurrences, total cost, or total of the particular unit of measure. Because the reasons are in decreasing order, the cumulative function is a concave function. To take the example above, in order to lower the amount of late arriving by 78%, it is sufficient to solve the first three issues. The purpose of the Pareto chart is to highlight the most important among a (typically large) set of factors. In quality control, it often represents the most common sources of defects, the highest occurring type of defect, or the most frequent reasons for customer complaints, and so on. Wilkinson (2006) devised an algorithm for producing statistically based acceptance limits (similar to confidence intervals) for each bar in the Pareto chart. These charts can be generated by simple spreadsheet programs, such as OpenOffice.org Calc and Microsoft Excel and specialized statistical software tools as well as online quality charts generators. Scatter plot A scatter plot or scatter graph is a type of mathematical diagram using Cartesian coordinates to display values for two variables for a set of data. The data is displayed as a collection of points, each having the value of one variable determining the position on the horizontal axis and the value of the other variable determining the position on the vertical axis. This kind of plot is also called a scatter chart, scatter gram, scatter diagram or scatter graph.

A scatter plot is used when a variable exists that is under the control of the experimenter. If a parameter exists that is systematically incremented and/or decremented by the other, it is called the control parameter or independent variable and is customarily plotted along the horizontal axis. The measured or dependent variable is customarily plotted along the vertical axis. If no dependent variable exists, either type of variable can be plotted on either axis and a scatter plot will illustrate only the degree of correlation (not causation) between two variables. A scatter plot can suggest various kinds of correlations between variables with a certain confidence interval. For example, weight and height, weight would be on x axis and height would be on the y axis. Correlations may be positive (rising), negative (falling), or null (uncorrelated). If the pattern of dots slopes from lower left to upper right, it suggests a positive correlation between the variables being studied. If the pattern of dots slopes from upper left to lower right, it suggests a negative correlation. A line of best fit (alternatively called 'trendline') can be drawn in order to study the correlation between the variables. An equation for the correlation between the variables can be determined by established best-fit procedures. For a linear correlation, the bestfit procedure is known as linear regression and is guaranteed to generate a correct solution in a finite time. No universal best-fit procedure is guaranteed to generate a correct solution for arbitrary relationships. A scatter plot is also very useful when we wish to see how two comparable data sets agree with each other. In this case, an identity line, i.e., a y=x line, or an 1:1 line, is often drawn as a reference. The more the two data sets agree, the more the scatters tend to concentrate in the vicinity of the identity line; if the two data sets are numerically identical, the scatters fall on the identity line exactly. One of the most powerful aspects of a scatter plot, however, is its ability to show nonlinear relationships between variables. Furthermore, if the data is represented by a mixture model of simple relationships, these relationships will be visually evident as superimposed patterns. Stratified sampling In statistics, stratified sampling is a method of sampling from a population. In statistical surveys, when subpopulations within an overall population vary, it is advantageous to sample each subpopulation (stratum) independently. Stratification is the process of dividing members of the population into homogeneous subgroups before sampling. The strata should be mutually exclusive: every element in the population must be assigned to only one stratum. The

strata should also be collectively exhaustive: no population element can be excluded. Then simple random sampling or systematic sampling is applied within each stratum. This often improves the representativeness of the sample by reducing sampling error. It can produce a weighted mean that has less variability than the arithmetic mean of a simple random sample of the population. In computational statistics, stratified sampling is a method of variance reduction when Monte Carlo methods are used to estimate population statistics from a known population.

Q.3.What is the objectives of layout? Explain the classification of layouts.

Objectives of layout The primary objective of plant layout is to increase productivity and also to ensure employee satisfaction and lowering the costs. The major objectives of a good plant layout are:

Reduced risk to health and safety of employees Improved morale and worker satisfaction Increased output Fewer production delays Savings in floor space - production, storage, and service Reduced material handling Greater utilization of machinery, manpower, and service Reduced inventory-in-process Shorter manufacturing time Reduced clerical work and indirect labor Easier and better supervision Less congestion and confusion Easier adjustment to changing conditions Facilitate the overall production process. Minimize material handling costs Increase production throughout Effective utilization of available space Improve employee morale Utilize labor effectively

Avoid unnecessary capital investment Provide flexibility Reduce in-process inventories

Classification of layouts The facilities in a manufacturing organization can be classified as follows:

Production facilities Workshops, tool room, machine shop, assembly, heat treatment, painting, testing and inspection. Support facilities Storage, packing, administrative, library, service centre, reception. Employee utilities Vehicles parking, canteen, healthcare, rest room. Additional facilities Conference hall, board room, customer service, training hall.

