TECHNICAL UNIVERSITY OF MOMBASA

FACULTY: ENGINEERING AND TECHNOLOGY

DEPARTMENT: MECHANICAL AND AUTOMOTIVE ENGINEERING

NAME: EDWIN OMOLLO TOM

REG NO: BEME/066J/2012

UNIT NAME: OPERATION RESEARCH

UNIT CODE: EMG 2518

TASK: ASSIGNMENT/CAT

LECTURER: MR NG’ANG’A

DATE: 08/02/2018
 OPERATION RESEARCH QUESSTION

1.Explain reasons for holding stocks (10mks)

a) To ensure that sufficient goods are available to meet anticipated demand.

b) To absorb variation in demand and production.
c) To provide a buffer between production processes. This is applicable to work-in-progress
stocks which effectively decouple operations.
d) To take advantage of bulk purchasing discount.
e) To meet possible shortages in the future.
f) As a necessary part of the production process e.g. maturing of whiskey.
g) As deliberate investment policy, particularly in times of inflation or possible shortage
h) Obsolete items are retained in stock.
i) Poor or non-existent inventory control resulting in over-large orders, replenishing orders
being out of phase with production, etc.
j) Inadequate or non-existent stock record.
k) Poor liaison between the production control purchasing and marketing departments.
l) Sub-optimal decision making e.g. the production department might increase W-I-P stocks
unduly so as to ensure long production runs.

2.Holding stocks is expensive discuss (10mks)

A) COSTS OF HOLDING STOCK

Also known as carrying costs which include the following:

· Interest on capital invested in the stocks;

· Storage charges (rent, lighting, heating, refrigeration, air-conditioning and others);

· Warehouse manpower, equipment maintenance and running costs;

· Handling costs;

· Audit, stocktaking or perpetual inventory costs;

· Insurance, security and others;

· Deterioration and obsolescence and

· Pilferage, vermin damage and others

(B) COSTS OF OBTAINING STOCK:

Also known as Ordering costs which includes

· Clerical and administrative costs associated with the purchasing, accounting and goods received
departments;

· Where goods are manufactured internally, the set up and tooling costs associated with each
production run.

(c) STOCK OUT COSTS

Stock out costs are associated with running out of stock. As a result if insufficient/stock out
situation, the company will lose a lot of opportunity costs which includes the following:

· Lost of future sales as unhappy customers will go away;

· Loss of customer goodwill;

· Cost of production stoppages caused by stockouts of raw materials and or work-in-products;

· Lost contribution through lost sales;

· Extra costs associated with urgent, often small quantity, replenishment purchases which
includes freight and or courier charges instead of the normal cheaper shipping and normal
transportation costs;

· Production workers will be frustrated if their wages are based on pieces or overtime rate.

3.Explain the procedure of solving problem through operation research technology

i) Definition of Problem
This involves the development of a clear and concise statement of the problem at hand. This
gives direction and meaning to other steps. In defining the problem, it is important that the
whole system be examined critically in order to recognize all the areas that could be affected by
any decision taking. It is essential to examine the symptoms and true causes of the problem
when defining the issue.
Note that when the problem is difficult to qualify, it may be necessary to develop specific and
measurable objectives that may not solve the real problem.
(ii) Construction of a Model
This step involves the construction of a suitable model (usually mathematical), which is a
representation of the problem at hand. It might be of a functional nature as in linear
programming or have a logical structure as in simulation and algorithms
(iii) Data Collection
It involves obtaining quantitative data either from existing records or a new survey that fits well
into the constructed model of the problem

(iv) Developing a Solution

This involves the manipulation of the model to arrive at the best (optimal) solution to the
problem. It may require solving some mathematical equations for optimal decisions as in
calculus or linear programming models. It may also be a logical approach or a functional
approach which does not require solving a mathematical equation, such as in queuing theory.
The optimal solution is then determined by some criteria.
(v) Interpretation of the Results/Establishment of Controls
This involves determining the implication of the solutions to the system. In most cases, a solution
to a problem will result in a kind of action or change in the organization. The implication of these
actions or changes must be determined and analysed before results are implemented. This
analysis (sensitivity analysis) determines how much the solution changes if there were changes in
model or in the input data. Controls are therefore established so that changes that make a
significant difference in solution are recognized and taken into account.
(vi) Implementation of Model

This is the process of incorporating the solution into the system, which is carried out by the
personnel already working in the area and not the Operations Research team. The solution to
the problem has to be translated to a set of operating instructions which can be handled by the
personnel involved.
4.Explain 5 tenets of just in time (5mks)
a) JIT Elimination of Waste
The core principle objective of Just in Time (JIT) is to improve process efficiency by eliminating
waste. Toyota's Fujio Cho defines waste as "anything other than the minimum amount of
equipment, materials, parts, and workers, which are absolutely essential to production" (Suzaki,
1987).
b) Quality at the Source (Jidoka)
Jidoka or ensuring quality at the source ranks amongst the major JIT principles. This principle
entails identification and correction of problems at the manufacturing stage itself, as soon as it
occurs.
JIT provides for jidoka through automation that caters to the automatic working of the
assembly line and complete shut down upon detection of error. The production line resumes
only after rectification of the error.
Jidoka makes inspection and quality control a part of the production process rather than a
separate activity, and places the responsibility for quality on everyone in the company rather
than the quality team alone.
c) Simplification
The third of the major JIT principles is simplification or using minimum resources to attain
process efficiency. The JIT principle holds that excess of any kind masks problems such as low
quality raw materials, unreliable vendors, defects in machinery, and the like. Removing the
excess makes problems apparent.
d) Cellular Manufacturing System
Group technology or Cellular manufacturing is another major JIT principle. The Cellular
manufacturing system advocates that segmented and product focused manufacturing is much
simpler than a linear process-oriented manufacturing.
JIT institutes strategic capacity management techniques such as multiple small machines
instead of a large bulky machine that requires constant production for profitability and others
towards this end.
e) Respect for People
Among the major JIT principles is respect for people at all levels, be it employees, customers,
suppliers or management. Success of JIT depends on identification of what the customer needs
and fulfilling the request in the best possible manner.
Success of JIT depends on
 clear and effective communication among all the stakeholders
 employees empowered to make decisions and cross-trained to handle many machinery
to ensure smooth flow of the product
 suppliers understanding and fulfilling demand for specific components at the right time
The management that respects people and works towards such people related critical success
factors succeeds in reaping the benefits of JIT.