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MB 0044 - Production and Operation Management

Q1. State the important considerations for locating an automobile plant.
Ans. The important considerations for locating an automobile plant:
1) Availability of land- Availability of land plays an important role in determining
the plant location. On several occasions, our plans, calculations and forecasts
suggest a particular area as the best to start an organization. However,
availability of land may be in question. In such cases, we will have to choose
the second best location.
2) Availability of inputs- While choosing a plant location, it is very important for
the organization to get the labor at the right time and good quality raw
materials. The plant should be located:
Near to the raw material source
At the market place
Close to the market when universally available, so as to minimize the
transportation cost
3) Closeness to market places- Organizations can choose to locate the plant
near to the customers market or far from them, depending upon the product
they produce. It is advisable to locate the plant near to the market place,
The projected life of the product is low
The transportation cost is high
The products are delicate and susceptible to spoilage
After sales services have to be prompt
4) Communication facilities- Regions with good communication facilities namely
postal and tele-communication links should be given priority for the selection
of sites.
5) Infrastructure- Power, Water and Waste Disposal.
6) Transport- Timely supply of raw materials to the company and supply of
finished goods to the customers is an important factor. The basic modes of
transportation are by air, road, rail, water, and pipeline. The choice of location
should be made depending on these basic modes. Cost of transportation is
also an important criterion for plant location.
7) Government support- The factors that demand additional attention for plant
location are the policies of the state governments and local bodies concerning
labour laws, building codes, and safety.
8) Housing and recreation- Locating a plant with or near to the facilities of good
schools, housing and recreation for employees will have a greater impact on
the organization, as they motivate the employees and hence the location
9) Economic stability outside investments
10) Cultural factors
11) Wages

12) Joint ventures support of big time players

Q2. Explain essentials of Project Management Philosophy.
Ans. 1. Characteristics of project mindset

Time: It is an important parameter in framing the right mindset. It is possible to

improve the pace of the project by reducing the time frame of the process.
The mindset is normally to work out a comfort mode by stretching the time
Responsiveness: Responsiveness refers to quickness of response of an
individual. The vibrancy and liveliness of an individual or an organization are
proportional to its capabilities to respond to evolving processes and structure.
Information sharing: Information is power. Information is the master key to
todays business. Information sharing is an important characteristic of the
project mindset today. A seamless flow of information is the key to build a
healthy mindset among various stakeholders in a project.
Processes: Project mindset lays emphasis on flexible processes. The major
difference in a process and a system is in its capabilities of providing flexibility
to different situational encounters. Flexible processes greater capabilities of
Structured planning: Structured planning based on project management life
cycle enables one to easily and conveniently work according to the plan. It
also enables efficient use of project resources and prioritization of the
activities based on resource planning.

2. Project evaluation and selection criteria

State-of-the-art technical methodologies.
Relevance to market.
Project management and work plan.
Effort justification.

3. Typical characteristics of a project

A project is a temporary endeavor with a finite completion date undertaken to

create a unique product or service.
Projects bring form or function to ideas or needs.
Project has a start and an end date.
A program of non-routine work bringing about a beneficial change.
Guided by at least one well-engaged sponsor who has both adequate
authorities and resources to charter the project effort.

A multi-disciplinary team brought together for the project.

Scope of work that is well defined.
Constrained by cost, time, and quality.

4. Project parameters for negotiation

Scope, cost and schedule objectives

Changes to scope, cost or schedules
Contract terms and conditions

5. Value addition of project management--Steps of a good project management

Define the project

Set manageable tasks
Obtain resources
Build a team
Plan and allocate the tasks
Monitor and control the work
Report progress to higher officials
Close down the project when completed
Review the project

6. Project management players, their roles and responsibilities.

Q3. Several different strategies have been employed to assist in aggregate
planning. Explain these in brief.
Ans. 1. Pure strategies- involve taking up only one type of approach and the
production is obtained when only one of the decision variables is permitted to vary
while all others are held constant.
Three focused or pure strategies are:
(a) Chase demand strategy-Vary production to match demand by changes in
employment: This strategy permits hiring and layoff of workers as required.
When the output is to be increased more workers are added and when the
output is to be decreased, workers are removed.
(b) Level production strategy-Produce at a constant rate and use inventories:
This strategy retains a stable work force producing at a constant output rate.
Inventory can be accumulated to satisfy peak demands. Promotional
programs may also be used to shift demand. However, by producing at a
constant rate, it is possible that the entire demand is not met leading to sales
loss in some periods while excess production results in inventory build-up in
some cases.
(c) Stable work-force strategy- Produce with stable workforce but vary the
utilization rate : This strategy retains a stable work force but permits overtime,
part-time, and idle time. Some versions of this strategy leads to a combination
of back orders, subcontracting, and use of inventories. This strategy avoids
the detrimental effects of layoff and hence is seen as a stable strategy.
Typically, information technology companies follow this strategy.

