Amity Campus

Uttar Pradesh
India 201303
ASSIGNMENTS
PROGRAM: MFC
SEMESTER-II
Subject Name:
Study COUNTRY:
Roll Number (Reg. No.):
Student Name:

OPERATIONS MANAGEMENT
SOMALIA
MFC001512014-2016091
MOHAMED ABDULLAHI KHALAF

INSTRUCTIONS
a) Students are required to submit all three assignment sets.
ASSIGNMENT
Assignment A
Assignment B
Assignment C

DETAILS
Five Subjective Questions
Three Subjective Questions + Case Study
Objective or one line Questions

MARKS
10
10
10

b) Total weight-age given to these assignments is 30%. OR 30 Marks

c) All assignments are to be completed as typed in word/pdf.
d) All questions are required to be attempted.
e) All the three assignments are to be completed by due dates and need to be
submitted for evaluation by Amity University.
f) The students have to attach a scanned signature in the form.
Signature

: _________________________

Date: 06, June, 2015

( ) Tick mark in front of the assignments submitted
Assignment A

Assignment B

Assignment C

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Operations Management
Part A
Q: 1).
Discuss the changing philosophy of operations management. What are
the new trends in operations management?
Answer:
CHANGING PHILOSOPHY OF OPERATIONS MANAGEMENT
Operations management has two important components. The first is the operation systems
and procedures. The second and important component is the philosophy, which defines the
process, serves the customer needs and decides the system capacity. The performance of the
organization is greatly influenced by the philosophy or mental models or mental framework
of the people involved. It is this area, which makes all the difference in customer satisfaction.
Management philosophy influences the decision-making and thought process in the
organization. This lays standards of acceptability, choice of more important issues and less
important issues and in setting up the priorities in operations. It builds the value base and
value structure of the organization. It provides a working environment and work culture,
which makes all the difference to the organization.
Operations management is concerned with all these aspects rather than just producing goods
or services. In todays operations management, the focus has shifted from the earlier concept
of large-scale production and cost reduction to new methodologies, new approaches, new
tools, systems simplification, continuous improvements, total quality management and JustIn-Time (JIT) manufacturing. The operation managers are not limiting their options to the
new technological development, automation and computerization, but are looking beyond
with new approaches and perspectives.
TRENDS IN OPERATIONS MANAGEMENT
Operations management has undergone lots of changes in its concept, structure and
implementation. The three terminologies Manufacturing Management, Production
Management and Operations Management are interrelated. The concept of
manufacturing management is more than a century old. Subdivision of work and
specialization of workforce was the focus of manufacturing management. Production
management became popular in 1930s. Scientific approach, techniques of doing work or use
of techniques in decision-making became the focus of production management. Industrial
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Engineering applications, work measurement, method study, incentive schemes were used to
improve efficiency in operations. Importance of improving the performance of workers and
human relations were clearly visible in this period.
The modern operations management has come a long way. The focus in modern operations
management is on product quality, customer satisfaction, technological innovation, collective
performance of management and use of models in better decision-making. Today,
operations management is more open for new ideas and has started believing that there is
better way of doing things. Further to the earlier concept of employee improvement, the
operations management is striving for system improvement and organization development.
Accurate, timely and relevant information is the need of the hour in operations management.
In the light of global competition many recent trends in operations management have
evolved that have impact on manufacturing firms. Some of these are discussed below:
Quality: There is a great emphasis on the quality of the product in modern operations
management, which was never seen earlier. The understanding of quality has undergone
tremendous change. Quality is associated with the use and cost. It is not the best quality, that
is demanded, but what is most suited for the purpose has more weightage.
Revenue: Traditionally, the cost of the product was the main consideration of management.
Various operations in processing the product need inputs like materials, men, energy,
information, quality control, etc. Value is added to the inputs in each operation and the final
product is a value added product. In the present scenario, the final cost of the product is
looked at from the point of view of revenue. As long as revenue is more than the cost of the
product, operations management is satisfied. The generation of positive income for the
organization is a very important consideration.
Value: The need for cost reduction has dominated for long-time, so as to ensure that the
organization remains competitive in the market. This would mean reduction of material cost
even at the cost of quality of materials used or curtailment of some of the features in the
product, which could be done away. The modern operations management has realized that it
is the value of the product rather than the cost of the product, which is more important to
the customer, even though he may have to pay more money for the product.
Customers: Operations management has clear vision as to which customer it is looking
forward to. The product, various activities in processing the goods and the management
system have to be tailored to the needs of the customer, or groups of customers, which the
company wants to serve. This calls for changes in the product and the operation systems in
line with the change in customers need. Flexibility in operation is an essential element of
modern operations management.
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Flexibility: The ability to adapt quickly to changes in volumes of demand, in the product
mix demanded, and in product design or delivery schedules, has become a major competitive
strategy and a competitive advantage to the firms. This is sometimes called as agile
manufacturing.
Total Quality Management: TQM approach has been adopted by many firms to achieve
customer satisfaction by a never ending quest for improving the quality of goods and
services.
Time Reduction: Reduction of manufacturing cycle time and speed to marker for a new
product provide a competitive edge to a firm over other firms. When companies can provide
products at the same price and quality, quicker delivery (short lead time) provide one firm
competitive edge over the other.
Worker Involvement: The recent trend is to assign responsibility for decision making and
problem solving to the lower levels in the organization. This is known as employee
involvement and empowerment. Examples of employees empowerment are quality circle
and use of work teams or quality improvement teams.
Business Process Re-engineering: BPR involves drastic measures or break-through
improvements to improve the performance of a firm. It involves the concept of clean-state
approach or starting from a scratch in redesigning in business processes.
Global Market Place: Globalization of business has compelled many manufacturing firms
to give operations in many countries where they have certain economic advantage. This has
resulted in a steep increase in the level of competition among manufacturing firms
throughout the world.
Operations/Production Strategy: More and more firms are recognizing the importance of
operations strategy for the overall success of their business and the necessity for relating it to
their overall business strategy.
Technology: Advances in technology have led to a vast array of new products, new
processes and new materials and components. Automation, computerization, information
and communication technologies have revolutionized the way companies operate.
Lean production: Production system have become lean production systems which have
minimal amount of resources to produce a high volume of high quality goods with some
variety. These systems use flexible manufacturing systems and multi-skilled workforce to
have advantages of both mass production and job production.

