DRIVE- SPRING 2014

PROGRAM- MBA
SEMESTER- II
MB0044 - PRODUCTION AND OPERATIONS MANAGEMENT
Q1. Explain briefly elements of operations strategy? [List the elements of operations
strategy, Explain the elements of operations strategy (what it involves, provide examples
if required)] 1, 9
Answer:
Elements or Components of Operations Strategy
The six elements of operations strategy are:
1) Designing of the production system
2) Facilities for production and services
3) Product or service design and development
4) Technology selection, development, and process development
5) Allocation of resources
6) Focus on facilities planning
1 Designing of the production system
The designing of the production system involves the selection of the type of product design,
processing system, inventory plan for finished goods, etc. The product design has two
varieties. They are:
Customized product design The design is customized when the volume is low and special
features are inbuilt. Examples: Industrial products like turbines, boilers, air compressors, etc.
Standard product design The designer adopt a universal design so that the product will
have wide acceptance across the customers. Also the demand is more and quantity is high.
Examples: Air conditioners, TV, fans, etc.
2 Facilities for production and services
Certain specialization in production allows the firm to provide the customers with products of
lower cost, faster delivery, on-time delivery, high product quality, and flexibility. Here,
overheads will be less and the firm can outperform compared to the competitors. While
planning the specialised lines, the economies of scale and the continuous demand are to be
looked into. For example, Nikon Cameras plan and establish special lines for each model and
manufacture huge quantities for the global market. Here, the economies of scale and the
continuous demand matters.

3 Product or service design and development

The stages followed in developing a product are:
1. Generating the idea
2. Creating the feasibility reports
3. Designing the prototype and testing
4. Preparing a production model
5. Evaluating the economies of scale for production
6. Testing the product in the market
7. Obtaining feedback
8. Creating the final design and starting the production.
Any product designed and introduced into the market has its own life cycle.
The various stages of life cycle are:
1) Introduction stage
2) Growth stage
3) Maturity stage
4) Decline stage
4 Technology selection and process development
A product selected for production will be analysed for the process and the applicable
technology for optimal production. There are many challenges faced by the operations
managers in this decision as the alternatives are many. The techno-economic analysis for each
alternatives will help to decide the required technology. Combining high technology
production equipments with conventional machines and using robotics, flexible
manufacturing systems, automated devices for material movements, etc have given an edge to
the production units to excel in quality, flexibility, production at economic costs, etc thus
enabling the firm to meet the competitions.
5 Allocation of resources
The production units face continuous problems of allocating the scarce resources like capital,
machines, equipments, materials, manpower, services, etc. Allocation at the right time to the
right place of production indicates the efficiency of the production planners. Optimal use of
resources will enable economical production. Minimising waste, optimal utilisation of
resources, and the best quality product demand a sound operations strategy.

6 Facility, capacity, and layout planning

The location, layout, and facilities creation for the production are the key decision areas for
the operations manager. These are critical for achieving the competitiveness. The decision
also influences the future expansion of the plant. While evaluating the aternatives, the
operations manager will consider the availability of raw materials, access to market, etc.
Enormous capital requirement is required and the planning is always long range. Here, the

production process adopted and the technology pursued dictates the volume, quality, and cost
of production.
Q2.Describe the general factors that influence the plant location decision. (List the
general factors that influence the plant location decision, Describe the general factors
that influence the plant location decision) 2, 8
Answer: General factors
The general factors that influence the plant location are listed as follows:
Availability of land Availability of land plays an important role in determining the plant
location. On several occasions, our plans, calculations and forecasts suggest a particular area
as the best to start an organization. However, availability of land may be in question. In such
cases, we will have to choose the second best location.
Availability of inputs While choosing a plant location, it is very important for the
organization to get the labour at the right time and good quality raw materials. The plant
should be located:
Near to the raw material source
At the market place
Close to the market when universally available, so as to minimize the transportation
cost Figure 1 depicts the general factors influencing a plant location

Figure 1-General Factors

Closeness to market places Organizations can choose to locate the plant near to the
customers market or far from them, depending upon the product they produce. It is advisable
to locate the plant near to the market place, when:
The projected life of the product is low
The transportation cost is high
The products are delicate and susceptible to spoilage