2. Mixed strategies-the production targets are achieved by a combination of

approaches which seeks to utilize resources both in-house and as well external to
the organization. In mixed strategies, the aggregate planner has a wide variety of
choices by mixing two or more strategies. The number of mixed strategies in
alternative production plans is almost limitless. However, based on the realities of the
situation, the number of practical solutions is limited.
3. Mathematical Planning Models
Mathematical models attempt to refine or improve upon the trial-and-error
approaches. However, the solution generated may not be feasible and need to be
refined. A popular technique is the application of transportation algorithm which is a
special case of the linear-programming model. It views the aggregate planning
problem as the problem of allocating capacity (supply) to meet forecast requirements
(demand) where supply consists of the inventory on hand and units that can be
produced using regular time (RT), overtime (OT), and subcontracting (SC), etc.
Q4. Illustrate the different methods by which quality is sought to be achieved
using various tools and techniques.
1. Quality at the source
The concept of quality makes the production worker responsible for inspecting
his/her own work and for taking corrective actions. Since inspection is done
immediately after a job is done, finding the cause of the error with clarity aids in
faster rectification. Every worker has the authority to stop production, if he/she finds
some serious defect. This puts responsibility for quality on the workers and gives
them pride in their work. Help should always be available from the quality control
personnel to help workers understand the implications of the above actions. This
brings in cooperation and improves the achievement of quality. The information
generated may be used to effect improvements at the suppliers end also. The entire
process brings in openness, commitment, participation and helps in achieving
2. Quality control tools
The most popular and widely used tools are called as 7 QC tools. These include flow
chart, check sheet, histogram, pareto analysis, scatter diagram, control chart, and
cause and effect diagram. These are the basic seven quality control tools used for
achieving or improving quality.
3. Acceptance sampling
Acceptance sampling is also known as end of line inspection and categorizing the
products based on sample based inspection. In acceptance sampling method of
quality control, the supplier and customer agree upon accepting a lot, by inspecting a
small number taken randomly from the bulk supply. Out of the sample, if a small
number as agreed upon by the parties or as validated by a sampling scheme, is
determined as defective, the lot is accepted. If the number of defectives is more than
the agreed size, the entire lot is rejected. Obviously, risks for the producer and buyer
exist. As the sample size increases and the number of acceptable defectives
decreases, the risk for the buyer decreases. And the converse is true. That is the

reason these numbers cannot be fixed as they depend on the customers

requirements. Sometimes parties go for a doubling sampling plan. In this case a
range of defectives is fixed. If defectives are less, the lot is accepted. If it is more
than the higher number, the lot is rejected. If the number of defectives falls between
the above two numbers, another sample of a higher size is taken for inspection and if
the total number of defectives is less than another determined number, the lot is
Q5. Explain the basic competitive priorities considered while formulating
operations strategy by a firm?
Ans. Operations strategy reflects the long-term goals of an organization in its
corporate strategy. To achieve good results, a clear understanding of the operating
advantages and a good cross functional coordination between functional areas of
marketing, production, finance, and human resources departments are required.
Operating advantages depend on its processes and competitive priorities considered
while establishing the capabilities. The basic competitive priorities are:
1. Cost
Cost is one of the primary considerations while marketing a product or a service.
Being a low cost producer, the product accepted by the customer offers sustainability
and can outperform competitors. Lower price and better quality of a product will
ensure higher demand and higher profitability. To estimate the actual cost of
production, the operations manager must address labor, materials, scrap
generations, overhead and other initial cost of design and development, etc.
2. Quality
Quality is defined by the customer. The operations manager looks into two important
aspects namely high performance design and consistent quality. High performance
design includes superior features, greater durability, convenience to services, etc.
where as consistent design measures the frequency with which the product meets its
design specifications and performs best.
3. Time
Faster delivery time, on-time delivery, and speedy development cycle are the time
factors that operations strategy looks into. Faster delivery time is the time elapsed
between the customer order and the delivery. On-time delivery is the frequency with
which the product is delivered on time. The development speed is the elapsed time
from the idea generation up to the final design and production of products.
4. Flexibility
Flexibility is the ability to provide a wide variety of products, and it measures how fast
the manufacturer can convert its process line used for one product to produce
another product after making the required changes. The two types of flexibilities are:
Customization and Volume flexibility. While customization is the ability of the firm to
satisfy the specific needs of each its customer, the volume flexibility is the ability to
accelerate or decelerate the rate of production to handle the fluctuations in demand.
Q6. Explain briefly the four classification of scheduling strategies?
Ans. Scheduling strategy differs from organization to organization as it depends on
the quantum of production, size and type of production, companys policy, priorities,
etc. Most of these strategies are concerned with job shop production since the

problems encountered is more when more than one product is produced in the same
Following are the classifications:
Detailed scheduling
Cumulative scheduling
Cumulative-detailed scheduling
Priority decision rules
1. Detailed scheduling
All job orders from customers are scheduled to the last details. This may not be
practical in case disruptions are there in production line like machine breakdown,
absenteeism, etc. (Possible in airlines, hotels, etc)
2. Cumulative scheduling
The customer orders are pooled to form a cumulative work load and then matched
with the capacity. The work load is then allocated in such a way that immediate
periods get allocated to maximum capacity.
3. Cumulative-detailed combination
This combines both the earlier strategies of firm and flexible nature of work load.
Cumulative work load projections can be used to plan for capacity as needed. As
changes happen during the week, the materials and capacity requirements are
updated. The actual time allocated to the specified job at each work center is as per
the standard hours needed. This is tuned further with the requirements of the master
4. Priority decision rules
When a set of orders are to be executed, the question of prioritizing arises. These
priority decision rules are scheduling guidelines used independently or in conjunction
with any one of the above three strategies.
The major criteria for applying rules are set up costs, idle time of machine and labor,
in-process inventory, percentage of jobs that are late, average number of jobs
waiting in queue, average time to complete job, and standard deviation of time to
complete job.
Classifications of priority decision rules
A. Single-criteria rules
B. Combined criteria rules (Johnsons rule)
C. Critical ratio scheduling
D. Index method of scheduling
E. Critical path method