Masters in Business Administration. Examinations for Semester I. / 2009 Semester II

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1 Masters in Business Administration Cohort: MBEA/09A/PT Year 1 MBA/09A/PT Year 1 Examinations for Semester I / 2009 Semester II MODULE: OPERATIONS MANAGEMENT MODULE CODE: OPS5110 Duration: 3 Hours Reading time: 15 Minutes Instructions to Candidates: 1. This question paper consists of Section A and Section B. 2. Section A is compulsory. 3. Answer any two questions from Section B. 4. Always start a new question on a fresh page. 5. Total Marks: 100 This question paper contains 5 questions and 7 pages. Page 1 of 7

2 SECTION A: COMPULSORY QUESTION 1: (40 MARKS) You are required to read the case study to answer the questions. CASE STUDY: LOCATION STRATEGY Ford In 1994 the Ford Motor Company embarked on one of its most radical reorganizations on a worldwide scale. Part of its plan was to establish five vehicle programme centres (VPCs). Each VPC was to take responsibility for the design of a particular type of vehicle worldwide. The idea of forming these five VPCs was to avoid costly duplication of design and development effort. For example, the Ford Escort launched in the early 1990s had been developed separately for the US and European markets. Although both cars were of almost the same dimensions and aimed at very similar parts of their respective markets, entirely unrelated versions were built in the US and Europe. Ford figured that locating all design and development of each class of vehicle in one place would prevent this kind of waste. The location of its five VPCs was based on which part of its organization had the greater experience and expertise. For example, the European VPC would take worldwide responsibility for the design, development and engineering of all of Ford s small and medium front-wheel-drive cars. North America by contrast had the greater experience in larger cars, trucks, higher displacement engines and automatic transmission. Fiat Company The Polish government has been engaged in its strategy of returning formerly stateowned industries into private hands. One industry in particular has attracted considerable interest and investment from Western companies. The country s car- and truck-making capacity was the focus of attention from such car giants as Fiat, PSA (Peugeot and Citroen), Ford, Volvo, General Motors, Mercedes-Benz and Volkswagen. The cause of all this interest was only partially due to Poland s lower manufacturing costs (anyway, exports from Poland were sometimes restricted: for example, the European Union allowed only a certain number of models to be imported free of its 30 per cent customs duty). The car companies were playing a Page 2 of 7

3 longer game. They had in mind the potential growth in the East European market in the medium to long term. When Fiat bought 90 per cent of the former state-held FSM car maker based in Bielsko-Biola in southern Poland, it was not only investing in the experience and under-utilized resources of the company, it was seeing its investment as a longer-term gateway to other East European markets. Hyundai When Hyundai moved its personal computer operations to America, its market share had shifted from 5 per cent in the late 80s down to 1.5 per cent in the 90s. It seems, therefore, an unusual decision to move to a country with higher labour and accommodation costs. In fact, Hyundai reckoned that the increased costs were more than offset by savings in time and inventories. When it manufactured in Korea its goods used to take two months to reach the US, after which its sales operations used to hold the stocks for around three months of sales. After the move, the amount of stock was reduced to less than a third and responsiveness to market trends was enhanced by being far closer to the market itself. Also, product development time, which had been between 12 and 18 months, was reduced to five months after the move. Hoover In 1994 the domestic appliance manufacturer Hoover (owned by the American Maytag Corporation) closed its French vacuum cleaner manufacturing operation and relocated production to its Scottish plant. The decision was primarily influenced by cost of manufacture. The company had figured that, to remain competitive in its global business, all vacuum cleaner production for Europe should be concentrated on a single plant in order to gain economies of scale. Hoover s workers in Scotland were also paid lower wages than their French counterparts. Furthermore, non-wage costs such as health insurance were a much lower percentage of overall costs in Britain than they were in France. Reportedly, the company also believed that the workforce in its Scottish plant had demonstrated more flexibility in adapting to new working methods, which would help it to keep manufacturing costs down in the future. Page 3 of 7

4 (a) Critically discuss the main factors that influenced location decision making process for each of the companies described in the case. [20 marks] (b) Using the location decisions, explain what these companies were trying to improve? [12 marks] (c) The disruptive nature of supply chain dynamics has forced operations managers to focus on improving the supply chain performance. In view of the two cases namely Hyundai and Hoover, discuss how the supply chain can be improved. [8 marks] Page 4 of 7

5 SECTION B: ANSWER ANY TWO QUESTIONS QUESTION 2: (30 MARKS) (a) Explain the contribution of project management in business operations. [6 marks] (b) Southern Textile was inspected by OSHA and found to be in violation of a number of safety regulations. The OSHA inspectors ordered the company to alter some of its existing machinery to make it safer; purchase some new machines to replace older and dangerous ones; relocate some machines to make operations safer. The government has given Southern textile only 35 weeks to make the changes else the company will be fined Rs The engineering department determined the different activities that must be completed to meet the safety regulations and estimated the activity times as shown in Table 1.0. Table 1.0 ACTIVITY DESCRIPTION PREDECESSOR DURATION (Wks) A Order new machines - 2 B Design new layout - 5 C Determine safety changes - 3 D Receive Equipment A 10 E Hire New employees A 7 F Make plant alterations B 15 G Changes to existing machines C 9 H Train new employees D,E 3 I Install new machines D,F 4 J Relocate old machines G,I 5 K Conduct safety orientation H,J 2 Using the data from the above table, (i) Construct the network diagram for the mini project. [5 marks] (ii) Determine the Critical Path & project completion time. [5 marks] (iii) Determine the Earliest & Latest time events and activities with slack times. [14 marks] Page 5 of 7

6 QUESTION 3: (30 MARKS) (a) In relation to an organisation with which you are familiar, critically discuss how an operations manager can make operations different using the five operations management performance objectives. [20 marks] (b) Just-in-time (JIT) or lean approaches to operations management emphasise the ideal to meet demand instantaneously, with perfect quality and no waste. Explain the Just-In-Time (JIT) philosophy of operations. Support your answer with examples from a manufacturing or service operations of your choice. [10 marks] QUESTION 4: (30 MARKS) (a) Supply chain management is the integration of the activities that procure materials and services, transform them into intermediate goods and the final product, and deliver them to customers. The key to a successful supply chain structure and operation depends upon a customer/supplier relationship based on partnership principles. Critically discuss the importance for companies to develop a supply chain strategy. [15 marks] (b) Leal Communication Ltd stocks and sells Toshiba note-book. It costs the store $400 each time it places an order with the manufacturer. The annual cost of carrying the note-book in inventory is $150. The store manager estimates that the annual demand for such note-book will be 1200 units. (i) Explain why organisations hold inventory. [9 marks] (ii) Determine optimal order quantity and total annual inventory costs. [3 + 3 marks] Page 6 of 7

7 QUESTION 5: (30 MARKS) The customer is the focal point of the quality system and hence it is essential to ascertain their perceptions of the quality service they receive. Using the service delivery system gap analysis model, discuss how a service-based organisation of your choice can use the model to manage its customer satisfaction. ***END OF QUESTION PAPER*** Page 7 of 7

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