Student nr.

Mock exam
Operations and Supply Chain
Management
25.10.2018

Sample solution

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Task 1: OSCM strategies, product design, investment, legal

forms and accounting (30 points)

1.1. OSCM strategies, product design

a) Separate the terms "operations processes" and "supply chain processes". Give a brief
example of each process. (2 points)

Operations processes: Manufacturing and service processes that convert input goods
(resources) into products
 Example: manufacturing cars

Supply Chain Processes: Processes that transport material and information from and to
manufacturing and service processes through the supply chain.
 Example: logistics processes

b) Name the five phases of the product development process that you learned during the
lecture. (3 points)

Phase 0: Planning
Phase 1: Concept Development
Phase 2: System-level Design
Phase 3: Detail Design
Phase 4: Testing and Refinement
Phase 5: Production Ramp-Up

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1.2. Analysis of Economic efficiency

A plant is bought, used for 3 years and sold again. The following data is known:

 Cost of purchase in t0: 650.000 €

 Units sold in t1, t2, t3: 25.000, 35.000, 7.000
 Retail price per unit: 11 €
 Retail value of the plant in t3: 50.000 €
 Interest rates in t1, t2, t3: 5,5 %; 6 %; 6 %

a) Specify the corresponding payment series (incoming and outgoing payments). (2 points)

Sale of the
Investment Revenues
machine

Time t t0 t3 t1 t2 t3

Payment -650.000€ 50.000€ 275.000€ 385.000€ 77.000€

b) What is the net present value of the investment rounded to the nearest thousand euros? (2
points)

62,07
NPV = 62 T€

c) Is the investment profitable with respect to the result from b)? Explain. (1 point)

1), KW>0
NPV = 62.070 € > 0  execute!

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1.3. External accounting

a) The figure below shows the empty balance sheet of OSCM Ltd. First name the usual
subcategories of the two pages (marked with (a)). (1 point - 0.5 per complete pair of terms)
Balance Sheet

Assets Liabilities

a.1) Long-term Assets Shareholder´s Equity

b) Vehicles and machinery 130.000 Shareholder´s Equity 40.000 € (+2

€ (1 point each) points)

Land & Building 45.000 €

Furniture 13.000 €

Acquired patents 13.000 €

a.2) Current Assets Current Liabilities

b) Bank 12.000 € Liabilities to bank 206.000 €

Accounts receivable 55.000 € Accounts payable 43.000 €

Cash 21.000 €

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b) After an inventory, you receive details about the company. Please classify the items listed
below correctly in the balance sheet. How high is the equity? (6 points)

Item Value Item Value

Vehicles and machinery 130.000 € Liabilities to bank 206.000 €

Bank 12.000 € Acquired patents 13.000 €

Accounts receivable 55.000 € Land & Building 45.000 €

Accounts payable 43.000 € Cash 21.000 €

Furniture 13.000 € Equity ???

1.4. Breakeven analysis

You know the following information:

 Fixed costs: 100 €
 Variable costs: 80 €
 Quantities produced: 400 pc.
 Quantities sold: 400 pc.
 Retail price: 100 €

a) Set up the revenue and cost functions and enter the functions in the diagram below. Also
name the axes (boxes). (3 points)

Revenue function R(x)

R(x) = Price (P)*Quantity (x) = P*x = 100€*400 = 40.000€

Cost function Ctot

Ctot = Cfix + x*Cvar = 100€ + 80€*400 = 32.100€

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Revenue / Costs Revenue function

profit zone

Cost function

Loss zone

Quantity X

b) How is the intersection of the two functions (revenue and cost function) called? (1 point)

Break-Even Point

c) Clearly mark (!) the profit zone and the loss zone in the chart. (1 point)

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1.5. Legal forms

a) Name 4 criteria that are used for the choice of a legal form. (2 points)

Partnership / Corporation
 Administration
 Capital risk (limited/unlimited liability), Taxation
 Auditing and disclosure requirements
 Financing options (creditworthiness)
 Foundation (Form: informal, entry in the commercial register; number of
shareholders, minimum contribution)

b) Name the characteristics of the two company forms “GmbH” and "AG" regarding the
given categories! (2 points)

Category GmbH AG

Minimum contribution 25.000 € 50.000 €

Minimum number of owners >= 2 >= 1

Who runs the company? Managing Director board of directors

Liability of the owner also with

No No
private assets?

