WINTER DRIVE 2015

EXAM

APRIL/MAY 2016

MASTERS OF BUSINESS ADMINISTRATION

SEMESTER II
SUBJECT CODE - MB0044
PRODUCTION AND OPERATIONS MNGT.
Q. No.1 What is value engineering? List the main benefits of value
engineering?
Ans.1
Value engineering\ value analysis
Value engineering (VE) or value analysis is a methodology by which we try to
minimize the cost and improve the revenue of a product or an operation.
Let us consider a component which needs a round brass rod as raw material of
diameter 21.5mm. the component has to perform seven operations: cutting,
drilling, chamfering, boring, milling, plating, and polishing.
Value analysis considers all aspects of each of these and investigates whether any
of them can be substituted by another material, a different size, a different tool for
an operation, a different chemical, a different concentration, a different voltage,
shorter time or processing.
Modern manufacturing can be seen from two important perspectives. One is the
management approach which consists of adopting techniques like TQM, JIT,
Kanban, cincurrent engineering, lean manufacturing, TPM, group technology,
cellular manufacturing, and others. These have basic philosophies based on which
techniques, tools, and methodologies are developed, to aid the process, we have
computers and software written to collect data, process them, distribute them, and
analysa them. We have management information systems which help in decision
making, and this can be stated as the second important perspective.

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With globalization, procurement and distribution are being conducted over great
distances. The main thrust is on quality and timely delivery at the least price.
These are the values that we put in the product.

Benefits:
The main benefits of the application of VE are:

cost reduction

overall cost consciousness

a culture of effecting savings across organization

streamlining of administration and creation of transparency in all dealings

evens with outsiders

development of reliable suppliers

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Q. No.2 Case study: SABMiller revamps supply chain management

SABMiller, the $24bn global brewing giant,is revamping its supply chain
management system to reduce stock-outs caused by an increasingly
complex and hard to predict market.
The firm is developing and testing the new system in South Africa with an
eye on rolling it out to group companies worldwide. Says SABMiller
programme manager Rudi van Schoor.
The trigger for the revamp came when the companys customers ran out
of stocks of popular SABMiller brands during peak periods in two
consecutive years, 2007 and 2008. The shortfall on some brands was as
high as 22%. That had a direct on the bottom line, Van Schoor says.
Given SABMillers ambition to be the worlds most efficient producer,
such a gap was never going to be tolerated. Bout instead of addressing
the symptom, it called in management consultancy
McKinsey to look at the entire supply chain system to see where it could
be improved and future stock-outs avoided.
The study revealed a complex situation, one that wasnt susceptible to a
quick fix, Van Schoor says..
Why did SABMIller revamp its supply chain? Describe the domain
application used for SCM integration?
Ans.2
Solution: It revamped its SCM system to reduce stock-outs. As its customers ran
out of stocks of popular its brands during peak periods in 2007 & 2008. The
shortfall on some brands was as high as 22%.Its average stock availability target of
98%."But for some premium brands the target is 100%. It has excess stocks of
some products.
Analyze key & minor issues for revamping
Key issue for revamping is to reduce stock-outs. It has average stock availability
98% but shortfall on some brands was as high as 22% in during peak periods in 2
consecutive years. It has excess stocks of some products. So, there is mismatch
between cost of under stocking & cost of overstocking. As per given information, it
is testing the new system in South Africa .But to test all nations. McKinsey
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suggested to use SAP & it has to improve stock-outs with correct demand, see
ethnicity & demography of diverse South African market which is fast-changing. It
suggested to change and upgrade tastes & also see new product development &
new routes to market. Major issue is its brands are the same as any other rivals
brand but if buyer does find product, he switches to substitute rivals brand. That's
dangerous. There is lack of planned promotions, a reason for raising cost.
Description of the SAP system, why it was used & benefits from using it.
SAP maintains records, sees gaps that creeps into O.
Use it along with ERP software to store, sort & see
data & make them available to staff across the globe. SAP will forecast sales for
about 2,600 SKU depots for brewing division & 3,100 for the soft drinks division
etc. It will integrate data 12 factories (7 breweries &5 soft drink plants).With it , it
will have planned conversion of input into output, procurement &production
scheduling. With SAP ,it can use Infor's demand forecasting. It will see costeffective location, given the local demand, manufacturing, transport and inventory
costs.
SABMilller, the $24bn global brewing giant, is revamping its supply chain
management system to reduce stock-outs caused by an increasingly complex and
hard to predict market. The firm is developing and testing the new system in South
Africa with an eye on rolling it out to group companies worldwide, says SABMiller
programme manager Rudi van Schoor. The trigger for the revamp came when the
company's customers ran out of stocks of popular SABMiller brands during peak
periods in two consecutive years, 2007 and 2008. The shortfall on some brands
was as high as 22%. "That had a direct impact on the bottom line," Van
Schoorsays.
Q. No: 3 Write short notes on:

