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Fall-2013 Master of Business Administration - MBA Semester 3 OM0010 Foundation of Quality Management-4 Credits (Book ID: B1240) Assignment

t (60 Marks) Q1. What are the effects of Global Competition on the industries in India? (Global Competition Quality-3 marks, Customer Service-3 marks, Cost Challenges Advanced Technologies-3 marks, Conclusion-1 marks) 10 marks. Answer. Global Competition Quality Due to rapid globalisation, industries in most countries are facing intense competition. Developed countries look for new markets for their products in new countries as their own home markets are maturing, while the emerging economies churn out superior products offered at lower prices since the industries in their countries look for larger markets. Tremendous growth in transportation and communication has made accessing the modern and distant market easier. The entire world can be perceived today as a Global Village5, wherein economic events in one country promptly affect other countries. China and India, with their very large populations, have emerged as the biggest markets for the future. On the other hand, the same high population, coupled with improved education levels and experience in many industries, are also posing fresh competition to west-based industries.The above dynamics are giving birth to new international companies whose domain of operations spans several countries. Consequently, operations managers have to coordinate with geographically dispersed operations. On the other hand, several countries have broken trade barriers and are actively cooperating with other countries. For example, the European Union is one such example; even though the countries are separated geographically by thousands of miles they have set up bilateral agreements. These have given rise to more strategic alliances amongst individual companies. Quality, Customer Service and Cost Challenges Spiralling competition and great strides in innovation have literally made (prospective) customers to behave like kings. Due to the awareness of the choices available for them, customers demand for quality of products. Consequently, many companies today are no more satisfied with delivering acceptable quality but strive for perfect product and service quality. Companies are now striving to meet the customers needs and meet the ideal of perfect quality that is the concept of Total Quality Management (TQM). TQM also focuses on continuous improvement of quality which, in turn, calls for empowering all those who are involved in making and delivering the products. Another area of pressure on companies is that of costs and prices. Industry has found ways to reduce cost and to increase scope of fixing prices in the market. Automakers concentrate productivity and retailers try to leverage such aspects as economies of scale, huge discounts on large scale purchases and other Supply Chain practices to reduce costs dramatically and thus, effectively compete in the market place. Other measures such as restructuring, downsizing, outsourcing, have become popular among companies in their attempts to keep costs low. Labour-intensive industries have resorted to off-shoring their activities. Advanced Technologies Both Manufacturing, as well as service industries has experienced farreaching impact on their operations because of automation. The initial disadvantages of high investments in automation are outweighed by not

only lower manpower costs, but also by improved productivity, improved quality, reduced wastage and scrap, quicker response to customers and more frequent introduction of new products and services. One of the examples of automation is Computer and Software Technology. Computer applications and software have helped companies replace labourintensive processes such as payroll, billing, sales order processing, inventory control, etc. with computerised software. Integrated ERP software systems facilitate real-time data and information to support decision making. Conclusion However, competitive advantage resulting out of a companys automation does not last long since competitors invariably duplicate such innovations. At the same time, companies cannot avoid innovating since doing so renders them at a competitive disadvantage.

Q2. How is Economies of Scope different from Economies of Scale? (Explanation of Economies of Scope and Economies of Scale -2 marks, Differences-5 marks, Examples-2 marks, Conclusion-1 marks) 10 marks Answer. Economies of Scope Many businesses, due to the competitive market, are forced to broaden into manufacture of different types of products, and achieve higher volumes only through the variety of products. Efficient and flexible operations systems can develop this process. This approach is called the Economies of Scope Economies of Scale The concept of Economies of Scale can be explained by considering a situation where a manufacturing facility has been just set up, and the necessary raw materials, power connections, work force, etc. have all been organised, and the company is all set to commence manufacture. Differences Economies of scope and economies of scale differ from each other. The difference is that, if an organisation or firm receives a cost advantage by producing a complementary variety of products with a concentration on a core competency. However, economies of scope and scale are often interdependent and positively correlated. Frankly speaking if the benefits from scope have little to do with the size of output. For example, if you take any paper products in the industry, it is common for large firms to produce the primary ingredient in paper and their own pulp. This is done before manufacturing the paper goods themselves. Smaller firms will have to buy pulp at higher costs from others, higher than what the large companies pay. For the large producers, an economy of scope would be the savings from producing both pulp and paper, although the large companies will probably have economies of scale that make it possible to invest in pulping operations in the first place. Conclusion

