UNIVERSITY OF MALAYA EXAMINATION FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION ACADEMIC SESSION 2015/2016: SEMESTER 1 CMGB6104: OPERATIONS MANAGEMENT DEC 2015/JAN 2016 TIME: 2 HOURS INSTRUCTIONS TO CANDIDATES: ANSWER ALL QUESTIONS FOR SECTION A AND ONE (1) QUESTION FOR SECTION B. Diagram/illustration must be drawn clearly. (This question paper consists of questions on 5 printed pages)cMGB6104 SECTION A Question 1 Dahlia Marine, one of the Kenya's 10 largest power boat manufacturers achieves its mission — providing luxury performance boats to customers worldwide using the strategy of differentiation. The company differentiates its products through constant innovation, unique features and high quality. Increasing sales suggest that the strategy is working, a. How would each of the 10 operations management strategic decisions support the company’s strategy? (20 marks) b. How does these strategic decisions change during a product's life cycle? (10 marks) Question 2 Gorgeous Inc has a close supplier relationship which encourages suppliers to focus on their individual capabilities to sustain their market. Research and development costs are too high and fashion styles are changing rapidly. Suppliers are also pressed to drive down lead time, lot sizes and inventories. Gorgeous Inc, in turn keeps its research customer-focused and leverages that research to help itself and suppliers. The owner of the company, Fatnin has made a move by constructing special web pages for suppliers, allowing them to view orders for materials they supplied as well as current levels of inventory at Gorgeous Inc. With the collaboration, the company not only helps the suppliers to keep supply chain moving smoothly, yet they could also offer the latest fashion rapidly. On the distribution side, Gorgeous Inc. uses direct sales, primarily through Internet to increase revenues by offering a virtually unlimited variety of shirts, blouses, pants, jackets and handbags. Options displayed over the Internet allow the company to attract customers that value choices and latest trends. The customers place order at any time of the day from anywhere in the world. And the price is cheaper since retail stores have additional costs because of their brick and mortar model. The company has also customized web pages that enable large business customers to track past purchases and place orders consistent with their purchase history and current needs. The process of dying the clothes into variety of colours for instance, could begin immediately after receipt of customer order. In an industry where products have short life cycle, Gorgeous Inc. enjoys huge early-to-market advantage. This business model also allows them to enjoy cash flow advantage. Direct sales permit the company to eliminate distributor and retailer margins and increase their own margin. The company collects payment in a 215CMGB6104 matter of days after products are sold, but pay the suppliers according to the traditional billing schedules. Given the low inventory levels, the company is able to operate business with negative working capital as the payment from customers is received before they need to pay the suppliers. What the company has done is build a collaborative supply chain an innovative ordering and production system. The result is what the company likes to refer as value chain — a chain that brings value from supplier to customer while providing competitive advantage. a. How has Gorgeous Inc. used its direct sales and make-to-order model to develop an exceptional supply chain? (15 marks) b. In your opinion, why does the company decide not to employ vertical integration practice? (5 marks) Question 3 Farah operates a small fast food restaurant in Ipoh. Currently, the company are suffering one of the biggest blows to its track record for quality. Customers often complained that their burgers are not freshly prepared. The raw materials used such as patties, frozen French fries and salads had to be discarded as they were not fit for consumption, incurring costs for the business. Farah realizes that she needs to overhaul the business operations in order to survive. She is considering improving the business processes by implementing Just-In-Time (JIT) strategy. Demonstrate how such strategy could be implemented at Farah's fast food restaurant. (15 marks) 3/5CMGB6104 SECTION B Question 4 Sally Kong, a president of King Electronics has two design options for her new line of resolution cathode-ray tubes for CAD workstations. The sales forecast for the cathode- ray tubes is 100,000 units. Design option A has a 90 probability of yielding 59 good cathode-ray tubes per 100 and a .10 probability of yielding 64 good cathode-ray ray tubes per 100. This design will cost RM1, 000,000. Design option B has a .80 probability of yielding 64 good units per 100 and a .20 probability of yielding 59 good units per 100. This design will cost RM1,350,000. Good or bad, each cathode ray tubes will cost RM75. Each good unit will sell for RM150, while bad units are destroyed and have no salvage value. Any disposal costs are ignored in this problem. Using a decision tree, decide which option is the best decision. (35 marks) Question 5 Linda, a demand planner for Cheeznaz Snack Food need to provide top management with a forecast of next year demand. She knows how important an accurate demand forecast is to the supply chain. On the downstream side of the chain, the local stores expect that their shelves are stocked with fresh puffed cheese balls, while on the upstream side Cheenaz's suppliers need the forecast to plan their overall production levels of raw ingredient and packaging materials. Within the Cheeznaz manufacturing, forecast data are needed to plan production. Linda looks at the sales figure for the past 9 years shown in the following table and is trying to decide on several forecasting methods, which include naive method, exponential smoothing (4=0.8 forecast time 1 = 50) and 4-month moving average. Using data given below, forecast for year 2008 to 2016 using the three methods, and decide which method would be suitable. Year Actual demand 2007 110 2008 130 2009 150 2010 170 2011 160 2012 180 2013 140 2014 130 2015 140 (35 marks) 45CMGB6104 FORMULA : 1. Economic Order Quantity = | 2D, 2. Annual Setup Cost = 2s 3. Annual Holding Cost = ou 4, Average inventory level = Maximum inventory level 2 5. Reorder point =dxL 6. Expected number of orders = NG 7. Length of production cycle = 2 8. Fi= Aur Az + Arg +. ten n 9. Fe Fit + 0 (Avs — Fes) to. MAD = y/4i= FU! a n END 5/5