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Task 2: Production and service processes (30 points)

2.1. Strategic capacity management

a) A factory has a maximum capacity of 4,000 units per day including overtime and daily
maintenance. At 3,500 units per day, the factory operates at a level where average costs
are minimal. Currently, 3,000 units per day are planned. How high is the capacity
utilization rate? Enter the formula for calculating the value. (1 point)

= 3000/3500 = 85,7%

b) Name and describe the different time horizons in capacity planning. What is the time
horizon for the decision to build a new production hall? (2 points)

Short-term Medium term Long-Term

Period: <1 month
• Daily/weekly planning
process
• Target/actual
comparisons of the
current output
• Example: Planning of
overtime, additional shifts
Period: 1-4 months
• Planning of the next
period (6-18 months)
• Example: New hires,
equipment procurement
Period: >1 year
• Long-term capacity
and plant planning
• Integration of
management
decisions
• Example: build a new
production hall

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c) There are two alternatives for the decision to increase capacity. The first alternative is
estimated at 1.000.000€ cost and a profit of 550.000€/450.000€ over the next 3 years
with strong/low growth, the second alternative at 800.000€ cost and a profit of
500.000€/400.000€ over the next 3 years with strong/low growth. Which alternative would
you choose? What is the expected profit? Assume an interest rate of 10%. The
probability for a strong growth is 55%, for a low growth 45%. (3 points)

Alternative 1:

Strong growth: NPV = 550.000€ x (0.909 + 0.826 + 0.751) – 1.000.000€ = 367.300€

Low growth: NPV = 450.000€ x (0.909 + 0.826 + 0.751) – 1.000.000€ = 118.700€
Mean: 255.430€ (0,55*367.300€ + 0,45*118.700€)

Alternative 2:

Strong growth: NPV = 500.000€ x (0.909 + 0.826 + 0.751) – 800.000 = 443.000€

Low growth: NPV = 400.000€ x (0.909 + 0.826 + 0.751) – 800.000 = 194.400€
Mean: 331.130€ (0,55*443.000€ + 0,45*194.400€)
 Choose Alternative 2!

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2.2 Production processes and layout planning

a) What is the name of the type of production if a company produces already developed
products only after receiving the customer's request? Is the inventory risk high or low for
this type of production? (1 point)

Make-to-order  Low inventory risk

b) Name and explain the 4 elements of the service triangle (2 points)

 The customer is the focus of all decisions and activities

 Therefore, the service strategy, the employees and the support systems that serve
the customer and support the employees are built around it.

 Customer service is the basis of the company's existence

 OSCM departments in the company are responsible for the service system
(equipment, etc.) and the management of the service staff.

 The "service triangle" represents these interrelationships

c) The process types in production differ in individual characteristics. Assign the given
production processes the correct description. Only one answer is correct at a time. (1 point)

1: Site fabrication
2: Shop fabrication
3: Group fabrication
4: Flow production
5: Continous process

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Number Description

3 • Different machines to produce the product are arranged in cells

4 • Processes are arranged according to the work sequence

d) Hybrid-electric vehicles currently make use of conventional drive systems such as the
internal combustion engine. In their production, the manufacture of crankshafts is an
important component. The crankshafts are to be manufactured in 4 process steps
(forging "f"  drilling "d"  forging "f"  joining "j"). Roughly outline the hall layout with
typical machine arrangements and the material flow, if the production is aligned
according to the principle of Shop fabrication. (2 points)

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e) The transport graph below (with adjacent key) of a Job Shop with manufacturing equipment
(ME) 1 to 5 is given. Fill out the transport cost matrix completely. (2 points)

A
5 1
B Letter Material flow costs
C
A 3 B
A 5
B A C
2 A+C 4 B 10

A C 30

Please complete the transport matrix with the respective values.