Economies of Scale and Economies of Scope are important techniques based on which both planning and execution of operational processes are conducted. While economy of scale seeks to reduce costs by scaling up operational levels, economy of scope is based on the fact that a company can optimise costs even by enlarging the basket of its products, so that certain fixed nature of costs are shared between the products.

Q3. List and explain the six basic steps involved in preparing a forecast (1. Understand and specify the purpose of the forecast 2. Establish a time-horizon of the forecast 3. Select the suitable forecasting technique 4. Mobilise relevant data and analyse the same 5. Prepare the forecast 6. Monitor the accuracy of the forecast) 10 marks Answer. The Forecasting Process Forecasting process is the mechanism for approaching for participation from people who are experienced and have the capability to predict the future events and arrange them in a sequence to develop a format. It generally defines on how to gather and arrange the information in a logical order. The forecasting process consists of six basic steps: 1. Understand and specify the purpose of the forecast: It is necessary to express for what purpose and when the forecast is to be used so that the level of detail and accuracy required, and the resources that can be justified can be examined. For example, if the firm is interested in introducing a new product within the next six months, or if the production department want to plan next month s production to meet the market demand, or, if the top management looking at diversifying into new areas of business. Each of the above situations would call for a different type of forecast- in terms of time-horizon, or accuracy level of the forecast and the forecast results would also be used differently in each case. 2. Establish a time-horizon of the forecast: The longer the time-horizon of forecast, the less is its accuracy likely to be. At the same time, the kind of decision to be made would decide the time horizon for which the forecast is required. The time horizon identified would also determine the type of data required in terms of variety and source of data and the detail to which the data is required. 3. Select the suitable forecasting technique: The next step after identifying the purpose, time-horizon, and the nature of data is to choose an appropriate model. To help do this, a sample set of data relating to earlier period can be picked up and a quick analysis can be done to examine the presence o f seasonal or cyclical effect. Information about existence of such patterns helps in selecting the appropriate model for consideration. Each model will involve certain parameters that are to be determined. For example, if a moving average technique is to be used to predict future demand, then the parameter would be the number of periods for which the average will be calculated. Based on the sample data, the parameters of the selected model have to be established, after which the logic could be used for forecasting. Mobilise relevant data and analyse the same: The quality and quantity of data that a firm can mobilise for forecasting purposes will limit the accuracy in forecasting. Therefore, it is vital to know the type of data required and the normal sources through which data can be obtained. Sales force estimates can provide data about:

Actual consumption Changing profile of consumption Competitors corresponding performances Movement in market shares amongst competitors Market growth figures Since sales force normally spans the entire geographical range of the firms market, data obtained through the sales force can be particularly significant in short-term forecasting, and for mid-course corrections to sales and production planning. 5. Prepare the forecast: While preparing a forecast you should follow few things which are very crucial. They are: Be very practical in estimating the forecast. You should choose the right technique for forecasting. 6. Monitor the accuracy of the forecast: A forecast has to be monitored to determine whether it is giving required results. Monitoring a forecast includes: Checking the forecast regularly against actual data that is present or against the historical data. Monitoring the operations for getting better results. Adjusting the forecast as the information flows, in case of absence of historical data. Q4. Explain Johnsons rule for sequencing and how it is different from CDS algorithm (Purpose or use of alogorithm-2 marks, steps to be taken-4 marks, differences-3marks, conclusion-1mark) 10 marks Answer. Johnsons Algorithm of Sequencing This algorithm is used for sequencing of n jobs through two work centres. The purpose is to minimise idle time on machines and reduce the total time taken for completing all the jobs. There are no priority rules since all jobs have equal priority. The order of the operations will be machine1 first and machine 2 next. The steps to be taken are: i) Choose the job which has the shortest processing time in any of the two work centres. ii) If it happens to be on machine 1, then load it first; if it is on machine 2, allot it for loading last. iii) Eliminate this job. Continue this till all jobs have been allotted. Example: Time on