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Just in time production: JIT is a pull system of production, so actual orders provide a
signal for when a product should be manufactured. Demand-pull enables a firm to produce
only what is required, in the correct quantity and at the correct time. This means that stock
levels of raw materials, components, work in progress and finished goods can be kept to a
minimum. This requires a carefully planned scheduling and flow of resources through the
production process. For example, a car manufacturing plant might receive exactly the right
number and type of tyres for one days production, and the supplier would be expected to
deliver them to the correct loading bay on the production line within a very narrow time slot.
Computer Aided Manufacturing: Computer-aided manufacturing (CAM) is the use of
computer-based software tools that assist engineers and machinists in manufacturing or
prototyping product components. CAM is a programming tool that makes it possible to
manufacture physical models using computer-aided design (CAD) programs. CAM creates
real life versions of components designed within a software package. CAM was first used in
1971 for car body design and tooling.
Computer Aided Design: Computer-aided design (CAD) is the use of computer
technology to aid in the design and particularly the drafting (technical drawing and
engineering drawing) of a part or product, including entire buildings. It is both a visual (or
drawing) and symbol-based method of communication whose conventions are particular to a
specific technical field.
E-Supply Chain Management: Supply chain management is the management of supply
chain from suppliers to final customers reduces the cost of transportation, warehousing and
distribution throughout the supply chain. But SCM was a traditional concept which is now
being replaced by E-SCM. E-Supply chain management is a series of Internet enabled valueadding activities to guarantee products created by a manufacturing process can eventually
meet customer requirements and realize returns on investment. Supply chains have advanced
in the last two decades with improved efficiency, agility and accuracy. The recent
advancement of Internet technology has brought more powerful support to improving
supply chain performance. In this context, e-supply chain management becomes a new term
that distinguishes itself by net-centric and real-time features from traditional supply chain
management.
Enterprise Resource Planning: Enterprise resource planning (ERP) is an enterprise-wide
information system designed to coordinate all the resources, information, and activities
needed to complete business processes such as order fulfillment or billing.
Environmental Issues: Todays production managers are concerned more and more with
pollution control and waste disposal which are key issues in protection of environment and
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social responsibility. There is increasing emphasis on reducing waste, recycling waste, using
less-toxic chemicals and using biodegradable materials for packaging.
Corporate Downsizing (Or right Sizing): Downsizing or right sizing has been forced on
firms to shed their obesity. This has become necessary due to competition, lowering
productivity, need for improved profit and for higher dividend payments to shareholders.
Supply Chain Management: Management of supply chain from suppliers to final
customers reduces the cost of transportation, warehousing and distribution throughout the
supply chain.
Q: 2).
What is the difference in strategy in developing an initial layout for a
new facility as compared to the strategy in improving the layout of an existing
facility?
Answer:
The difference in strategy in developing an initial layout for a new facility as compared to the
strategy in improving the layout of an existing facility depends on the production and
logistics process and products you can apply for.
New facility:
collect all the data of the external environment to the facility
study the physical flows in and out to the facility
analyze the max capacity of the production process, and avoid bottlenecks
make it simple and efficient, with an appropriate layout between production area,
warehouse and "indirect people office" supporting the production : this people needs
to be co-located closed to the production area to support it quickly
simulate and model the possible solutions with a computer based program before
implementing
Revised
Take into account all the existing constraints in terms of
physical structure and building
health and safety issues to be respected
redesign the material flow streamlining it with a lean approach
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 test a pilot
implement totally
Of course, you can also consider what is suggested for new facility.
General Factors influencing Layout of Plants
Industrial plants have special requirements. It is not only the production process, which is
important, but also the supporting facilities that play a vital role in smooth operation of the
plant. Various factors, which influence the layout of a plant, are:
Operational requirements
Size of operations
Safety aspects
Technology aspects
Systems design
Systems arrangement
Locational aspects
Governmental regulations
Planning the layout of a new plant:
Layout decisions have long term consequences on cost and companies ability to serve the
customers. Its optimal goal is to maximize the profit by arrangement of all the plant facilities
to the best advantage of total manufacturing of the product. The following are the major
objectives of layout:
Providing enough production capacity
Reducing material handling costs
Easy supervisions
Improvement in productivity
Efficient utilization labor
Increase in morale of the employees
Reducing accidents and hazards to personnel
Reducing congestion
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 Utilizing the space efficiently and effectively