ME 1 ME 2 ME 3 ME 4 ME 5

ME 1 30 30 10 5

ME 2 - 10 35 5

ME 3 - - 5 -

ME 4 - - - 5

ME 5 - - - -

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f) Why should the cycle time not be greater than the customer takt? (1 point)

Customer is not served, or inventory is reduced

g) The figure below shows five workstations (AP) of a flow line. What is the efficiency of the
line? (2 points)

Efficiency = 75,8 %

Efficiency:
∑cycle time = 81,9 sec + 96,3 sec + 79 sec + 67 sec = 378,9 sec
Current number of stations*cycle time per station: 5 * 100 sec = 500 sec
 Efficiency = (378,9/500)*100% = 75,8%

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2.3 Process analysis and design

a) A flow chart of a warehouse is given which accepts orders from 7 am to 7 pm. How is the
bottleneck of a process chain defined? Which process represents the bottleneck of the
represented overall process? (1 point)

Customers Customer Customer Waiting for

Accept Combine Pack
orders orders dispatch
orders orders/parts orders

100 orders/h 80 orders/h 60 orders/h

The bottleneck is "Pack orders" with a capacity of approx. 60 orders per hour.

b) In the flowchart above, what is the current maximum number of customer orders the
warehouse can ship per hour without overtime? (1 point)

The maximum number of customer orders is the minimum {"Accept orders", "Combine
orders", "Pack orders"}  with a capacity of approx. 60 orders per hour

c) What is the maximum number of customer orders you can make ready for dispatch if you
increase the capacity in the packing process to 120 orders per hour? At what points will
blockages and idle times occur? (2 points)

The bottleneck is "Combine orders" with a capacity of approx. 80 orders/h  The

maximum number of customer orders is the minimum {"Accept orders", "Combine orders",
"Pack orders"}  with a capacity of approx. 80 orders per hour

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d) Which method cannot be used to shorten the residence time in a system? Please tick the
correct answer. (1 point)

x Doubling the lot size

Elimination of bottlenecks

x Pooling of activities

Parallel processing of two successive activities

e) You perform a value stream analysis and count a stock of 100 components at a buffer
between two production steps. What is the average residence time of a component in the
buffer if an average of 20 components per hour reach and leave the buffer? Also enter
the formulas for the calculation. (1 point)

Mean residence time:

N = λ*residence time  residence time = N/λ = 100/20 = 5h

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2.4 Quality management

a) Name and describe the 5 steps of the DMAIC method. (2 points)

Define Measure Analyze Improve Control

Identification of Determination of Analysis of Identification of Determine how
customers and measurement process data means to the redesigned
their priorities procedures and with statistical reduce the processes can
performance methods causes of be maintained
Recognizing a
evaluation defects
Six Sigma- Identifying the
enabled project Measurement of causes of errors Modify/improve
current defects using the "key the process
etc. variables”

b) In the Failure Mode and Effects Analysis (FMEA), the risk of an error is quantified by the
Risk Priority Number (RPN). Specify the formula for calculating the RPN and name the
three factors that make up the risk priority number. (1 point)

RPN = meaning x probability of occurrence x probability of detection

c) If a process has a tolerance width of 2mm and a standard deviation of 0.2mm, how far
may the mean be from the target mean to achieve a Cpk value > 1? (1 point)

bar{x} – LSL > 3sigma = 0,6mm  distance < 0,4mm from target mean

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d) Determine the upper and lower control limits of a p-chart where 𝑝̅ = 0.05, n = 100 and z =
2. (2 points)

UCL = \bar{p} + z*s_p = 0,05 + 2*s_p, s_p = \sqrt{p*(1-p)/n} = 0,022

UCL = 0,0944
LCL = 0,006

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Task 3: Supply chain processes, procurement and demand

planning and control (30 points, 10 points knowledge queries, 20 points application & transfer)

3.1 Lean Supply Chains, Logistics, Distribution and Transport

a) You operate a Kanban system in which 60 parts per hour are retrieved from the
downstream station. The replenishment time is 3 hours and one container can hold 30
parts. How many Kanban cards do you need if 10% is to be planned as a safety buffer? (1
point)

𝑫∗𝑳 ∗(𝟏+𝑺)
𝒌= = [60 parts/h * 3h * (1,1)]/ 30 parts = 6,6 = 7
𝑪
cards

b) A small company looking for a new production site supplies three production plants with
the following coordinates and demand volumes. Use the Centroid method to find a new
production site for the small company. (2 points)

Location Coordinates (x,y) Volume (Parts/year)

Peoria (300, 320) 4000

Decatur (375, 470) 6000

Joliet (470, 180) 3000

𝜮𝒅𝒊𝒙∗𝑽𝒊 𝜮𝒅𝒊𝒚∗𝑽𝒊
𝑪𝒙 = 𝑪𝒚 =
𝜮 𝑽𝒊 𝜮 𝑽𝒊

Cx Cy
Peoria
Decatur

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Joliet

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3.2 Global Sourcing

a) Which supply chain strategy would you recommend for the product FiFi at the
beginning of the product life cycle? Categorize it according to the dimensions "supply
uncertainty" and "demand uncertainty". What is the goal of the chosen SC strategy?
(2 points)

