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Mast er of Busi ness Admi ni st r at i on

Cohor t : MBA/08/PT - Year 1
Ex ami nat i ons f or 2008 Semest er 2
MODULE: OPERATIONS MANAGEMENT

MODULE CODE: MBA 2105

Duration: 3 Hours

Reading time: 10 Minutes




Instructions to Candidates:

1. This paper consists of sections A and 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 10 pages.
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SECTI ON A: COMPULSORY

QUESTION 1: (50 MARKS)

Read the case carefully and then answer the questions which follow.

BEATING THE ODDS
Tropics garments Ltd, a multinational with its headquarters in Hong kong and having
units in J amaica, China, Bangladesh, Malaysia and Vietnam, set up its first unit in
Mauritius in 1972. This was in the Industrial zone of Plaine lauzun on the outskirts of
Port Louis, the capital city and the port. This unit was called Textile industries Ltd.
The management team consisted of expatriates mainly from Taiwan and Hong Kong.
The group is a family-owned business and all strategic decisions are taken in Hong
Kong. Marketing, a core activity, is carried out by the head office. Units outside Hong
Kong have no direct contact with the buyers. Even Customer complaints are
channeled through the head office.

The organization expanded its activities in Mauritius in the 80s. In 1986 it had four
units, employing around 8000 workers. The local head office was at Plaine Lauzun
and the other units include Bright garments at Coromandel, Creative garments at
Curepipe and Vacoas garments at Vacoas. The garments manufactured include
shirts for both sexes, trousers, blouses, polo shirts and track suits. The foreign
clients were mostly from the lucrative American market and include Kmart, Sears,
J C Penney, Van Heusen, Tommy Hilfiger. Relying solely on expatriates for its
management team posed certain problems. Besides being a costly proposition, the
expatriates often had human relations and communication problems with the local
workforce. In 1985 the first batch of Mauritian graduates was recruited. They
subsequently joined the management cadre.

Production of garments does not involve sophisticated technology. However the
planning of production is a highly complex exercise. It was crucial to respect the due
date of orders. The main activities include marker preparation, spreading the fabric,
cutting, bundling, sewing, ironing, packing, storing and shipping. Quality assurance is
effected at each stage. In-line control and final inspection are prevalent. At this time
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orders were large and production runs long. The various operations were carried out
one after the other. The cut pieces and work- in- progress flow from one work centre
to another. Balancing the production line was critical in order to reduce bottlenecks.
There was often capacity shortage. In 1990 a modern factory was constructed on a
newly bought plot of land at Beau Bassin. This factory was fully air conditioned and
used the latest technology in garment production. All the other units, except Creative
garments which was involved in trousers production, closed down. Costs of
production were rising. In this context an industrial engineering team was set up in
order to analyse processes and propose process improvements.

In the 1990s Mauritius experienced full employment and skilled labour became
scarce. The organization set up a training unit in order to train new recruits. This only
partly solved the labour shortage problem. The solution was foreign labour.
Permission was obtained from the government and the first batch of Chinese
workers arrived in 1993. In 1995 Dr Lo took over as managing director. As a shrewd
businessman, he reassessed the organisations processes. Non-core activities, like
transport of workers, security, food preparation for foreign workers and maintenance
were outsourced. This considerably reduced the overheads.

The turnover of the organization continued to rise. The ISO 9001:2000 quality
management system was implemented in order to manage quality of products better.
Further the exigencies of the American market required the implementation of a
social accountability system. This was achieved with the certification to WRAP
( World responsibility apparel production). In 2002 the Environment protection act
was revised and more stringent requirements regarding effluent treatment and solid
waste management were included. In its effort to be at the forefront of environment
protection, the ISO 14001 Environment management system was put in place in
2002. A team was set up to manage the various management systems in place.

The millennium brought with it a number of challenges. The multifibre agreement
was dismantled and the African growth opportunity Act was promulgated.
Competition became more intense from the low cost producers like China,
Bangladesh and Vietnam. In 2004 Tommy Hilfiger stopped buying trousers from
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Mauritius, as our trousers were no longer competitive. In August 2003 Creative
garments closed down, laying off its 4000 odd workers. It was an unexpected event
and it sent shockwaves throughout the island.

The main unit at Beau Bassin survived. Dr Lo decided to reorganize the whole
organization and supported by his industrial engineering team, the whole supply
chain was reviewed and processes redesigned. The organization rethought itself.
Established practices were questioned and reviewed. It was an example of business
process reengineering at its very best. The strategy of production changed
drastically to that of high quality products. Orders were now small and runs short.
However they were high value-added products. In 2006 a small unit for assembly of
components, was set up at Bel Air. Finishing remained with the main unit.

With the rise in cost of living in China, Chinese labour became too expensive. The
organization had to search for other options. Bangladesh was the option. The first
batch of Bangladeshis came in J une 2007. They met all expectations.

In order to take advantage of AGOA, a spinning and weaving mill was set up at La
Tour Koenig in 2008. It provided yarn and fabric both for its units and other local
firms.

Things have greatly improved now. An air of optimism prevails. For Dr Lo, Tropics
garments (Mauritius) Ltd will survive as long as it remains profitable to produce shirts
here.
( Written by B. Abacousnac for the MBA exams 2008 )

Answer the questions below based on the above case:

(a) The success or failure of an organization depends to a large extent on its
location

Discuss briefly two factors which have determined the location of the first unit of
Tropics (Mauritius) Ltd. (6 marks)
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(b) (i) Identify the type of production system which was prevalent in the late 1980s.
J ustify your answer. (3 marks)

(ii) Enumerate five characteristics of the production system identified in (i).
(5 marks)

(c) Differentiate between core and support processes for a garment manufacturing
organization. Illustrate your answer with examples (4 marks)

(d) The operations manager had problems of lack of capacity in order to meet a
sudden surge in demand

Discuss the options available to the operations manager inorder to meet a
sudden surge in demand . Indicate at least three options with proper reasoning
(9 marks)

(e) The management of external factors offers some of the biggest challenges to the
Operations managers.

