Instructions To Participants:: Compulsory Question

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INSTITUTE OF MANAGEMENT TECHNOLOGY

GHAZIABAD
Post-Graduate Diploma in Management – Full Time
(Batch 2021 – 23)
End Term Exam: I (Take Home Exam)
Subject: Operations Management (OM)
Faculty Name: Profs Nikunj Kumar Jain / Sachin Modgil / Kampan
Mukherjee/ Kaustov Chakraborty/ Namrata Sharma / Ankur
Chauhan
Exam Date: 01.10.2021 Section : ALL
Time: 2:30 Minutes Maximum marks : 40

Instructions to participants:
● Question 1 is compulsory of 10 marks.
● Attempt any three questions (10*3=30 marks) from questions 2 to 7.
● Total four questions (1 compulsory and 3 optional) to be attempted.
● Please state your assumptions clearly before attempting the problems.
● Write interpretations to problems in the word file. Numerical calculations/diagrams/
figures may be submitted in excel sheet or as the image (screenshot) of the same in
the word file.

Compulsory question

1.
a. It is a common saying that the only thing certain about a forecast is that it will be wrong.
Comment on the same with the help of an example?

b. A firm is faced with the attractive situation in which it can obtain immediate delivery of an
item it stocks for retail sale. The firm has therefore not bothered to order the item in any
systematic way. However, recently profits have been squeezed due to increasing competitive
pressures, and the firm has retained a management consultant to study its inventory
management. The consultant has determined that the various costs associated with making an
order for the item stocked are approximately $70 per order. She has also determined that the
costs of carrying the item in inventory amount to approximately $27 per unit per year
(primarily direct storage costs and forgone profit on investment in inventory). Demand for the
item is reasonably constant over time, and the forecast is for 16,500 units per year. When an
order is placed for the item, the entire order is immediately delivered to the firm by the
supplier. The firm operates 6 days a week plus a few Sundays, or approximately 320 days per
year. Determine the following:

(i) Optimum Order Quantity Per Order


(ii) Total Annual Inventory Cost for optimal order quantity
(iii) Optimal Number of orders to place per year
(iv) Number of operating days between orders, based on the optimal ordering
[10 marks]

Attempt any three problems from following questions 2 to 7.

2. A fast-food restaurant that operates in Connaught Place, New Delhi, specializes in


offering food during peak hours. The restaurant operates only for two hours in the
morning and promises faster turnaround for customer orders. The restaurant needs to
design the workstations at the front end of the kitchen to assemble all customer orders.
The back end of the kitchen provides the required food items. A study of the tasks, their
dependencies and times taken on an average to assemble reveals the information shown in
Table
Table: Dependencies and Time Taken to Assemble/serve Food
Task ID Description Task Time (Seconds) Predecessor
A Set up the serve Tray 20 None
B Arrange plates, cups, tissues 20 A
C Place the main item in the 35 B
plate
D Fill in the side Dishes 35 B
E Place a filled in water cup 20 D
F Arrange cutlery items in the 20 C, E
plate
G Verify the order 15 F
H Prepare a bill for the order 35 G

a. If, during a typical peak hour operation, the restaurant is able to take 144 orders,
what is the maximum permissible cycle time for the assembly workstations?
b. If the restaurant desires to set a target of the above cycle time, what is the minimum
number of workstations they should have at the assembly?
c. Design the assembly with the minimum number of workstations
d. For the final design that you have made, compute the average utilization of
workstations.
[10 marks]
3. An organization is using the exponential smoothening method for preparing short-term
forecasts for its product with an alpha value (or Smoothing constant) of 0.20. However, it
is not clear if the forecasts obtained from the system are reliable enough. It is also not
clear what the most appropriate measure is for assessing the forecast accuracy. Perform
the following exercises using Table given below and suggest a suitable course of action
for the organization:

Table: Demand Data


Month Data
January 65
February 80
March 90
April 100
May 110
June 80
July 75
August 55
September 50
October 60
November 50
December 45

(a) Test the proposed forecasting tool by considering MAD and MAPE from July to
December with same parameter.
(b) Suppose you decide to change the value of α ¿ 0.50. How will this impact forecasting
accuracy?
(c) On the other hand, if you replace the exponential smoothening model with a 3-period
moving average model, will the forecasting accuracy improve?
[10 marks]

