Section-A

1. Why is aggregate planning in produce-to-order firms difficult?  What can operations managers do to overcome these difficulties?

2. Explain how these factors affect process design decisions:  a. nature of product demand,  b. degree of vertical integration,  c. product and volume flexibility,  d. degree of automation,  e. product quality.

3. Compare and contrast the philosophy of traditional and JIT manufacturing.  What are their objectives?  How do they achieve them?

4. A time study of a production operation yielded an average time of 9.00 minutes per product, a performance rating of .90, and allowances of 50 minutes per 8-hour shift.

a. Compute a labor standard for the operation.

b. If a worker performed only this operation, how many products per 8-hour shift could be produced under ordinary operating conditions?

c.  If the labor rate is $10 per hour, what should the accounting department use as the standard labor cost per product?

Section-B

1) Define Facility Location and Layout? Highlight the importance of various facility layouts of both manufacturing and service firms?

2) The Magneto Company manufactures magneto assemblies that generate direct electrical current when rotated. These assemblies are used by other companies in their products. The magneto is in the decline stage of its product life cycle. The historical data below reflect this decline, and Magneto's management expects this trend to continue. Use these data to develop a time series regression forecast for next year's sales.

                                                     ---------------------------------

                                                       Magneto's                                                     Magneto's

                                                           Sales                                                               Sales

                                                        (Millions                                                        (Millions

                            Year                  of Dollars)                          Year                  of Dollars)

                                                           ---------------------------------

                               1                            5.6                                    4                            5.5

                               2                            5.5                                    5                            5.3

                               3                            5.4                                    6                            5.3

                                                           ---------------------------------

3) The Oklahoma Crude Oil Refinery buys crude oil from the Red Rock oil field located in eastern New Mexico, western Texas, and western Oklahoma.  The refinery has been guaranteed through long-term supply contracts that its needs for crude will be supplied from this field at $18.90 per barrel as long as the refinery accepts 5,000 barrels per day during shipping periods.  The refinery uses crude oil at a rate of 1,500 barrels per day and plans to purchase 450,000 barrels from the Red Rock field next year.  If the carrying cost is 20 percent of acquisition cost per unit per year and the ordering cost is $2,500 per order:

a. What is the EOQ for Red Rock crude? What is the TSC at the EOQ?

b. How many days of production are supported by each order of Red Rock crude?

c. How much storage capacity is needed for the crude?

Section-C

(Caselets/Situational Questions)            

1. A company produces a mix of high technology products for use in automobiles. The annual sales data are as follows:

For inventory control reasons, the company wants to classify these items into three groups on the basis of annual sales value of each item. Suggest an inventory control technique  and classify the above items with a precise graph?

2. In practice, companies are driven by a whole variety of motives when they make their location decisions. Here are four which illustrate a diversity of operations objectives.

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.The Polish government has been engaged in its strategy of returning formerly state-owned 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 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.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.

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.

Questions

1 For each of these four location decisions, rank what you think are the main factors which influenced the location decision.

2 What do you think the companies described in each of these four location decisions were trying to improve and why?

In the decision by the Ford Motor Company to establish vehicle programme centres, do you think the factors influencing the location of design centres are different from those that influence the location of manufacturing operations?