The facilities in a service industry are almost similarly developed for various activities. For example, in an airport the layout consists of:

Runways for landing and take-off Parking area for employees and passengers Cargo area Baggage collection and retrieval Counters Security check area Canteens Administrative offices Storage area Health care Restrooms

Q.4. List the benefits of forecasting. Discuss the role of forecasting in modern business context. Benefits of forecasting Business forecasting takes a lot of time and effort; however, it is definitely worth it. These 10 reasons will show you the advantages of forecasting in business and why you should take the time to implement great forecasting tools.

Business forecasting is a critical step in the creation of any business plan. Forecasting is almost never completely accurate but it helps companies look at the big picture. Here we look at 10 advantages of forecasting in business. We will use the wine industry to provide examples of how forecasting can truly benefit a business. 1. Helps to Predict the Future Forecasting does not provide you with a crystal ball to see exactly what will happen to the market and your company over the coming years, but it will help give you a general idea. This will provide you with a sense of direction which will allow your company to get the most out of the marketplace. Predicting the future in the wine industry can be very difficult. But by doing so, a winery can predict future trends and then change their company objectives to achieve success in this new environment. 2. Keep Your Customers Happy In order to keep your customers satisfied you need to provide them with the product they want when they want it. This advantage of forecasting in business will help predict product demand so that enough products is available to fulfill customer orders. By using business forecasting to look ahead, wineries are able to make sure they always have product available for the customers to purchase. If the shelves are bare for any length of time, a customer is extremely likely to try another brand. 3. Learn From The Past Looking at what has happened in the past can help companies predict what will happen in the future. Thus making the company stronger and most likely more profitable. Wineries look at past sales and trends and use that data to try and predict the future.

4. Keeps Companies Looking Ahead By forecasting on a regular basis, it forces companies to continually think about their future and where their company is headed. This will allow them to foresee changing market trends and keep up with the competition. Wineries have to keep looking ahead or else they will not be able to meet demand. Giving their competition even a slight advantage could be devastating. 5. Save on Staffing Costs One of the advantages of forecasting in business is that it allows companies to predict how much product will need to be produced to meet customer demand. From here a company can use this data to accurately determine how many employees they will need to have on hand to meet the required level of production. Many wineries have fairly small profit margins, so it is important to make sure they have the correct amount of staff on hand and are not employing too many people. 6. Remain Competitive A business that does not use forecasting techniques will likely succumb to their competition in a short time. Having a general idea of what sales to expect in the following period is very important. This will help a company prepare to meet customer demand; otherwise the customer will look to fulfill their needs elsewhere. The wine industry is extremely competitive. There are literally thousands of different wineries fighting for the same shelf space. Attracting new customers with expensive advertising campaigns and flashy labels is very costly. That is why once a company gets a new customer, they want to do everything in their power to keep them. 7. Receive Financing In order to receive financing for new startups or to fund an existing enterprise, a forecast will need to be completed. The lender needs an estimate on the number of sales you will have within a given time period before they will consider lending out large sums of money.

Financing is a key component of success for most wineries. Most have loans on their buildings, equipment, and vineyards. Without this financing, they would more than likely not be able to operate so this is an essential advantage of forecasting in business. 8. Reduce Inventory Costs Forecasting helps predict how much inventory should be on hand at any given time. By having the right amount of inventory, your company will be able to save on warehouse and transportation costs. There will also be less risk of incurring obsolescence costs or having to discount products because you have a large surplus. Having the correct amount of inventory on hand is very important for every winery. White wine can only be kept on the shelf for a couple of years. That is why it is extremely important to make sure there is not a large surplus of product. 9. Helps Prepare for a Drop in Sales A drop in sales is never a good thing for a company, however, this advantage of forecasting in business reveals sales drops which in turn, can be recognized and dealt with quickly. Learn how to create a sales forecasting spreadsheet in Excel right here on Bright Hub. When a winery has forecasted a drop in sales they will slow down production. This means having less wine in their tanks or barrels at any given time, and also less finished goods inventory on hand at their various facilities. 10. Prepare for New Business By forecasting demand, a company can see if an increase in sales is likely imminent. This will allow the company to prepare for this increase in business by providing extra staff or production facilities to meet this new level of demand. Wineries will increase wine production and bottling to meet this new demand and hopefully gain lifelong customers in the process.

