UNIVERSITY OF COLOMBO, SRI LANKA

FACULTY OF MANAGEMENT AND FINANCE

Postgradoate& Mid-career DevlopmentUnit
- August,
2008
(Semestcr
Examination
II -First-halD
Administration
Master
ofBusiness
MBA 538- OperationsMaoagement)
Three(03)Hours
fromeachPart
at Least
tlvoquestions
in all selcting
Answerfive (05)questions
answerbooksand
Answers
to PART-i andPART- ii shouldbewrittenin two separate
handed
overto thesupervisor
separately.

Ql.
i.

"Product is a bundle of goodsand services" Commenton this statementproviding

examplesto strengthenyour answer,
(6 marks)

ii.

Make-to-stock and make-to-order are two product strategies lollowed by

manufacturers.What are the market conditions satisfied under these Product
strategies?
(7 marksl

l,

"OperationsManagementdecisionsare not limited to operationaldecisions,but they

includestrategicas well.astacticaldecisions".Explainthis statement.
(7 marks)
(Total 20 Marks)

Q2.
i.

Explainhow the following factorsaffectprocessselection

a. ProductqualitY
b. productvariety
volume
c. production

(5 marks)

Dilferentiatestrategiccapacityplanningandrnediumterm capacityplanning
(5 marks)
nl.

of
XYZ MachiningCompanyhasdecidedto modernizeits product;onfacility because
increased competition. Three altemative production technologies are being
consideredlor this purpose namely: Cellular Manufacturing (CM), Numerical
Controlledmachines(NC) and a FlexibleManufacturingSystem(FMS).
Costsfor th.eealtemativesare givenin the following Table.

CM
Annualfixedcost(Rs.)
Vafiablecostper unit (Rs,)

s80,000
t.890

FMS
NC
1 . 1 1 0 . 0 0 0 2,500,000
1,680
1,750

a. Based on the annual cost, at what volume of annual production would the
companybe indifferentbetween
i.
CM andNC productiontechnologies.
NC and FMS prcductiontchnologies.
ii.
(6 marks)

\rould
technology
volumeis 15.000units.r hichproduction
b. Ifannualproduction
you rccommendto the company?
(4 marks)
(Total20 Msrks)
Q3.
i.

Fixedorderquantitymodelandfixed periodmodelaretwo majormodelsusedin

inventorycontrol.Brieflyexplainthesetwo modelsanddiscussin whichsitualions
theyareused.
(6 marks)

ii.

of safetystock?How will the useof safetystockaffectthe

Whatarethe purposes
EOQ?
(4 marks)

llI.

A maintenancedepartmentof a manufacturingplant needsto plan inventorisfor

part, a bearing.Cuffently, Rc_orderpoint and the order
frequenllyusedmaintenance
quantity of the part are being consideredby the department.Averagedemandper
week is 15 unitsofbearingsandaverageleadtime is 5 weeks.

demandduring
undera policyof carrying50 percentof expected
The plantoperates
ordering
bearing
as
this
same
class
leadtirneassafetystockacrossall itemsin the
costis Rs.1000perorderandholdingcostis Rs 25 peryearperitem.Determine:
level
a. Re-order

(5 marks)

OrderQuantity.
b. Economic

(5 marks)
(Tolal 20 Marks)

Q4.
Briefly explainhow followingtoolscanb usedfo. quality improvement
a. Pareloanalysis
b. Fishbone(causeandeff'ect)diagram

(2marks)

c. Scatterplot

ll.

,ll.

(2marks)

(2marks)

'Qualityof
by both'QualityofDesign'and
"Finalqualityofa productis determined
Explainthisstatement.
Conformance".
(7 marks)
Explainhowworkstudyis usedto improveproductiviry.
(Tmarks)
(Total20Marks)

PART ii

Qs.
i.

Describethe Delphi methodofforecasting.

(,1marks)

ii.

List the stepsinvolvedin choosinga lorecastingmethodto a demandpaltern in your

oaganrzatlon.
(5 marks)

iii.

Historicaldemandofa productofa companyfor the last9 yearsis givenbelow:

Year
Dmand
(units)

50 54 55

)f

60

5 6 62

Assuminga lineartrendline pattemfor the abovedata,find the equationof the

line.

(6 marks)

b.

Usingthe equationfoundin (a), forecastthe demandior yearl0 andy"u'f

n1urL9

Whatwould be the forecastfor the year l0 and I l, if simple3 yearperiodmoving

melhodi\ used:Staleall )our assumPlions
average
(3 marks)

(Total20 Marks)

Q6.
i.

Planning(MRP) syslem
Explainthe benefitsofMaterial Requirement
(5 marks)

ii. Whatarethc inputsandoutputsofMRP system?

(4 marKs)
Q is madeof
iii, ProductP is madeoftwo unitsofQ and threeunitsofR sub-assembly
R is madeof two unitsof S andfour
one unit of S and two unitsofT. Othersub-assernbly
unitsofU. Leadtime of P,Q,R,S,TandU areas follows:
0lweek, and U= O3weeks'
P= 0l week,Q= 02 weeks,R- 03 wecks,S= Ozweeks,T=
a. Draw the bill ofmaterial(producttreestmcture)

(4 marKs)

b. lf, 100 units of P are neededin theloth week,developa planningschedule

showingwhen each item shouldbe orderedand in what quantity Currnt
=
T
areasfollowstP:20 units,
inventoiies
Q = 40units,R = 30units'S 50units,
= 100units,U= 900units.
(TMarks)
(Total20Marks)

Q7.
"Transportationdecisionsshouldnot be purely madebascdon transportationcost
with your argument.
alone".validate the statement
(4 mar[5)

Discusshow you canminimizefreightcost in transportation.

(4 mark\)
A firm has an annualdemandof 1,095,000water pumpsof one variety.Average
cost ofthe pump is $90.A safetystockof 25% ofthe demandduring deliveryleadtime is maintainedby the firm, Inventoryholding cost per year for the pump has
beenestimatedas 12%. The logistic managerofthe firm has four altemativestc,
signa contractto managethe transpoiationnextyear.
The following table showsthe capacityof eachtransportationaltematives,annual
transportation
cost,lead-timeandtransittimes.

Alternative

/
AnnualTransport Lead-TimeTransitTime/
Capacity
t vdy.
uaj.
Cost/ $
NumberofPumps

AltemativeA

u,:oo

20,000

AltemativeB

1,750

1?,000

AltemativeC

1,000

r2,000

AlternativeD

4,000

15,500

(a) Calculatethe costcomponents

andtabulatethe rcsults.
(b)' Selectthe best alternativcto be signedwith contractor.(Assume365 days
for a year.
(12 Marks)

(Total20Marks)