With reference to the case, discuss four external factors impacting on Tropics
(Mauritius) Ltd and indicate how it responded to these challenges. (16 marks)

(f)(i) Why should an organization control outsourced processes? (2 marks)

(ii) For the organization in the case it is not advisable to outsource some
processes.

According to you, which processes should not be outsourced as far as
possible justifying your choice. (5 marks)
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SECTI ON B: ANSWER ANY TWO QUESTI ONS

QUESTION 2: (25 MARKS)

The Managing Director of Beauty Soaps Ltd just visited a soap manufacturing firm in
Malaysia and he was immensely impressed by its raw materials stock management
System. He wanted his Operations manager to implement the just-in-time stock
management system in his unit in order to eliminate all the costs associated with
keeping stocks. For the Operations manager the local conditions are not conducive
for the implementation of such a system. The main raw materials are sodium
palmitate noodles, colour and perfume, imported from Malaysia. Wrappers and
cartons are produced locally.

(a) Discuss the various costs associated with keeping costs. (6 marks)

(b) Discuss the conditions to be present in order to enable the successful
implementation of just-in-time stock management system. (5 marks)

(c) A trader expects to sell about 300 units of a component per month. The
storage space taken up by one unit of the product is estimated at Rs 30 per
year. The cost associated with ordering is Rs 65 per order and interest rates
are expected to be 10% per year. Each unit costs Rs 50.

(i) Calculate the economic order quantity ? (4 marks)

(ii) Calculate the total cost of the component for one year. (5 marks)

(iii)A supplier came up with an offer of supplying the same component at Rs 40 per
unit, if the ordering quantity is 600 units per order. Should the trader accept the
order ? (5 marks)



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QUESTION 3: (25 MARKS)

(a) With reference to examples you are familiar with, explain the terms dependent
demand and independent demand. (4 marks)

(b) Materials requirement planning is a technique used in the planning of ordering
of materials and components in order to meet demand of customers. Explain
if it is an example of dependent or independent demand. (1 mark)

(c) Exotic furniture Ltd has received firm orders for the month of December 2008
for tables. A table consists of one top and one leg assembly. The leg
assembly consists of four legs, two short rails and two long rails. The demand
are 200 tables for week 4, 150 for week 5 and 100 for week 6. The present
stocks are evaluated as 50 tables, 50 tops, 100 leg assembly, 150 legs and
50 short rails. Scheduled receipts are 50 tops in week 2 and 100 legs
in week 2.

Planned lead times in weeks are assemble table : 1 week, finish leg assembly
: 1 Week, purchase legs : 1 week, purchase short rails : 1 week, purchase
long rails 1 week and purchase top : 2 weeks. (Assume that all figures occur
at the beginning of the week )

(i) Analyse the product graphically showing the different levels and components.
(2 marks)

(ii) Calculate the net requirements and planned order releases for each component,
needed to meet the demand. Present your results in tabular form. (18 marks)


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QUESTION 4: (25 MARKS)

(a) CPM and PERT are two techniques widely used in project management.

Under what conditions is each one of them used ? Illustrate your answer with
examples. (3 marks)

(b) Why project managers should understand the environment in which a project
takes place ? (4 marks)

(c) Lovely cosmetics Ltd intends to undertake a redesign of a product and its
associated packaging. The list of activities have been identified with associated
duration and precedence relationships. These are shown in the table on the next
page.

(i) Draw a network for the project. (4 marks)

(ii) Calculate the earliest start time, earliest finishing time, latest start time, latest
finishing time and float for each activity. (10 marks)

(iii) Identify the critical path and calculate the project completion time. (2 marks)

(iv) If activity G is delayed by 2 weeks, what will be its impact on the overall project
completion time ? (2 marks)
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Activi ty
Code

Activity
Duration
(weeks)
Activity i n first column must
be completed before the one
below can start
A Redesign product

7

C
B Redesign packaging

3

D

C Order and receive
components for product


4

E
D Order and receive
materials for packaging


2

F
E Assemble product 5 G
F Make up packaging 2 G
G Package redesigned
product
2 H
H Test market redesigned
product

7 J
I Revise redesigned
product

8 K
J Revise redesigned
packaging
4 K
K Present results to the
board
1 -

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QUESTION 5: (25 MARKS)

(a) Quality has been identified as one of the performance objectives.
Give three reasons why quality is important for a service provider such as a
Tourist resort. (3 marks)
(b) Differentiate between quality assurance and quality control. (4 marks)
(c) Discuss the various stages in the development and implementation of the quality
planning and control activity. (8 marks)
(d) Wire mesh products Ltd manufactures wire fencing. The quality control officer
wants to use control charts to monitor the quality of the product better.
The number of defects for each of 20 samples are shown in the table below.
Sample No. Number of
defects
Sample No.

Number of
Defects
1 8 11 8
2 7 12 4
3 3 13 3
4 4 14 4
5 9 15 5
6 3 16 7
7 6 17 6
8 4 18 3
9 1 19 2
10 2 20 1

(i) Using the above data, calculate the Upper and lower control limits for a
C-Control chart. ( Use any appropriate formula ) (5 marks)
(ii) Draw a C-Control chart on graph paper. (3 marks)
(iii) Deduce whether the system is under control or not. (2 marks)

***END OF QUESTION PAPER***