Role of forecasting in modern business context Every decision rests on a forecast a view of the future. We know from everyday experience that many of the forecasts we are obliged to make will prove mistaken. Yet this does not invalidate the case for basing decisions upon forecasts. We are obliged to formulate forecasts of some kind or other as a means of determining a future course of action. Man has evolved into a highly successful surviving animal. His chances of success have been enhanced by his ability to foresee the consequences of his decisions. In that sense we are all forecasters. Forecasting is an essential discipline in planning and running a business. Success depends, to a large extent, on getting those forecasts right. We know, however, that the future is highly uncertain. Throughout our lives we are confronted with uncertainties. There is, therefore, a fair chance that we will not make the right decisions. In business we are continually confronted by the need to take decisions. The important decisions compel us to construct a route map of the future and to forecast which way our decisions will take us. A wrong decision can end in disaster. For that reason we need to bring a wide range of skills to bear on the possible and probable outcomes of the decisions. The business environment is constantly changing. It has become increasingly complex. Large organizations have the capacity to set up specialist units to provide forecasts for a wide range of subjects. All firms need to forecast the level of sales and revenues. This may require commissioned market research to establish the pattern of the market, its size and its growth potential. The firm will also require an analysis of the competition, an appraisal of product design and development and an assessment of pricing policy. This also leads to an analysis of costs, covering labour and purchase of materials, components and services. The cost of capital may also be relevant, as will premises and location. The network of related items needed for a thorough analysis and a set of forecasts relating to sales will include a number of crucial areas where we have no control. We cannot control interest rates, exchange rates, commodity prices, taxation and legislation. We cannot control the labour market or the levels and changes in the customers spending power. Yet it is just as important to forecast those factors which are beyond our control as to forecast those which we can control. All businesses will be affected by changes in taxation and interest rates. No business can escape the rises and falls of the business cycle. It is therefore essential to have an understanding of the

causes of cyclical fluctuations and to make allowances for those potential fluctuations in building up a set of forecasts. This may be summarized as: to minimize uncertainty and to identify and evaluate risk. Faced with doubts about the future the decision-taker requires as much information about the past and the future as is possible. He will need to know how much risk attaches to alternative decisions. For these reasons, the problem of forecasting needs to be approached in as scientific a manner as possible. Yet it is as well at the outset to keep in mind the imprecise nature of many of the subjects to be forecast. Not only is our knowledge of the future extremely limited but our knowledge of the past is far from complete. There are few truly dependable sets of statistics describing the past and the margin of error in many of the series in common use is wide in some cases so wide as to invalidate statistical analysis. Thus forecasting must continue to be regarded very much as an art rather than a science, in spite of the continuous advances in computer technology. A golden rule of the computer industry is rubbish in equals rubbish out. Subjective judgement will be called into play at many points in the construction of a set of forecasts and the forecasters judgement will be more dependable if he has a strong grounding in history and a feel for the passage of time and the pace of change. He has to be armed with a storehouse of knowledge about the subject in question, to know the sources of the relevant statistics and above all to know how dependable (or unreliable) these sources may be. It is in this respect that forecasting is an art rather than a science and the greater the forecasters experience the better. This does not mean that scientific methods should not be employed. The statistical techniques for calculating a trend or a relationship are obviously scientific. Q.5. Mention the significance of plant location decision. Explain the location decision sequence. Significance of plant location decision The strategic significance of facility location is connected with capacity decisions. Indeed, the issue of capacity expansion immediately raises the companion issue of where to expand in order to tie in effectively with the distribution network. We have separated the materials into two areas because the approaches to the sub-problems are quite different and to divide the materials into manageable units.

The location of facilities involves a commitment of resources to a long-range plan. Thus, predictions of the size and location of markets are of great significance. Given these predictions, we establish facilities for production and distribution that require large financial outlays. In manufacturing organizations, these capital assets have enormous value, and even in service organizations, the commitment of resources may be very large. Location and distribution take on even greater significance because these plans represent the basic strategy for accessing markets and may have significant impacts on revenue, costs, and service levels to customers and clients. It is not immediately obvious that location is a dominant factor in the success or failure of an enterprise. Indeed, it is not uniformly important for all kinds of enterprises. Decentralization within industries must mean that many good locations exist or that the location methods used could not discriminate among alternative locations. General technological constraints will commonly eliminate most of the possible locations. Or, to take the opposite point of view, a technological requirement may dominate, so that activity is then oriented toward the technical requirement. For example, mining is raw material oriented, beer is water oriented, aluminum reduction is energy oriented, and service activities, including sales, are consumer or client oriented in their locations. If some technological requirements, such as the location of raw materials, water, or energy, does not dominate, then manufacturing industries are often transportation oriented. The criterion for the choice of location should be profit maximization for economic activities. If the prices of products are uniform in all locations, then the criterion becomes one of minimizing relevant costs. If the costs of all inputs are independent of location, but product prices vary, then the criterion for location choice becomes maximum revenue. In such instances, locations will gravitate to the location of consumers, and the general effect will be to disperse or decentralize facilities. If all processes and costs are independent of location then choice will be guided by proximity to potential customers or clients or to similar and competing organizations and to centers of economic activity in general.