Facilitate the organizational structure
Improvements in existing layout
The improvements of layout in existing facility has the important role in the sense that A
good plant layout involves not only the designing and installing of the layout for the first
time but also revision of existing layout, in addition The best layout becomes obsolete over a
period of time. The following reasons can push plant managers to undertake new strategies
for facility layout revisions:

A. Expansion
It is a natural feature of any industrial establishment. A plant may expand in:
Increase in the output of the existing layout
Introduction of a new product diversification of the lines of activity
B. Technological development
Replacement of labour by machines
Developments in fuel and energy
Developments in process
Developments in materials
Improvements in product design
Advancements in information technology
C. Improvement in the layout
Layout needs to be reviewed and revised to correct any deficiencies.
Q: 3).
Discuss the various factors to be considered to decide the location of a
cement plant? How do the factors differ in case of a nuclear plant?
Answer:
Location of plant is a very important issue as it has direct impact on the operating cost of the
plant. An industrial plant uses raw materials for producing the product. It also uses various
spares and consumables for the maintenance of the plant & machinery. Plants also need
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skilled manpower for its operations. Availability of these resources and their cost differs
from one location to another and has a direct effect on the operational cost of the plant. It
has been observed that a plant location, which seems to be very attractive initially from
various points of view, become a constraint on further growth of the plant. Location of the
plants has far reaching effects on its future. There are many important considerations that
are to be examined and studied thoroughly before deciding on the most suited location.
For example, a plant may be located in an area which may be earthquake prone. At the time
of earthquake, the foundation and the building of the plant may develop cracks and may
need heavy repair costs. The frequency and severity of the earthquake may even force the
management to think of even shifting the plant to another location.
Factors to be considered in Location planning of Plants
There are various factors, which influence the location of a plant. These factors are classified
under various categories, such as: Technical, Economical, Commercial, Social, Political and
Government policies
Technical factors
Technical considerations relating to the location of a plant may include the following:
Vibrations, Climate, Floods and Soil condition.
Vibrations: Nature of the plant to be installed has an influence on its location. A factory
making precision equipment is very sensitive to vibrations. Vibrations can be generated due
to occurrence of earthquake or from a nearby plant using heavy machineries or hydraulic
presses, crushing units or grinding units. It is necessary to study all the aspects that can
generate vibrations as well as their intensity.
Climate: Climatic conditions of that area is the next important aspect to be considered. For
certain products, extreme temperatures, both hot and cold, are harmful. It is better to avoid
installation of plants manufacturing inflammable products in the regions, where extreme
high temperature prevails such as in middle east countries.
Floods: It is better not to install a plant in a region where frequent floods are encountered.
Floods adversely affects the transportation of incoming raw materials and dispatch of the
outgoing finished goods.
Soil condition: Some of the plants using heavy machines have suffered serious breakdown
and maintenance problems due to poor soil condition at the location of the plant. In some
cases, the foundation of the heavy machines have sunk in the ground creating serious
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problems of alignment of machine parts and resulted in serious maintenance problems

incurring heavy cost of repairs.
Economic Factors
Factors that affect the installation cost and operating cost of the plant are to be examined
carefully. Cost of land is normally very high in an industrial area. But if a plant is located in
remote area, distance from the plant from the source of raw materials or from the market for
the finished products becomes very long. Lot of money has to be spent for movement of
raw materials to the plant or for moving the products to the market. Apart from this, lot of
time and effort are spent in transportation of the materials. Economic factors that need to
be considered are: Availability of power and water, Quick access to raw material source,
Quick access to the market, Manpower and Total cost
Commercial Factors
Location of a plant is generally influenced by many commercial factors such as:
Location of other industrial units installed in the region
Availability of services from expert contractors
Availability of competent repairs facilities in the vicinity of the plant
It is a great advantage if the main machinery manufacturer has his office nearby. Banking
facilities, airport and seaport should be closer to the plant. Lots of materials are required at
very short notice for urgent repairs and maintenance of the plant and machinery. Too long a
distance between the plant and the airport/ seaport is not desirable. Iris advantageous to
have the location of the plant in or near a commercially developed area well connected by
road, sea and air.
Social Factors
Availability of good housing complexes, recreation facilities, school and medical facilities
facilitate the living of the people. It is essential to fulfill the basic requirements of the people.
Good quality of people could be attracted if their basic needs are fulfilled.
A plant producing high level of air and noise pollution disturb the nearby environment and
people living in adjoining areas. At the same time, a plant which does not create such
problems to the society, if located nearby creates more job opportunities to the local
population.