4.
a. The Great North Woods Clothing Company sells specialty outdoor clothing through its
catalogue. A quality problem that generates customer complaints occurs when a warehouse
employee fills an order with the wrong items. The company has decided to implement a
process control plan by inspecting the ordered items after they have been obtained from the
warehouse and before they have been packaged. The company has taken 30 samples (during
a 30-day period), each for 100 orders, and recorded the number of “defective” orders in each
sample, as follows:

Sample Number of Sample Number of Sample Number of


defective defective defective
1 12 11 9 21 18
2 14 12 11 22 22
3 10 13 14 23 26
4 16 14 12 24 20
5 18 15 7 25 24
6 19 16 6 26 18
7 14 17 3 27 19
8 20 18 7 28 20
9 18 19 10 29 17
10 17 20 14 30 18

Construct a p-chart for the company that describes 99.74% of the random variation in the
process, and indicate if the process seems to be out of control at any time
b. A manufacturing plant produces parts and components for ventilation and air conditioning
industry. One particular product is 6-inch metal hollow tube. The target diameter is 6 inch
exactly, with an acceptable tolerance of ± 0.3 inches. Anything produced outside of
specifications is considered defective. The supervisor for this product has data showing that
the actual diameter of finished product is 5.99 inches with a standard deviation of 0.01
inches. (i) What is the current capability index of this process?
(ii) Through better training of employees and investment in equipment upgrades, the
company could produce output with a mean diameter equal to the target and a standard
deviation of 0.005 inches. What would the process capability index be if this were happen?
[10
marks]

5. XYZ (P) Ltd specializes in constructing quality homes in the city of Bangalore. XYZ is
known for timely completion of its projects. Consider one of the projects of XYZ. Table,
shown in below, lists the activities their precedence relationship with other activities and
their duration. Construct a network for the project, clearly depicting the activities and
their interrelationships.

Activity Duration (weeks) Predecessor Successors


A 8 - B, C
B 12 A D, E
C 4 A H
D 2 B F
E 8 B G, I
F 2 D G, I
G 3 E, F H
H 2 C, G J
I 2 E, F J
J 2 I, H -

Construct the network for this project and determine the critical path and the project duration.
[10
marks]

6. A manufacturer of an agri-equipment manufactures four varieties of motors. The type 4


equipment requires a larger amount of customization than the other three. The production
planning department has estimated the number of hours required for manufacturing one
unit of equipment of each variety. Type 1 requires 125 hours; Type 2 requires 175 hours;
Type 3 requires 200 hours; and Type 4 requires 350 hours. The forecasts for the four
varieties are given below

Forecast of Motor Demand (units)


Month Type 1 Type 2 Type 3 Type 4
April 100 40 60 10
May 90 30 30 5
June 80 50 50 10
July 130 40 70 20
August 70 30 30 15
September 90 50 50 5

The overtime (OT) premium is estimated to be INR 20 per hour while undertime (UT)
costs are 50 percent of the OT premium. The cost of carrying inventory is INR 15 per
hour per month and the backordering/shortage costs are 200 percent of inventory carrying
costs. The company can subcontract capacity from a reputed vendor and the additional
cost related to subcontracting is INR 25 per hour of capacity. Evaluate the following
alternatives for AOP:

(i) Prepare a level strategy. Use inventory/backlogging to absorb the demand-supply


mismatch.

OR

(ii) Maintain a production level of 31,000 hours per month and use OT/UT alternatives to
chase the demand.

(iii) What are the key inferences? [10


marks]

7. Assume that Product Z is made of two units of A and four units of B. A is made of three
units of C and three of D. D is made of two units of E.
Lead times for purchase or fabrication of each unit to final assembly are: Z takes two
weeks; A, B, C, and D take one week each; and E takes three weeks. Fifty units of
product Z are required in Period 10. (Assume that there is currently no inventory on hand
of any of these items.)

a. Show the bill-of-materials (product structure tree).


b. Develop an MRP planning schedule showing gross and net requirements and order
release and order receipt dates of product Z, A, B, C, D and E.
[10 marks]

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