Industrial Plant Locations: In most plant location models, the objective is to minimize the sum of all costs affected by location. Some items of cost, such as freight may be higher for city A and lower for city B, but power costs, for example, may have the reverse pattern. We are seeking the location that minimizes costs on balance. In attempting to minimize costs, however, we are thinking not only of todays costs but of long-run costs as well. Therefore, we must be interested in predicting the influence of some of the intangible factors that may affect future costs. Thus, factors such as the attitudes of city officials and town people toward a new factory site in their city may be an indication of future tax assessments. Poor local transportation facilities may mean future company expenditures to counterbalance this disadvantage. A small labor supply may cause labor rates to be bid up beyond rates measured during a location survey. The type of labor available may indicate future training expenditures. Thus, although a comparative cost analysis of various locations may point toward one community, an appraisal of intangible factors may be the basis of the decision to select another. The result is an excellent example of a managerial decision with multiple criteria, where trade-offs must be made between the various values and criteria. Location decision sequence Location decisions start from the national level, and move to the site level after moving through regional level and the community level. This means that, first the country of choice is to be selected, followed by regional choices and finally community levels have to be selected. Country

Political risks, government rules, attitudes, incentives Cultural and economic issues Location of markets Labor availability, attitudes, productivity, costs Availability of supplies, communications, energy Exchange rates and currency risks

Region

Corporate desires Attractiveness of region

Labor availability, costs, attitudes towards unions Costs and availability of utilities Environmental regulations Government incentives and fiscal policies Proximity to raw materials and customers Land/construction costs

Site

Site size and cost Air, rail, highway, and waterway systems Zoning restrictions Nearness of services/ supplies needed Environmental impact issues

Q.6. what is meant by business process? Explain logical process modelling?

Business process A business process or business method is a collection of related, structured activities or tasks that produce a specific service or product (serve a particular goal) for a particular customer or customers. It often can be visualized with a flowchart as a sequence of activities with interleaving decision points or with a Process Matrix as a sequence of activities with relevance rules based on the data in the process. Business Process Modeling A process is a coordinated set of activities designed to produce a specific outcome. There are processes for saving a file, constructing a building, and cooking a meal. In fact, there is a process for almost everything we do. A business process is a type of process designed to achieve a particular business objective. Business processes consist of many components, including: The data needed to accomplish the desired business objective Individual work tasks that manipulate, review, or act upon the data in some way

Decisions that affect the data in the process or the manner in which the process is conducted The movement of data between tasks in the process

Individuals and groups which perform tasks Processes can be manual or automated, fully documented or simply knowledge in the minds of one or more people. They can be simple or complex. They can be formal, requiring exact adherence to all details; or flexible, provided the desired outcome is achieved. There are three types of business processes: 1. Management processes, the processes that govern the operation of a system. Typical management processes include "Corporate Governance" and "Strategic Management". 2. Operational processes, processes that constitute the core business and create the primary value stream. Typical operational processes are Purchasing, Manufacturing, Advertising and Marketing, and Sales. 3. Supporting processes, which support the core processes. Examples include Accounting, Recruitment, Call center, Technical support. A business process begins with a mission objective and ends with achievement of the business objective. Process-oriented organizations break down the barriers of structural departments and try to avoid functional silos. A business process can be decomposed into several sub-processes, which have their own attributes, but also contribute to achieving the goal of the super-process. The analysis of business processes typically includes the mapping of processes and sub-processes down to activity level. Business Processes are designed to add value for the customer and should not include unnecessary activities. The outcome of a well designed business process is increased effectiveness (value for the customer) and increased efficiency (less costs for the company). Business Processes can be modeled through a large number of methods and techniques. For instance, the Business Process Modeling Notation is a Business Process Modeling technique that can be used for drawing business processes in a workflow.