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Political Factors
Besides economic, technical and social factors, political factors are equally important for
deciding the location of a plant. Various parts of the world are facing militancy in one form
or the other, adversely affecting peace in the region and influencing every walk of life. Even
business is not left untouched by militancy. Political instability or disturbances in a country
can ruin the smooth operation of a plant and hamper its future growth.
Government Policies
For development of a backward area, various governments offer many attractive concessions
and benefits to industrial entrepreneurs to set up their plants. These benefits or concessions
are so attractive that they influence the decision about the location of a plant. For example,
the government can give land at a very low price, assure an uninterrupted and adequate
power supply and water supply, construct a very good road network and give tax rebates for
a period of five or ten years. In view of such benefits, various investors are attracted to
invest in the area by setting up the plants as the returns on the investments are very high.
CONCLUSION
There are certain factors that influence the cement industry. The factors include:
Economic scenario Phases of growth in the economy are positively linked to
cement company growth.
Cost structure and competitiveness There isnt much that cement companies can
do regarding cost structure because the margins are less to begin with. Cost advantages
are usually due to companies having access to a cheaper power source, a quality
limestone reserve, or being close to bigger markets.
Legal, regulatory, and environmental scenario The cement industry is affected by
regulatory norms. This is prominent in developed countries where environmental
issues are more stringent. This adds to the companies costs.
Technological advancement A disruptive innovation can give the innovating
company an advantage. For example, when companies moved from the wet
manufacturing process to the dry manufacturing process, there was a cost savings of
5%10% of the overall cost structure.
Geographic advantages Its an advantage for companies to be near limestone
mines or waterways. Ease of transportation is an advantage.
These factors differ in case of a nuclear plant as shown in this table:
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Factors
Marketing Area
Raw Material Supply
Transport Facilities
Availability of Labor
Availability of Utilities
Availability of Suitable Land
Environmental Impact
Local Community Considerations
Climate
Political Strategic Considerations

Cement plant
Very important
Very important
Very important
Very important
Very important
Important
Critical
Critical
Critical
Less critical

Nuclear plant
Less important
Less important
Very important
Less important
Less important
Very important
Highly critical
Highly critical
Highly critical
Highly critical

Q: 4).
Write short notes on: (a) Capacity requirement plans (b) Rough cut
capacity plans (c) Resource requirement plans
Answer:
(a) Capacity Requirement Plans:
Forecast for demand of the product is the base for estimating the short term workload on
the facility. Companies make plans for a period of about one year and workout the expected
output of different products or services based on the forecast. The plans thus generated are
compared with the existing capacity. It is observed that one of the products have high
demand in one season and low demand in another.
For example: Woolen clothes would have high demand in winter season whereas in summer
it could have low or no demand. Another product could have a uniform demand throughout
the year. For example, milk and some of the food items have uniform demand throughout
the year.
Capacity Requirement plans (CRP) looks into the individual operations by using the routine
information. Each operation is valued in standard hours, which results in total hours
required per work center per time period. Final adjustments are then made to the
manufacturing plan at the operation level to obtain a balanced workload for each work
center.
Capacity requirements plan is a time-phased display of present and future load (capacity
required) on all resources based on the planned and released supply authorizations (i.e.,
orders) and the planned capacity (capacity available) of these resources over a span of time.
See: load profile.

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(b) Rough Cut Capacity Plans

Rough cut capacity plans (RCCP) serves the Master Production Schedule (MPS) for one or
two years. RCCP is used to check the balance of scheduled items, normally finished goods,
and time period. RCCP looks at the workload for each critical area by time period. If this
exercise is not carried out, it would result in an out of balance MPS, which would cause
overloads and waiting time in manufacturing. Rebalancing the workload at the last minute to
get the material supply in line with the MPS would be a very difficult job.
Rough-Cut Capacity Planning (sometimes called resource requirements planning) is done in
conjunction with the tentative master production schedule to test its feasibility in terms of
capacity before the MPS is finally settled. This step ensures that a proposed MPS does not
inadvertently overload any key department, work center, or machine, making the MPS
unworkable. Although the check can apply to all work centers, it is typically applied only to
the critical ones that are most likely to be bottlenecks. It is a quick and inexpensive way to
find and correct gross discrepancies between the capacity requirements (in direct labor
hours, for example) of the MPS and available capacity.
Rough-cut capacity planning (RCCP) is the process of converting the master production
schedule into requirements for key resources, often including labor, machinery, warehouse
space, suppliers; capabilities, and, in some cases, money. Comparison to available or
demonstrated capacity is usually done for each key resource. This comparison assists the
master scheduler in establishing a feasible master production schedule. Three approaches to
performing RCCP are the bill of labor (resources, capacity) approach, the capacity planning
using overall factors approach, and the resource profile approach. See: bill of resources,
capacity planning, capacity planning using overall factors, product load profile.
(c) Resource Requirement Planning
Resource Requirement Planning (RRP) serves the production plan and covers a number of
years. Longer term capacity requirements are difficult to determine due to the uncertainties
in the future market demand and technologies. RRP is interactive. Capacity requirements are
dependent on the marketing plans and forecasts.
Q: 5).
Actual demand differs from forecasted demand. How to adjust the
aggregate plan to meet this situation?
Answer:
Forecasting is a technique to plan the future activities and is based on the past data. The past
data is systematically put in a predetermined way to prepare estimates for the future.
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Forecasting is a quantitative technique to project the demand for a product or service. Based
on the demand for the main product, other activities are planned, executed and controlled.
The past data is available for the existing products and services.
On the other hand, Actual Demand in the form of booked customer orders and interplant
orders. Actual demand is netted against forecasted demand for a given time period to
generate requirements for material planning systems.
Aggregate Planning Strategies in Response to Demand
Strategy 1.Vary the number of Productive employees in Response to Varying output
Requirements (also known as Chase 1 plan).
Here, first the average productivity per employee is first calculated which determines the
number of employees needed to meet the monthly required output demand. The employees
are laid off when the output demand falls. As a result there is always Hiring and laying off
employees.
Strategy 2: Maintain a Constant Work Force Size but Vary the Utilization of the Work
Force (also known as Level # 1)
Suppose, for example, we chose the strategy of employing 70 workers per month throughout
the year. On an average, this work force would be capable of producing 700 wagons each
day. During the lean months (January, February, March, July, October, November,
December), the work force would be scheduled to produce only the amount forecasted,
resulting in some idle working hours. During high-demand months (April, May, June,
August, September), overtime operations would be needed to meet demand. The work force
would therefore be intensely utilized during some months and underutilized in other
months.
Strategy 3: Vary the Size of Inventory in Response to Varying Demand (also known
as Chase #2 plan)
Finished goods inventories in make-to-stock companies can be used as a cushion against
fluctuating demand. A fixed number of employees, selected so that little or no overtime or
idle time is incurred, can be maintained throughout the planning horizon. Producing at a
constant rate, output will exceed demand during slack demand periods, and finished goods
inventories will accumulate. During peak periods, when demand is greater than capacity, the
demand can be supplied from inventory. This planning strategy results in fluctuating
inventory levels throughout the planning horizon.