After sales services have to be prompt

Communication facilities Communication facility is also an important factor which

influences the location of a plant. Regions with good communication facilities namely postal
and telecommunication links should be given priority for the selection of sites.
Infrastructure Infrastructure plays a prominent role in deciding the location. The basic
infrastructure needed in any organization is:
Power For example, industries which run day and night require continuous power supply.
So, they should be located near the power stations and should ensure continuous power
supply throughout the year.
Water For example, process industries such as, paper, chemical, and cement, require
continuous water supply in large amount. So, such process industries need to be located near
the source of water supply.
Waste disposal For example, for process industries such as, paper and sugarcane industries,
facility for disposal of waste is the key factor.
Transport Transport facility is a must for facility location and layout of location of the
plant. Timely supply of raw materials to the company and supply of finished goods to the
customers is an important factor. The basic modes of transportation are by air, road, rail,
water, and pipeline. The choice of location should be made depending on these basic modes.
Cost of transportation is also an important criterion for plant location.
Government support The factors that demand additional attention for plant location are
the policies of the state governments and local bodies concerning labour laws, building codes,
and safety.
Housing and recreation Housing and recreation factors also influence the plant location.
Locating a plant with or near to the facilities of good schools, housing and recreation for
employees will have a greater impact on the organization. These factors seem to be
unimportant, but there is a difference as they motivate the employees and hence the location
decisions.
Special factors
The special factors that influence the plant location are:
Economic stability outside investments
Cultural factors
Wages
Joint ventures support of big time players

Q3. Write short notes on

Total productive Maintenance, GNATT Chart, and Bullwhip effect in SCM, Scheduling
in services. (2.5 marks each)
Answer: Total productive maintenance
Maintenance of equipment is a fundamental requirement to increase the productivity in
required quantities with high quality. The presumption that machines deliver these is the basis
to JIT philosophy.
Generally, periodic and preventive maintenance is conducted by the operator, sometimes with
the help of the supervisor. These activities help them to understand the machine better and
give an opportunity to sense when the equipment may need a major repair or reconditioning.
This is to be done to bring back the machine to give the required quantities and not have any
impermissible variations. Break downs generally occur as the symptoms are neglected. In
total productivity maintenance, the worker is trained to:
Maintain the machine from any forced deterioration
Keep the machine clean and lubricated
Keep record of the parts to be replaced on a periodic basis
Inspect the machine for minor abnormalities and adjust it
This helps the worker to maintain his or her machine in a perfect order without breakdown. It
will be his or her responsibility to maintain the machine and his or her assistance to others
should be available. With these responsibilities, the worker will also have the autonomy to
undertake measures to ensure productivity and quality.
Gantt chart
A Gantt chart, commonly used in project management, is one of the most popular and useful
ways of showing activities (tasks or events) displayed against time. On the left of the chart is
a list of the activities and along the top is a suitable time scale. Each activity is represented by
a bar; the position and length of the bar reflects the start date, duration and end date of the
activity. This allows you to see at a glance:

What the various activities are

When each activity begins and ends

How long each activity is scheduled to last

Where activities overlap with other activities, and by how much

The start and end date of the whole project

Bullwhip Effect in SCM

An organisation always goes through ups and downs. It is necessary that the managers of the
organisation keep track of the market conditions and analyse the changes. They must take
decisions on the resources and make necessary changes within the organisation to meet the
market demands. Failing to do so may result in wild swings in the orders. This may adversely
affect the functioning of the organisation resulting in lack of coordination and trust among
supply chain members. The changes may affect the information and may lead to demand
amplification in the supply chain. The Bullwhip effect is the uncertainty caused from
distorted information flowing up and down the supply chain. This affects almost all the
industries, poses a risk to firms that experience large variations in demand, and also those
firms which are dependent on suppliers, distributors and retailers. A Bullwhip effect may
arise because of the following factors:

Increase in the lead time of the project due to increase in variability of demand
Increase in the stocks to accommodate the increasing demand arising out of
complicated demand models and forecasting techniques
Reduced service levels in the organisation
Inefficient allocation of resources
Increased transportation cost

