COURSE: OPERATIONS MANAGEMENT (MGA 602)

1) The Hunicut and Hallock Corporation makes two versions of the same basic file cabinet, the
TOL (Top-of-the-line) five drawer file cabinet and the HQ (High-quality) five drawer filing
cabinet.
The TOL and HQ use the same cabinet frame and locking mechanism. The drawer assemblies
are different although both use the same drawer frame assembly. The drawer assemblies for the
TOL cabinet use a sliding assembly that requires four bearings per side whereas the HQ sliding
assembly requires only two bearings per side. (These bearings are identical for both cabinet
types.) 100 TOL and 300 HQ file cabinets need to be assembled every week.
The record shows that 5 % bearings get rejected during assembly section. Also there is 10 %
demand of spare parts.
The price of each bearing is $ 20. It costs $600 each time to place an order, regardless of the
quantity ordered. The total holding cost is 40% per annum of the value of stock held. Assuming
the company is working 50 weeks in a year.

i) Calculate the weekly and yearly demand for the bearing considering rejection.
ii) If it is decided to maintain a safety stock of 10 % always determine the optimal
number of the items to order in one lot i.e. Economic Order Quantity (EOQ)
iii) Determine how many orders will be placed per year?
iv) Find the time gap between two consecutive orders?
v) Calculate the total inventory management cost, i.e. ordering + Holding cost?

2) In the above case the supplier offers a 3% discount on the purchase price for order quantities of
10,000 items or more. Should the discount be accepted?

3) Discuss the various characteristics of quantitative and qualitative forecasting methods. Also
discuss these methods are suitable in which areas.

4) The sales of TV in a city mart is as under:

Table 1: Day Wise Sales of TV

Day 1 2 3 4 5 6 7 8 9 10 11
Demand 326 355 390 410 421 450 490 512 550 579 617

i) Derive a least square linear forecasting equation.

ii) Use your equation to forecast the trend value for the 25th and 30th day.

5) Describe the process of job sequencing of “n” number of jobs on two machines as per any
suitable rule with all assumptions step by step.
6) Elaborate the nature of operations management in a “College Library”. In doing this, first
identify the purpose and products of the organization; then use the four decision types to identify
 important operations decisions and responsibilities.

7) The table below shows the demand for a particular brand of fax machine in a department store in
each of the last eight months.

Date 1 2 3 4 5 6 7 8
Calls 180 250 230 280 290 270 350 240

Using the above data prepare exponentially smoothed forecast for the α = 0.2 and F1 = 180
Calculate MAD and MAPD.

8) Eight tasks have to be processed through two work centers as shown in table 1. Assume Work
Center- M work continuously and that they are using Johnson's rule to process them.
(i) Decide the sequence of tasks to complete the order in minimum time period.
(ii) Calculate the minimum time to complete the task
(iii) Calculate the efficiency of the company

Table 1: eight tasks on two machines (Time in minutes)

Task 1 2 3 4 5 6 7 8
Work Center-M 18 29 12 36 25 16 23 26
Work Center-N 20 48 27 15 41 37 19 45
9) When we do not have sufficient data to forecast, which forecasting methods you will apply to
forecast the next one year demand.

10) A retail store dealing in computer hardware imports an enterprise model solid-state drive (SSD)
at a fixed price of $1400 per unit from the sole distributer of the SSD. On January 1, 2017, the
store received an offer of 15% discount on orders of 500 or more units. The estimated sales for
the year are 1100 units, the cost incurred per order is $1300 and the average holding cost per unit
per annum is estimated to be 25 % of price per unit. Please ignore opening and closing
inventories, safety stock etc. So analyses whether the stores go for discount offer or not.

11) Discuss any three job sequencing methods for n jobs on one machine.

12) M/s Skydrive Pvt. Limited is a refrigerator manufacturing company in UAE. The order for next
six months for their 165 Liter Model refrigerator is finalized and now production plan is
scheduled as under: The opening Inventory is 2800 refrigerators. The working staff as on 1 st
January is 240 employees.

Table: Orders of bulbs for next six months

Particulars Apr May June July Aug Sep Total
Demand 13600 11200 8000 6400 8000 12000 59200
No. of working 21 20 22 21 22 19 125
days in the month

The costs details are as under:

Inventory holding cost : $3 per unit per month
 Backorders Cost : $8 per unit per month
Hiring and training cost: : $500 per worker per turn
Layoff cost : $800 per worker per turn
Straight time cost (8 hours) : $6 per hour
Outsourcing : $40 per unit
Production hours per item : 4 hours

The top management asked to calculate the total cost of production considering
i) Chase strategy
ii) Level strategy (keeping average production capacity and maintaining inventory /
backorders.
13) Nine tasks have to be processed through two work centers i.e. Center lathe and Grinding
machine as per Table 4. Assume Center lather works continuously and no setup time is needed.
Apply Johnson's rule to find the best efficiency.
Table: Nine tasks on Two Machines
Activity I II III IV V VI VII VIII IX

Center lathe 10 34 32 19 51 36 34 38 40
(Time in minutes)

Grinding Machine 12 25 18 28 49 60 24 11 22
(Time in minutes)

i) Decide the sequence of tasks to complete the order in minimum time period.
ii) Calculate the minimum time to complete all jobs.
iii) Calculate the efficiency of the company?