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Part B
Q: 1).
Why is materials planning needed? Discuss the various aspects of
materials planning. Which other departments contribute to materials planning
and in what way?
Answer:
Need for Materials Planning
Materials planning are not limited to the working out of the materials requirements for
production. There are many other aspects related to the materials, which form part of
materials planning. Materials planning are very essential in the operations management for
various reasons, some of them are as:
Materials planning forces the planner to determine the total material required during the
year, to examine its required specifications and fixing of acceptable limits of the materials.
Materials planning help in development of procedures and systems and also in improving the
existing procedures and systems.
Materials planning focus on control parameters and helps in fixing them or revising them to
suit the changing situation. These control parameters include the levels for safety stock,
minimum and maximum stock level, reorder level, EOQ and inventory turnover ratio.
Classification of spare parts and consumables is an important part of planning. A typical
classification for inventory items could be protected items, stock items, project items,
obsolete items etc.
Fixing of norms for shelf life is an important aspect of materials planning and helps in
avoiding spoilage of materials with limited shelf life.
Materials planning help in arranging items of correct specifications, at the right time and in
the right quantity.
It helps in adhering to production schedules, market commitments and improves the image
of the organization.

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Aspects of Material Planning

Materials Requirement Planning (MRP)
MRP is a system of planning and scheduling the time phased materials requirements for
production operations. It also provides information such as due dates for components that
are subsequently used for shop floor control.
MRP in continuous Process Production System
Raw materials are most important to support an uninterrupted production process. Several
raw materials might be required to produce the ultimate product.
MRP in an Assembly Line Production System
In variance to the process plant, to produce a machine or its components in an assembly
line, different materials are required at different stages of the assembly line. Items required
are either manufactured or bought out and are assembled in a predetermined sequence of
operations to produce the final product.
Master Production Schedule
The purpose of master production scheduling is to meet the demand for individual products
in the product group. This more detailed level of planning disaggregates the product groups
into individual products and indicates when they will be produced.
Bills of Materials (BOM)
A list of all items to produce the machine, indicating the quantity of each item is called the
bill of materials. A separate bill of materials is prepared for each product. The BOM
identifies how each end product is manufactured, specifying all subcomponent items, their
sequence of buildup, their quantity in each finished unit, and the work centers performing
the buildup sequence.
Inventory Status File
A computerized system provides information such as inventory on hand, lead time, lot size,
and scheduled receipts etc.

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Other Departments involved in materials planning are:

Productions Department:
The production and planning department will set standards and targets for each section of
the production process. The quantity and quality of products coming off a production line
will be closely monitored. In businesses focusing on lean production, quality will be
monitored by all employees at every stage of production, rather than at the end as is the case
for businesses using a quality control approach.
Purchasing/ Procurement Department:
Procurement is the acquisition of appropriate goods and/or services at the best possible
total cost of ownership to meet the needs of the purchaser in terms of quality and quantity,
time, and location. Corporations and public bodies often define processes intended to
promote fair and open competition for their business while minimizing exposure to fraud
and collusion.
Purchasing managers/directors, and procurement managers/directors guide the
organizations acquisition procedures and standards. Most organizations use a three-way
check as the foundation of their purchasing programs. This involves three departments in
the organization completing separate parts of the acquisition process. The three departments
do not all report to the same senior manager to prevent unethical practices and lend
credibility to the process. These departments can be purchasing, receiving; and accounts
payable or engineering, purchasing and accounts payable; or a plant manager, purchasing and
accounts payable. The purchasing department will be responsible for providing the materials,
components and equipment required to keep the production process running smoothly.
The stores department:
The stores department will be responsible for stocking all the necessary tools, spares, raw
materials and equipment required to service and the manufacturing process. Where sourcing
is unreliable, buffer stocks will need to be kept and the use of computerized stock control
systems helps keep stocks at a minimal but necessary level for production to continue
unhindered.
The design and technical support department
The design and technical support department will be responsible for researching new
products or modifications to existing ones, estimating costs for producing in different
quantities and by using different methods. It will also be responsible for the design and
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testing of new product processes and product types, together with the development of
prototypes through to the final product.
The works department
The works department will be concerned with the manufacture of products. This will include
the maintenance of the production line and other necessary repairs. The works department
may also have responsibility for quality control and inspection. A key aspect of modern
production is ensuring quality. The term quality means fitness for purpose i.e. a product,
process, or service should do exactly what is expected of it.
Q: 2).
What do you understand by the term corrective maintenance? In what
way is corrective maintenance different from preventive maintenance and
predictive maintenance? Support your answer with examples.
Answer:
Corrective Maintenance
Sometimes, certain problems are actually noticed about the condition of the machine. The
machine might be operating in a condition that could cause damage to the machine if
continued to operate. Therefore, the machine is to be stopped without delay to correct the
situation.
Differences between corrective, preventive and predictive maintenances:
Corrective Maintenance
When certain problems are
actually noticed about the
condition of the machine, the
machine is to be stopped without
delay to correct the situation.

Preventive Maintenance
The very title of preventive
maintenance is indicative of
the concept behind it, i.e.,
to prevent the breakdown
of the machine by
checking it once a day, a
month, in three month or
in a year as required.
The problem has already noticed. It is based on checklists

Its measurements do not have a

fixed frequency.

Schedule of checks is
decided based on past

Predictive Maintenance
Various parameters are
identified, which could
reflect the condition of the
machine, as such, new
equipment or machines
were developed to measure
the parameters with ease,
quickness and accuracy.
It is based on the
measurement of certain
parameters representing
some characteristics.
Its measurements do not
have a fixed frequency. The
Page | 19

experience.

frequency of checks is
adjusted based on the
condition of the machine.
It is observed on detailed
Checks are carried out
Measurement of
inspection on the machine to
based on visual, touch and parameters is done with the
identify the where the problem is sound conditions.
help of special equipment
coming from.
developed for the purpose.
Its checks involve stoppage of
Its checks involve
Its measurements are
the machines at times.
stoppage of the
carried out on line while
machines at times.
the machines are in
operation.
Example: If an abnormal sound Example: To maintain the Example: Velocity &
is coming from a water pump, it machine in perfect
acceleration are measured
is necessary to identify the part
working order, some parts for study of the type &
of the pump from which the
are checked in each shift;
severity of vibrations.
abnormal sound is coming. It is
others might be checked
observed on detailed inspection
once a day, a month, in
on the pump that its bearing is
three month or in a year as
damaged and the problem of
required.
abnormal sound is solved.
Q: 3).
What do you understand by Total quality Management? Discuss the
objectives of total quality management. In what way the approach to Total
Quality Management has changed over the last ten years?
Answer:
Total quality management (TQM) is an integrated organizational effort designed to
improve quality at every level. TQM is about meeting quality expectations as defined by the
customer; this is called customer-defined quality. However, defining quality is not as easy
as it may seem, because different people have different ideas of what constitutes high quality.
Today, there is no single universal definition of quality. Some people view quality as
performance to standards. Others view it as meeting the customers needs or satisfying
the customer. However, there are some criterions used in more common definitions of
quality, such as:

Conformance to specifications
Fitness for use
Value for price paid
Page | 20

Having support services

Psychological criteria

The main objectives of TQM are:

It serves as a management approach to long-term success through customer
satisfaction.
It enables all members of an organization to participate in improving processes,
products, services and the culture in which they work.
It helps the company focus on its customers.
It provides the concept of continuous improvements, such as, plandostudyact
(PDSA) cycle.
TQM in the past ten years or so
During the past ten years many thousands of Australian organisations have enthusiastically
adopted quality management in one form or another however, notwithstanding this positive
progress, quality management has not been widely accepted in the world and, where it has, is
most likely a result of reactive proprietor, stakeholder or customer coercion i.e. not
proactively self-initiated and led by internal management as a direct result of their own
initiative.
The overwhelming evidence shows that quality management, even when only partially
applied, offers a vital tool for organisations to improve their organisational focus,
performance, competitiveness, and return on investment.
Market driven organisations have favoured customer-focused ISO Quality Assurance,
which has been typically limited to product creation and delivery activities i.e.
product related operational areas, thereby not fulfilling stakeholder expectations for
whole organisation business performance improvement.
Stakeholder driven organisations have favoured stakeholder focused TQM, which has
been typically limited to stakeholder satisfying management activities i.e. strategic
and infrastructure areas, thereby not fulfilling customer expectations for product,
service and performance improvement.
Continuous improvement focused organisations have favoured integrated holistic
ISO/TQM quality management intended to fulfil the expectations of all participants
and beneficiaries of organisational activity.

