UNIVERSITY OF MALAYA EXAMINATION FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION ACADEMIC SESSION 2016/2017: SEMESTER 1 (CMGB6104: OPERATIONS MANAGEMENT DEC 2016/JAN 2017 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 4 questions on 5 printed pages)CMGB6104 SECTION A Question 1 For many firms, the supply chain is likely to be the operational area that impacts the environment, which could provide opportunities for improvement. With consumers becoming increasingly aware of issues around environment sustainability, many major food and beverages operators have found themselves under the critical eye of government policies and customer pressure. Frito-Lay, the multi-billion-dollar snack food giant for instance, has initiated ambitious plans to produce environmentally friendly snacks. The firm becomes an aggressive “green” manufacturer with major initiatives in resources reduction and sustainability. a) Suggest how the firm could integrate the environmental perspective into the material sourcing and selection process, manufacturing, logistics activities and end- of-life phase. (20 marks) b) Why are these environment sustainability practices important to Frito-Lay? (10 marks) [Total: 30 marks] Question 2 Dell Computer, with close supplier relationships, encourages suppliers to focus on their individual technological capabilities to sustain their market. Research and development costs are too high and technological changes are too rapid for any one company to sustain leadership in every component. Suppliers are also pressed to drive down lead time, lot sizes and inventories. Dell, in turn keeps its research customer-focused and leverages that research to help itself and suppliers. Dell also construct special web pages for suppliers, allowing them to view orders for materials they supplied as well as current levels of inventory at Dell. With the collaboration, the company not only helps the suppliers to keep supply chain moving smoothly, yet they could also offer the latest ‘options, can built-to-order and can achieve rapid throughput. The payoff is a competitive advantage, growing market share, and low capital investment. On the distribution side, Dell uses direct sales, primarily through Internet to increase revenues by offering a virtually unlimited variety of desktops, notebooks and enterprise products. 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 205CMGB6104 consistent with their purchase history and current needs. Assembly begins immediately after receipt of customer order. Competing firms have previously assembled products filing the distribution channels before a product reaches the customer. Dell, in contrast introduces a new product to customers over the Internet as soon as the first of that model is ready. In an industry where products have life cycles measured in months, Dell enjoys a 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 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. Postponement, component modularity and tight scheduling allow low inventory and support mass customization. Manufacturers who sell via distributors and retailers find postponement virtually impossible. Therefore, traditional manufacturers are often stuck with product configurations that are not selling while simultaneously being out of the configurations that are selling. 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 Dell used its direct sales and make-to-order model to develop an exceptional supply chain? (10 marks) b) How does Dell's supply chain deal with the bullwhip effect? (10 marks) ¢) In your opinion, why do you think the company decide not to employ vertical integration practice? (5 marks) 4d) Explain how postponement and modularity help support Dell's mass customization. (10 marks) [Total: 35 marks] 3/5CMGB6104 SECTION B Question 3 Linda, is a demand planner for Cheeznaz Snack Food is working away at her desk. In two days’ time, she will need to provide top management with a forecast of next year demand, broken down by month. 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 2014 sales figure shown in the following table and is trying to decide on several forecasting methods Month Unit Sales January 52 February 61 March 73 April 79 May 66 June 51 Ju 47 August a4 September 30, October 55, November iz [December 125 a) Forecast sales for 2014 using naive method. (5 marks) b) Forecast sales for 2014 using exponential smoothing (a=0.8 forecast time 1 = 50) (12 marks) ©) Forecast sales for 2014 using four month moving average. (8 marks) 4) Using MAD value, determine which forecasting model is the best. (10 marks) [Total: 35 marks} 415Question 4 CMGB6104 Ramli operates a small business of dry fish. Fish purchased from local sources along the sea are processed at the facility and sold to customers for distribution. Ramli uses 700 pounds per month of the dried fish. The raw materials can be purchased either from ‘Supplier A of Supplier B. Their price lists are shown in the table. Ordering cost is RMS0, and annual holding cost per pound is RM 5. Which vendor should be selected and what order quantity is best if the company wants to minimize total costs? Supplier A ‘Supplier B Quantity PricelLB Quantity PriceiLB 1-499 RM16.00 1-399 RM16.10 500-999 RM15.50 400-799 RM15.60 1,000+ RM 15.00 800+ RM15.10 (35 marks) FORMULA 1. Economic Order Quantity = /2P5/, 2. Annual Setup Cost = 2s 3. Annual Holding Cost = ou 4. Average inventory level = Maximum inventory level 2 5. Reorder point =dxL 8. Expected number of orders = N2 9. _ Length of production cycle = 2 10. EF=ES+t 11. LS=LF-¢ 12. S=LS-ES or S=LF-EF 13. Cycle time = Production time available per day Units required per day 14, Minimum no. of workstations = 57 /2sktimes eycletime 15. Efficiency = Z task times (actual number of workstations) X (largest assigned cycle time) END 5/5