14) The annual usage of various parts of a specific product is as under. Classify these parts as per
ABC analysis.
Sr. No. 1 2 3 4 5 6 7 8 9 10
Part Name AQ 23 BD 48 CF 61 KL 19 ME 52 PR 72 UH 65 SL 94 TJ 37 GX 84
Annual 6000 1800 11000 7000 6500 5600 60000 4500 7000 3000
demand in
Units
Unit cost 1.70 8.50 11.50 1.90 00.80 25.50 2.75 1.25 2.50 2.00
in $

15) Signature Steps LLC is a trading company working in UAE. The company installs state of art
kitchens in five star hotels / hotel apartments and luxury villas. They procure quality kitchen
appliances from all over the world and assemble here in their own brand name i.e. “SiSe”. The
designed capacity of each Assembly Section is 456 kitchen Units per month, with an effective
capacity of 418 units per month. The manager observed the actual output of last month was 374
units. It was an issue of worry for him. He called a meeting and discussed with all the concern
heads regarding aggregate planning for next quarter. The Production Manager informed that the
production was less due to less production of a new part, which was added in design to ensure
 safety. The procurement Manager proposed to purchase this part from market. Now the
Operational manager has to decide “make or buy” the new part as well as some inventory
management for critical items. In-house production of the part needs infrastructural setup. Cost
and volumes estimates are as follows:

Detail Conditions for Conditions

Making
Annual Fixed Cost $ 430,000 None

Variable cost / unit $ 38 $ 67

Annual volume units 20,000 20,000

i) Calculate the efficiency and utilization of the plant.

ii) Decide whether to make or buy this part?
iii) At what quantity the decision has to change?

16) Al Safa Décor LLC is a company operating in UAE. The company purchases decoration items
from India and prepare wall mountings. It has assembly sections. The designed capacity of
Assembly Section is 625 units of Wall mountings per week, with an effective capacity of 560
units per week. The average production of last week showing production of 582 units per week.
As the company is planning to outsource the assembly shop activities, develop an aggregate
plan for “make or buy” decision for assembly process. In-house assembly of the Wall
Mountings needs fixed expenses per year. Cost and volumes estimates are as follows:

Detail Conditions for Conditions

Making
Annual Fixed Cost AED 1,600,000 None
Variable cost / unit AED 22 AED 62
Annual volume 30,000 30,000
units

The expected demand for next year will be 180,000 pieces per annum. Annual carrying cost
(H) is 5 % of the price of unit and ordering cost (S) is AED 300 per order. The company is open
300 days a year. The price of each product is AED 60.

a) Calculate the utilization and efficiency of the assembly section.

b) Is it advisable to make or buy the product? There is a possibility that volume could change in the
future. At what volume would the decision be indifferent between making and buying?
c) Calculate the reorder point i.e. calculate the expected time between two consecutive orders? And
estimate the total annual cost of Inventory i.e. setup cost + holding cost?

17) Short notes:

A) Capacity planning and bottleneck areas
B) FMS analysis for Inventory
C) Capacity planning in manufacturing sector
D) Inventory management cost
 E) Importance of Capacity planning in an organization
F) Capacity planning in manufacturing sector
G) Role of Supply Chain in service sector
H) Lean Manufacturing system
I) ABC Analysis
J) Benefits of inventory
18) Inventory Management (any one of following)
 Objectives achieved by proper management of inventory in any organization.
 Importance of Inventory management in the era of JIT
 Inventory is necessary devil or not
 Various principles of Inventory management system.
 Various advantages and disadvantages of having inventory in any organization.
 Excess inventory affects launch of a new product
19) Define inventory and explain why it is important for any organization. Discuss any two
inventory classification methods other than ABC analysis.

20) Explain need of aggregate planning and explain any one method in step by step.
21) Al Saleem LLC is a furniture manufacturing company in UAE. The order for next six months for
their famous dining table set (one table and six chairs) is finalized and now they have to plan the
production schedule. The opening Inventory is 700 units of dining table. The working staff as
on 1st April is 60 employees.

Particulars Apr May June July Aug Sep Total

Demand of 3400 2800 2000 1600 2000 3000 14800
dining set
No. of working 21 20 22 21 22 19 125
days in the month

The costs details are as under:

Inventory holding cost
Backorders Cost
Hiring and training cost:
Layoff cost
Straight time cost (8 hours)
Outsourcing
Production hours per item¨
: $2 per unit per month
: $6 per unit per month
: $300 per worker per turn
: $400 per worker per turn
: $5 per hour
: $30 per unit
: 5 hours

22) Apply Level strategy (Average capacity) and Chase Strategy for the below table and calculate
the total operational cost.

Table1: The Sales Forecast for the connecting rod of a popular model of car:
Quarter I II III IV
Quantity 150,000 90,000 230,000 290,000

The other details are as under:

Recruitment Cost = $200 per worker; Lay off cost = $900 per worker
Inventory carrying cost = $3.00 per piece per quarter;
Production per employee = 2,000 pieces per quarter; Beginning work force = 100 workers.