Page | 21

Case study
Paradise Land Management Company
Paradise Land Management owns and operates hotels and apartment complexes near a
major metropolitan area. They want to expand operations in the near future, the goal being
to increase net earnings before taxes. Two alternative expansion opportunities are under
considerations: the Densmore complex and the High gate project. Both projects involve the
purchase of land on which apartment building would be constructed and operated.
The site for the Densmore complex is situated in a respectable, quite, sparsely populated
residential neighborhood. Land for the 70-unit complex can be purchased for $60,000.
Building costs are estimated at $1,680,000. Annual maintenance costs would amount to
$30,000. Apartment units would rent for $410 per month. Paradise is also considering
constructing a recreation facility nearby. It would cost $100,000 and would service both
Dens more residents and the residents of the company owned Paradise west, the only
existing apartment complex in the neighborhood. Paradise west, with 120 units renting for
$290 per month, has had an average occupancy rate of 84% for the past three years. The
addition of Densmore and the recreation facility are expected to increase Paradise Wests
occupancy rate to 90% (probability 0.6) or 95% (probability 0.4). Densmores occupancy rate
is expected to be 90% (probability 0.5), 85% (probability 0.3), or 80% (probability 0.2).
The high gate project calls for 400 units to be constructed on land costing $220,000 in a high
density population neighborhood with many competing apartments. Building costs would be
$4,200,000. Rental revenue per unit would be $240 per month; annual operating costs would
be $150,000. High gates occupancy rate is expected to be 90% (probability 0.2), 80%
(probability 0.5), or 70% (probability 0.3).
Q: 1).

What factors should be analyzed in making this capacity decision?

Page | 22

Answer:
Paradise land management
Expend operation with goal of increasing EBT
Alternative expansion opportunities

Densmore complex
highgate complex

Densmore
No of units
70
Construction cost
$1,680,000
Rent per unit
$410 per month
Land cost
$60,000
Annual maintained cost
$30,000
Operation cost
Occupancy rate
90% with p=0.5
80% with p= 0.3
70% with p= 0.2
PARADIZE WEST
# OF UNITS
120
REN/UNITS
$290 PER MONTHS
OCUPANCE RATE FOR 84%
THE PAST 3YRS
RECREATION FACILITY
$100,000

Highgate
400
$4,200,000
$240 per month
$220,000
$150,000
90% with p = 0.2
80% with p = 0.5
70% with p = 0.3

Factors that should be analyses in making this capacity decision include

1) Defining a realistic cost unit that represents a suitable measure of service provided
since, here we have service industry a composite cost unit of occupied room night
seams an appropriate unit costing.
2) Number of rooms available per night, thats designed capacity.
3) Percentage occupancy achieved (actual capacity).
4) Room servicing cost incurred (actual cost per room)
Also, we need to calculate
1) The number of occupied room night = number of rooms available *30 nights
*expect percentage of occupancy rate.
Page | 23

2) The room servicing cost per occupied room night = Total room servicing costs/ #of
occupied room night.
3) Another important investment factor to be considered in this making capacity
decisions is Roi = EBIT/TOTALIVESTMENT.
4) Expected occupancy rate = 0.9*0.2 +0.8*0.5 +0.7*0.3. = 0.79 = 79%,
Dens more Complex,: Is the best factor to expand the operation near future, because the goal being to
increase net earnings before tax.
Is situated in a respectable, quite, sparsely populated residential neighborhood.
Rent per month > High- gate
Land cost < High-gate
Operation cost is null

Page | 24

Part C
Q: 1).
Which of the following methods best considers intangible costs related
to a location decision?
a)
b)
c)
d)
e)

weighted method
locational break-even analysis ()
transportation method
assignment method
none of the above

Q: 2).
What is the major difference in focus between location decisions in the
service sector and in the manufacturing sector?
a)
b)

there is no difference in focus

the focus in manufacturing is revenue maximization, while the focus in service
is cost minimization
the focus in service is revenue maximization, while the focus in
manufacturing is cost minimization ()
the focus in manufacturing is on raw materials, while the focus in service is on
labour

c)
d)
Q: 3).

Service / retail / professional locational analysis typically has a:

a)
b)
c)
d)

cost focus
revenue focus ()
labour focus
environmental focus

Q: 4).

Efficiency is calculated as:

a)
b)
c)
d)

Efficiency= Standard time * Actual time

Efficiency= Standard time/ Actual time ()
Efficiency= Actual time/ standard time
None of the above

Q: 5).