Q4. Explain the steps and tools for changing project management process. (List the
steps for changing project management process in your own words., Explain the steps
for changing project management process in your own words. , List the tools for
changing project management process in your own words. , List and explain the tools
for changing project management process in your own words. ) 1, 4, 1, 4
Answer:
Changing project management process
The project members should be responsive enough to handle the changes demanded by the
situation. The following are the processes involved in bringing about a change as depicted in
figure
a) Request for a change: The need for the change is identified first.
Based on the need a formal request is made. This request can come from either a member of
the project team or a client or a coordinator or key stakeholder.
b) Identify alternate solutions: Evaluate the change request and identify several alternative
solutions. Assess the alternatives with respect to the functional scope, schedule, effort, and
cost.
c) Decide on the actions for the change: Present the change request, alternative solutions
and recommendation to the project management team. The project management team is
required to accept the recommendation, choose an alternative solution, or request further
investigation. Based on this, a final action plan for the change is selected.

d) Implement change: Once the project management approves a solution for the change,
make appropriate schedule and other project plan adjustments to accommodate the change,
communicate these to team members, monitor progress, and execute quality control on the
changes.

Tools for changing a process

There are various tools which can be used to bring about a change in a process. All such tools
can be mainly classified into two types change management system and configuration
management as depicted in figure

1. Change Management System (CMS): CMS is a methodology which requires collection

of all formal documented procedures, defining:
how project performance is monitored and evaluated
how project plans are updated
how various measures are implemented to control the change process
These procedures may be unique to an organisation based on their project needs. It also
includes procedures to handle the changes that may be approved without prior review, so that
the evolution of baseline can be documented.
2. Configuration Management (CM): Configuration management involves:

Identifying the configuration items

Defining the naming and numbering scheme
Structuring the changes
Defining a backup procedure

Following the methods for tracking the status of configuration items

Defining the responsibility and authority of the CMS.

Q5. Under capacity options the company decides to vary the production output by
varying the time, workforce or outsourcing. What are the basic capacity options a
company can choose to meet demand?
(Give a brief description of each capacity option by explaining in which situation it can
be used and how it affects costs. (2 marks for each capacity option)
Answer:
Capacity options allow planners to change supply by adjusting labor, inventory, and
subcontracting.

Hire and lay off workers: The extent to which operations are labor intensive
determines the impact that changes in the workforce level will have on capacity. Of
the cost involved in this option, hiring cost includes recruitment, screening, and
training to bring new workers "up to speed." And, quality may suffer. Some savings
may occur if workers who have recently been laid off are rehired. Layoff costs include
severance pay, the cost of realigning the remaining workforce, potential bad feelings
toward the firm on the part of workers who have been laid off, and some loss of
morale for workers who are retained (i.e., in spite of company assurance, some
workers will believe that in time they too may be laid off). In addition, other factors
having impacts on this option include the availability of (in particular, skilled)
workers and the contracts of unions.

Overtime / slack time: The use of overtime can be especially attractive in dealing
seasonal demand peaks by reducing the need to hire and train people who will have to
be laid off during the off-season. Moreover, in situations with crews, it is often
necessary to use a full crew rather than to hire one or two additional people. It should
be noted that some union contractors allow workers to refuse overtime. Some people
may not appreciate having to work on short notice or the fluctuations in income.
Overtime could also result in lower productivity, poor quality, more accidents, and
increased payroll costs. Slack time can result in less efficient use of machines and
other fixed assets. Some organizations use slack time for training. It also gives
workers time for problem solving and process improvement, while retaining skilled
workers.

Part-time workers: The use of part-time workers depends on the nature of the work,
training and skills needed, and union agreements. It costs less than regular workers in

hourly wages and fringe benefits. Unions may regard such workers unfavorably
because they typically do not pay union dues and may lessen the power of unions.
Contract workers, also called independent contractors, have different pay scales and
no benefits. They can be added or subtracted from the workforce with greater ease
than regular workers, giving companies greater flexibility in adjusting the size of
workforce.

Inventories: Inventory can be built up during periods when production capacity

exceeds demand and drawn down in periods when demand exceeds capacity.
Inventory involves holding or carrying those goods as inventory until they are needed.
The cost is tied up that could be invested elsewhere. Additional cost includes
insurance, obsolescence, deterioration, spoilage, breakage, and so on. Although
services tend not to make use of inventories to alter capacity requirements, a portion
of the services can be done during slack periods (e.g., organize the workplace).

Subcontracting: Subtracting enables planners to acquire temporary capacity with great

flexibility. Factors to consider include availability capacity, relative expertise, quality
considerations, cost, and the amount and stability of demand. As an alternative to
subcontracting, an organization might consider outsourcing: contracting with another
organization to supply some portion of the goods or services on a regular basis.