Demand and supply uncertainty high  Agile Supply Chain  Rapid response to
conditions through flexibility and risk sharing

b) At a certain point in time, you have 1.89 weeks of supply in the system on a value
basis. The average inventory value is €5,897. What are the annual production costs?
(2 points)

Weeks of supply = Average inventory value / cost of goods sold *52

Cost of goods sold = Average inventory value / weeks of supply * 52
= 5.897 / 1,89 * 52 = 162.245,50

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3.3 Forecasting methods

a) Determine a forecast with a seasonality factor. You know the following information: (3
points)

 Season 1: Sales volume 600 pc.

 Season 2: Sales volume 400 pc.

 Season 3: Sales volume 800 pc.

 Forecast mean value: 1.200 pc.

Average sales: (600+400+800) / 3 = 600

Mean forecast: 1200 / 3 = 400

Season 1: seasonality factor: 600/600 = 1, forecast season: 400 * 1 = 400

Season 2: seasonality factor: 400/600 = 0,66; forecast season: 400 * 0,66 = 267
Season 3: seasonality factor: 800/600 = 1,33; forecast season: 400 * 1,33 = 533

b) You use the moving average method for your sales forecast. How does the number of
periods used affect the forecast? (2 points)

The fewer previous periods used for the forecast (smaller "n"), the weaker the sales
fluctuations of the individual periods are dampened. The more previous periods used for the
forecast (larger "n"), the more the sales fluctuations of the individual periods are dampened.

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c) Determine a forecast using the exponential smoothing method for the following data for
periods 2 to 4 and a smoothing factor of 0.25. (3 points)

Week Demand Forecast exponential smoothing

1 650 690
2 760 690 + 0,25 (650 – 690) = 680
3 850 680 + 0,25 (760 – 680) = 678
4 655 678 + 0,25 (850 – 678) = 721

d) Determine the forecast errors with the key figures MAD and MAPE for all four periods. (3
points)

MAD = Absolute value (Sum (requirement_t – forecast_t) / n)

= (690-650) +(760-680) +(850-678) +(721-655) /4 = 237

MAPE = MAD / average demand

= 237 / ((650+760+850+655)/4) = 0,33

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3.4 Inventory management

a) For the following demand data, determine the physical inventory at the end of the period,
the shortfall and the shortage and then calculate the α, β and γ service level. (3 points)

Period Demand Physical inventory (at the Shortfall Shortage

end of the period)
1 50 85 0 0

2 83 2 0 0

3 44 0 42 42

4 57 0 57 99

5 46 255 0 0

Acquisition of 400 units at the beginning of period 5.

α: 1 - (2/5) = 0,6
β: 1 - ((42+57)/(50+…+46)) = 0,65
γ: 1- ((42+99)/(50+…+46)) = 0,50

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b) Label the following figure for the inventory with the respective descriptions (no
abbreviations)! Enter the formula for the available inventory below! (2 points)

Goods receipt
Reorder point

Inventory

Inventory Position

Inventory on hand

Replenishment lead Time

time

Inventory Position = Inventory on hand + open orders

c) Determine the optimal order quantity (Qopt) for the Q-model as well as the lower order limit
(R) for a desired security of 95 % (z=1.64) and formulate the rule for triggering an order.
The following information is known: (4 points)

 Average daily demand: 7 units with deviation of 2 units/day

 Unit costs: 11,50 EUR
 Order costs: 6,00 EUR
 Delivery time: 7 days
 Annual interest rate Storage costs: 25%

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Optimal order quantity Qopt = sqrt(2*D*S/H) = sqrt (2*(365*7)*6/(0,25*11,50)) = 103 units

Standard deviation during delivery time: sqrt (7*2^2) = 5,29

Lower order limit: R = 7*7 + 1,64*5,29 = 58

Rule: As soon as the inventory on hand becomes smaller or equal than the lower order
limit R, a purchase of 103 units is triggered.

3.5 Material Requirements Planning (MRP) (3 points)

a) Name and describe the course of MRP planning. (3 points)

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