Time 1 Hr. is on M/c1 load it first. Cancel the row which contains 1 and 3.25. The job is C. Next, time 1.25 is on M/c1. Load job F next. The next is 1.5 which is on M/c. 2. Load it last. The job is E, continue The loading sequence is given in the box below In case the period on two machines for any of the jobs is the same, you may choose either of them for applying the above rule. CDS Algorithm for n jobs on m machines This algorithm given by Campbell, Dudek and Smith, gives m-1 solutions and we can choose the most optimal between them. We will use the Johnsons rule by converting the number of machines from m to 2, by considering differing combinations like 1 and m, then1+2, then M-1 and M, then 1+2+3 and a M-2, M-1 and M, and so on. This process is useful, when the numbers of machines is small. We will work out a problem where we have 4 machines. Example:

Perform the following steps: i) Take column M1 and M4, ignoring M2 and M3. Get the sequence by applying Johnsons rule. ii) Next Combine M1 and M2 Make it as one machine MX and combine M3 and M4 and call it MY. Get the sequence. iii) Next Combine M1 and M2 and M3 and call it MC. Similarly combine M2 and M3 and M4. Call it MD. Find the sequence. iv) Calculate the total time taken to process all jobs A, B C, D and E. Choose whichever given the total time. The first table will be

Calculate the total time taken when this sequence is followed. Remember, that except for M1, other machines may have to wait to start their operations, until the previous operation is over. You have to include idle times at the beginning, middle or the end.

Q5. How does Crosbys absolute of quality differ from Demings principles? (Similarities between the two to understand the need of differentiating-3 marks, Differences in approach-5 marks, Conclusion-2 marks) 10 marks Answer.

Deming's Philosophy on TQM Plan, Deming counsels that businesses should design quality products and services that customers want, develop processes and systems that reduce waste and increase quality and decrease the cost of production. Deming wanted to revolutionize the way Beefy's Burgers produces burgers. To gain a better understanding of the customer preferences, he surveyed everyone involved in the operation, from the customers to the employees. He even called his suppliers in to get their opinions. From the information collected, Deming was able to determine a few important things. Beefy's was competitive on price. However, the burger was small and flavorless. He called his employees in and showed them how to properly grill the burgers. He called his supplier in to discuss alternatives to the current beef he uses. A timing schedule for completion of burger orders was set. No burger would hit the grill until the customer placed an order. Tomorrow would be go time! Next, the businesses must do the work by putting the plan into action. As processes and systems are running, they must continually seek ways to do things better. Deming's crew knew exactly what to do. Stations were set up for bun-slicing, burger-grilling and ketchup-squeezing. As customers placed their orders, the beef hit the grill, the bun was sliced 1.2 seconds after and delivered to the grill, ketchup was squeezed and the process ended with wrapping. Customers were thrilled with the new and improved burgers. However, during busy times, it wasn't feasible to make each burger as ordered. Lines formed, creating more customer complaints. This time complaints were about the system. As work moves through the processes and systems, check points will monitor changes that need to take place - changes like removing barriers to quality by providing employees with the tools needed to do the job right the first time. Finally, managers take action. Management may make changes. Deming tweaked a few things to speed up the process by placing more people on the line. Customers received their burgers on time, and they were tasty, too! Crosby's Ideology of Conformance to Quality Standards Philip B. Crosby was a contemporary leader in TQM. He didn't engineer principles or steps. He simply made TQM easier for the layman to implement by breaking it down to an understandable ideology that organizations should adopt. Crosby re-defined quality to mean conformity to standards set by the industry or organization that must align with customer needs.