The factors involved in location decisions include

a)
b)
c)
d)
e)

foreign exchange
attitudes
labour productivity
all of the above ()
none of the above
Page | 25

Q: 6).
a)
b)
c)
d)
Q: 7).
a)
b)
Q: 8).
a)
b)
c)
d)
Q: 9).
a)
b)
c)
d)
e)
Q: 10).
a)
b)
c)

Industrial locational analysis typically has a

cost focus ()
revenue focus
labour focus
environmental focus
Hotel chain find regression analysis useful in site location
True
False ()
The telemarketing industry seeks locations that have
good electronic movement of data
low cost labour
adequate availability of labour
all of the above ()
Factors affecting location decisions include
proximity to markets, proximity to suppliers, proximity to athletic facilities
site costs, transpotation availability, labour availability
average age of labour force, labour costs, number of females in college
utility costs, zoning, altitude of city
all of the above ()
An aggregate plan for a manufacturing firm includes consideration of:
production rates
work-force levels ()
inventory holdings

Q: 11). A service firm's aggregate plan links the firm's strategic goals and
objectives with detailed operational plans called:
a)
b)
c)
d)

production plan
staffing plan
work-force schedule ()
none of the above

Page | 26

Q: 12).
a)
b)
c)
d)

Utilization is calculated as:

Utilization = Actual hours*Scheduled available hours
Utilization = Actual hours/ Scheduled available hours ()
Utilization = Actual hours+Scheduled available hours
None of the above

Q: 13). Which of the following statements does NOT apply to a production

plan?
a)
b)
c)
d)
Q: 14).
a)
b)
c)
d)

plans are consistent with company's strategic goals and objectives

enables the assessment of financial and physical resource needs without
excessive detail
serves as a bridge between the strategic and operational plans ()
provides a view of detailed work-force schedules
The time horizon for an aggregate plan is typically:
0 - 3 months
3 - 18 months ()
24 - 60 months
none of the above

Q: 15). A for-profit service may expect to encounter which of the following

sequence of plans?
a)
b)
c)
d)
Q: 16).
a)
b)
c)
d)

business plan; staffing plan; work-force schedule

business plan; production plan; work-force schedule
financial plan; staffing plan; master production schedule ()
Annual plan; production plan; master production schedule
The operations area input to the aggregate plan includes:
demand forecasts ()
cost data
work-force capacities
product design changes

Page | 27

Q: 17).
a)
b)
c)
d)

Aggressive alternatives for coping with demand requirements include:

anticipation inventory
creative pricing
employee hiring and layoffs ()
use of subcontractors

Q: 18). A reactive strategy that is sometimes called the capacity strategy may be
characterized as:
a)
b)
c)
d)
Q: 19).
a)
b)
c)
d)

Chase #1: vary work-force level to match demand

Chase #2: vary output rate to match demand
Level #1: constant work-force level ()
Level #2: constant output rate
Planned capapcity is:
Planned capacity = Demonstrated capacity * Efficiency * Utilization factor
Planned capacity= Designed capacity * Efficiency / Utilization factor
()
Planned capacity = Designed capacity * Efficiency * Utilization factor
None of the above

Q: 20). The aggregate planning strategy that is most likely to impact the
productivity of manufacturing workers, adversely, is:
a)
b)
c)
d)

hiring of temporary workers

use of overtime
layoff of workers
building anticipation inventory ()

Q: 21). A linear programming model CANNOT be used when which of the

following are true?
a)
b)
c)
d)

an optimal production plan is desired

the values of decision variables are fractional
a set of linear constraints may be defined
cross product relationships exist between two or more decision
variables ()

Page | 28

Q: 22).
a)
b)
c)
d)

Basic element of operations Management is:

Customer demand
Operating system/Process ()
Process capacity
All of the above

Q: 23). The transportation method may be used to determine the costs of

alternative strategies for anticipation inventory when which of the following
data are available?
a)
b)
c)
d)

work-force capacity per planning period

aggregate demand per planning period
beginning inventory
all of the above ()

Q: 24).
Which of the following statements are true about anticipation
inventory?
a)
b)
c)
d)

inventory increases during periods of light demand

use of anticipation inventory is a reactive alternative to arrive at an acceptable
aggregate plan
increase in anticipation inventory leads to increases in pipeline inventory
both a and b ()

Q: 25). When following a utilization strategy, which alternative relies on

external sources of production?
a)
b)
c)
d)

overtime/undertime
Subcontracting ()
back orders
stock outs

Q: 26). A major department store initiates a business plan that gets translated
into an operational plan called a _______________.
a)
b)
c)
d)

production plan
staffing plan
master production schedule ()
work-force schedule

Page | 29

Q: 27). An appliance manufacturer initiates a business plan that gets translated

into an operational plan called a _______________.
a)
b)
c)
d)
Q: 28).
a)
b)
c)
d)
Q: 29).
a)
b)
c)
d)
Q: 30).
a)
b)
c)
d)

production plan
staffing plan
master production schedule
work-force schedule ()
Which one is not a factor for make or buy decisions:
Cost
Quality
Labor
Plant location

()

Which one is correct:

Designed capacity > Planned capacity > Demonstrated capacity
Designed capacity > Demonstrated capacity > Planned capacity
Designed capacity = Demonstrated capacity > Planned capacity ()
All of the above
Plant Productivity is:
Productivity = Inputs/Outputs
Productivity = Inputs*Outputs
Productivity = Outputs//Inputs ()
None of the above

Page | 30