Q6. Write short notes on:

Relevance of Value engineering in manufacturing
Vendor Managed inventory
Rating methods for locating a plant
Importance of business process modelling
Answer:
Relevance of VE in Modern Manufacturing
Modern manufacturing can be seen from two important perspectives. One is the management
approach which consists of adopting techniques like TQM, JIT, Kanban, concurrent
engineering, lean manufacturing, TPM, group technology, cellular manufacturing, and others.
These have basic philosophies based on which techniques, tools, and methodologies are
developed. To aid the process, we have computers and software written to collect data,
process them, distribute them, and analyse them. We have Management Information Systems
which help in decision making, and this can be stated as the second important perspective.
Optimisation at every level looks into the aspects of cost and benefit. Modern machines like

automatic machines, special purpose machines, and robots are built to produce highly
accurate components at reduced costs. New materials and processes have resulted in great
advances in the variety of products available to large numbers of people. With globalisation,
procurement and distribution are being conducted over great distances. The main thrust is on
quality and timely delivery at the least price. These are the values that we put in the product.
Value analysis looks at the manufacturing activities with a view to make the components
simpler, processes faster, and the products better. Since huge investments are made on the
machines, it is mandatory that every component/part used is made as economically as
possible. Fabrication, erection, and installation being costly and having long term
implications, assessment of utility of the materials used and processes adopted is important.
In the manufacturing activities, many machine elements work with one another to obtain the
transformation on the materials that result in parts, components, and subassemblies. Using
machines with appropriate capabilities in terms of power, voltage, distances moved, lifting,
and placing them all provide opportunities for value analysis. Modifications may be made
to effect savings.
Vendor-managed inventory
The very purpose of JIT is to reduce inventory at all places in the supply chain. Inventory is
considered a waste because inventory is created by using materials, machines, and efforts of
persons. All of these are resources which have already been used up and that portion of it
which is not consumed and sent up the value chain causes a drag in the system.
However, inventories are inevitable because uncertainties exist at every stage, making it
necessary to provide a buffer so that demands do not go unfilled. The challenge is to keep it
to the minimum. To make this happen, the calculations involving the following are necessary:
Forecasts of the market demand
Capacities of the equipments
Worker absenteeism
Suppliers lead times
Quality of the produced components
Rating methods for locating a plant
In the case of general factors or special factors each factor has its own importance in
determining the location of a plant. Therefore, ranking them and giving weightage for them is
one of the ways of determining the location. The methods which determine the most likely
location are:
Rating plan method
Factor rating method
Point rating method
Break-even analysis
Centre of gravity method

Rating plan method In rating plan method, the various factors for locating a plant are
given ratings depending upon the perception of the management. The location which gets the
maximum rating, considering all the factors, is chosen for locating the plant.
Factor rating method In factor rating method, each of the factors for location is rated and
the rating of the competitive locations is considered. Then, the products of the rating are
added and the location which gets the maximum product of rating is selected.
Point rating method - In point rating method, we apportion a fraction of a suitably selected
total rating and see how many points we can allocate to the locations under consideration. We
should compare the totalled ratings and decide the preference.
Break-even analysis Every manufacturing company will have three major contributors to
cost:
1. Investments made for land, plant and machinery resulting in interest and depreciation
2. Recurring expenses, which are not proportional to the quantity of production
3. Variable costs, which are directly proportional to the quantities
Produced
Centre of gravity method This method is used mainly when:
Transportation costs, either for distribution of products or collection of materials from
different suppliers, is the main criterion
Production rates are high
The volume and weights of materials that have to be moved are huge
Time taken, either to receive material from suppliers or delivery to customers, is
critical
Importance of Business Process Modelling
Business process is a total response that a business undertakes utilising the resources and
delivering the outputs that create a value for the customer. The business process:
has a goal
uses specific inputs
delivers specific outputs
collects resources
performs a number of activities in some order
creates value for the customer
Business process modelling refers to a set of activities undertaken to optimise the business
process.
The reasons for optimising the business process are to:
Improve the performance of the process
Deliver better value for the customer
Maximise the earnings of the organisation
Stabilise, sustain and improve the processes to beat the competition from outsiders