There are Four Absolutes of Quality Management necessary for conformity:


Quality is defined as conformance to standards The system for causing quality is prevention The performance standard is not arbitrary; it must be without defect The measurement of quality is price of non-conformance

Crosby worked the register at Beefy's. He was also a business student at the local college. He used Beefy's as a field study on TQM. When customers sent back burgers, he looked at the price of inferior products and its toll on the overall organization. These four absolutes can be summed up to mean that quality is based on an industry or organizational standard, not flawlessness. That standard must be upheld. Inferior quality is preventable through processes that ensure quality, and the real measurement of quality is the price an organization pays for nonconformance to the quality standards set by the organization. Non-conformance to quality standards causes waste, and wasted product costs money! Crosby gets that Beefy's Burgers is a fast food joint. He did not demand a high-quality burger like those served at a steakhouse. He demanded that the burgers served at Beefy's meet the standard that Beefy's sets for their burgers. Conclusion In summary, W. Edwards Deming and Philip B. Crosby are three of the most influential people involved in total quality management. Total quality management is an approach to serving customers that involves the total reengineering of processes and systems to improve products and services in the way customers expect while considering the needs of employees and relationships with suppliers. Deming, Juran and Crosby believed that total quality management was the most important approach an organization can take to be competitive.

Q6. Analyse the various types of Probability distribution (Brief description of Discrete Distribution and Continuous Distribution -5 marks, Discrete Distribution Vs. Continuous Distribution-4 marks, Conclusion-1 marks) 10 marks Answer. Probability Distribution a probability distribution is a mathematical model that relates the value of the variable, with the probability of occurrence of that value in the population. In other words, we might visualise piston-ring diameter as a random variable. This is because it takes on different values in the population according to some random mechanism. Then, the probability distribution of ring diameter describes the probability of occurrence, of any value of ring diameter, in the population. Types of Probability Distribution There are two types of Probability Distribution: Discrete Distribution Continuous Distribution 1. Discrete Distribution: When the parameter being measured can only take on certain values, such as the integers 0, 1, 2, the probability distribution is called a discrete distribution. For example, the distribution of the number of nonconformities or defects in printed circuit boards would be a discrete distribution. A discrete probability can take on only a limited number of values, which can be listed. The function pi=P(X=Xi) or p(x), is called the probability function or more precisely probability mass

function (p.m.f) of the random variable X. The set of all possible ordered pairs {x, p(x)}, is called the probability distribution of the random variable X. To summarise the set of ordered pairs, [x, f(x)] is a probability function, probability mass function or probability distribution of the discrete random variable X, for each possible outcome x. if f(x) 0, then f(x) = 1 and P(X=x) = f(x). 2. Continuous distributions: When the variable being measured is expressed on a continuous scale, its probability distribution is called a continuous distribution. The probability distribution of piston-ring diameter is continuous. A frequency polygon gets smoother & smoother as the sample size gets larger, and the class intervals becomes more numerous and narrower. Ultimately, the density polygon becomes a smooth curve called, the density curve. The function that defines the curve is called the probability density function. Thus, in a continuous probability distribution, the variable under consideration is allowed to take on any value within a given range, so we cannot list all the possible values. A function p(x) is said to be the probability density function of the continuous random variable X, if it satisfies the following properties: p(x) 0, for all x in the interval *a,b+ For 2 distinct numbers c & d in the interval [a, b] P (c X d) = *Area under the probability curve between the ordinates (vertical lines) at x=c & x=d] Total area under the probability curve is 1, i.e., P (a X b) = 1 For a continuous random variable, the probability at a point is always zero, that is, P(X=c) =0, for all single point values of c. Hence, in case of continuous random variable, we always talk of probabilities in an interval & not at a point that is always zero.

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