Logical process modeling Logical Process Modeling is the representation of a business process, detailing all the activities in the process from gathering the initial data to reaching the desired outcome. These are the kinds of activities described in a logical process model:

Gathering the data to be acted upon Controlling access to the data during the process execution Determining which work task in the process should be accomplished next Delivering the appropriate subset of the data to the corresponding work task Assuring that all necessary data exists and all required actions have been performed at each task Providing a mechanism to indicate acceptance of the results of the process, such as, electronic "signatures"

All business processes are made up of these actions. The most complex of processes can be broken down into these concepts. The complexity comes in the manner in which the process activities are connected together. Some activities may occur in sequential order, while some may be performed in parallel. There may be circular paths in the process (a re-work loop, for example). It is likely there will be some combination of these. The movement of data and the decisions made determining the paths the data follow during the process comprise the process model. The contains only business activities, uses business terminology (not software acronyms, technical jargon, etc.), completely describes the activities of the business area being modeled, and is independent of any individual or position working in the organization. Like its sibling, Logical Data Modeling, Logical Process Modeling does not include redundant activities, technology dependent activities, physical limitations or requirements or current systems limitations or requirements. The process model is a representation of the business view of the set of activities under analysis. Heretofore, many applications and systems were built without a logical process model or a rigorous examination of the processes needed to accomplish the business goals. This resulted in applications that did not meet the needs of the users and / or were difficult to maintain and enhance.

Problems with an unmodeled system include the following:

Not knowing who is in possession of the data at any point in time Lack of control over access to the data at any point in the process Inability to determine quickly where in the process the data resides and how long it has been there Difficulties in making adjustments to a specific execution of a business process Inconsistent process execution

Ingredients of Business Process: 1) Time: You must understand that time is money. In business, our objective is to make

money. Period. But the question is how productively you convert your time into money. Are you making full use of your time or you just let the time pass by you? How much you make depends on how good you are at converting time to money. If you are already productive, then you may want to ask what are the things you can do to improve further the ratio of dollar/second. If you are making $0.01/second, what you can do to make it$0.02/second? Or even more. Remember time is the most valuable asset and once its gone, its gone. Also time is also the fairest distribution of resources every human being receives. 2) People: To be successful in business, you must have people connections. I mean the right

people. People consist of customers, suppliers, partners, staff, and associates. One thing that you must not leave out is your mentor or coach. Having genuine mentors or coaches is very important and it can make a very big difference in your business. To make sure that you have more profits, you must serve people well. Organize your database of people connections. By simply knowing who does what, who supplies what, who needs what, where to get what make you miles ahead of other people. To organize your connections, you can either use a paper folder or computer spreadsheet. 3) Knowledge and Skills: When I talk about knowledge and skills, I am not referring to

academic knowledge that you find in schools or colleges. Whats more important to you is knowledge and skills that can bring you results you want. How many MBA holders that you know of have become business owners and have made tones of money? That shows getting the right knowledge and skills are important. Dont blindly go after knowledge that could drown you.

Go for knowledge and skills that are universally tested and proven. Examples of right knowledge and skills are where to get what from who, money making trends, marketing strategies, art of dealing with people, negotiation skills, selling skills, skills of managing and growing money, investment skills, universal laws of success, and more. Dont waste time on unnecessary knowledge as I went through that before. Theres only so much that you need to know and learn. Be sharp and focus when you acquire knowledge and skills. Dont follow what normal people do. 4) Personal Health: In fact, this is the most important ingredient of all. How can you run a

business without a healthy body? In order to maintain an optimum health, you have to provide your body with proper nutrients and sufficient exercise. And also dont forget about emotional well being. Dont let anger and other negative emotions control you. This is where positive and empowering attitudes come into play. Maintaining your body is just like maintaining your car. If you send your car to workshop for regular service and pump petrol regularly, why dont you do the same for your body? Its something for you to think about. Dont be stingy over spending money for your own health because physical and mental health can cause you a lot of money in the long run if your body is not taken care of properly. 5) Money: Lets face it. It does take money to make money even you need a little. But you

might not need a lot of money to start a business because there are many ways to start one with low capital. I meet a lot of people who want to be rich but are not willing to invest the money. You must invest in something in order to for you to get something. The law of sowing and reaping is at work. Dont expect something without investing anything. Money is one of the investments you need to make. Even though you dont need to have a capital for your business, but at least you must be able to cover your expenses while building your business. You also need money to buy products to stock up and other stuff. So, you must at least come up with whatever amount that you have to start a business. These are the five basic ingredients of business success. Do your best to acquire or grow or invest in these ingredients. But the good thing is you dont need to have a perfect combination of ingredients to get started. You can still perfect the ingredients along the way. Somehow, get it started with what youve got.