Ingredients of a business process

Acceptance sampling

Work Breakdown Structure

Productivity

Ans.3 (a)
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The ingredients of business process:The ingredients that might be used in a business process can be briefly outlined as
follows:

the data which accomplishes the desired business objective

acquisition, storage, distribution, and control of data which undrtakes the

process across tasks

persons, teams, and organizational

units which helps to perform and

achieve the take

decisions which enhance the value of data during the process

We also have some behavioral aspects of the business process, mainly the decision
making process where humans are involved. Decision failures are common and
research has shown that, the failure of decisions due to:

bases in perception and fallacies in reasoning

tendency to bring out of memory the facts that reinforce easily for
verification and\ or confirmation

tendency of bring out of memory the facts that reinforce our assumption and
based evaluation

tendency to accept evidence or facts as absolute which support our

hypothesis

These listed factors result in faulty decision making. Being aware and avoideing
them consciously improves the processes of the business.
(b)
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
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acceptable defectives decreases, the risk for the buyer decreases. And the
converse is true. That is the reason these numbers cannot be foxed as they
depend on the customers requirements.
(c)
Work breakdown structure (WBS):
The entire process of a project may be considered to be made up on number of sub
process placed in different stage called the work breakdown structure (WBS).
WBS is the technique the content of work and cost by breaking it down into its
component parts. Project key stages form the highest level of the WBS, which id
then used to show the details at the lower levels of the project. Each key stage
comprises many tasks identified at the start of planning and later this list will have
to be validated.
(d)
Productivity
Productivity is generally expressed as the ratio of outputs to inputs.

While

the above ratio may imply efficiency is the value

added for every unit of investment. Thus, it is value added upon cost.
Enhancement of productivity is achieved by either reducing the inputs for the
same output or increasing the output by using the same input.
Productivity can be calculated for:

A single operation

A functional unit

A department or division

A plant

Productivity is a measure of the efficiency of the system and looks at the

economies achieved during the processes. Every process will have a number of
contributions which help in achieving the maximum productivity. The processes are
people, machines, facilitating goods, ancillary equipments, and technology. Each of
these elements attempts to enhance the contribution of other elements.
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Q. No. 4 Collaborative Forecasting Running Smoothly at Brooks Sports.

Brooks Sports designs and develops high-performance running footwear,
apparel and accessories which are sold in 80 countries worldwide. In
2001, when the company shifted from a broad product line to focus on
high-performance products targeted at serious runners, it was clear that
the forecasting process needed to change to support the strategic
direction of the company. The existing forecasting process, based
entirely on the judgment of the sales team, was limiting the companys
ability to grow.
What is the main issue of the case study? Analyze the forecasting
solution.
ANS.4
Main issue of the case study: The main theme of the case study is to change
the forecasting process of the company to make the company grow because
existing forecasting process is entirely based on the judgment of the sales team.
Forecasting challenges: The strategy shift created a number of forecasting
challenges for Brooks including:
Inconsistent style growth: the new line of products experience growth rates
anywhere from 0 to 50 percent annually.
Long production planning horizon coupled with short product life: production and
capacity decisions are typically made 18 months before a style is launched,
average lead time for a style is 6 months and the product life of Brooks styles
range from 6 to 24 months. This means that planners must sometimes set the
entire demand plan for a style prior to ever.
Average lead time for a style is 6months, must be made 18 months before a
style is launched. It had to set demand plan for a style prior to ever getting
customer order.
Rising at-once orders for immediate shipment is< 20% of total sales. Since
2001, however, at once orders have risen to nearly 50% of total sales.
No exposure to retail sell-through: Footwear are sold primarily through specialty
stores who can share sales data with vendors.
Evaluation of collaborative forecasting (DF)
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In Collaborative DF, team set up 3 steps:

Step 1: It makes monthly DF of SKU by seeing level, trend, seasonality. It has
software Forecast Pro to do so.
It has Ability: to create accurate DF.
to choose DF models or let software automatically select models
to model events (key for predicting spikes in D with new product launches)
to produce consistent DF at all aggregation
to override facility to enable collaborative forecasting
Implementing Forecast Pro is simple &it also addresses challenge of DF on
regular basisas races.
It forecasts a product hierarchy & generates detailed DF at the SKU level for
demand planning.
Step 2: On a quarterly basis, it does DF of sales for a 12-month horizon. We get
input via the Web .
Step 3: It compares statistical & judgmental DF & adjusts to create final monthly
DF.90% of the final DF are the same as statistical DFchanges are most
commonly made to the forecasts for new styles. These final DF are then
automatically fed into its ERP system. We now can systematically track changes,
&understanding of our DF performance.
Conclusion on if solution can be improved or not
By using Forecast Pro, DF accuracy has improved on average by 40 %, unfulfilled
demand has been lowered from approximately 20 % to < 5 % & closeouts have
been reduced by > 60%.It smoothens production & lowers costs.
Q.No.5 Explain the risk management and its various components.
ANS.5 Risk management: Risk management aims to identify the risks and then
take actions to minimize their effect on the project. Risk management entails
additional cost. Hence, risk management can be considered cost-effective only if
the cost of risk management is considerably less than the cost incurred if the risk
materializes.
Four important components in risk management are risk assessment, risk control,
risk prioritising and risk mitigation.
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Risk Assessment: Risk assessment identifies the possible risks & assesses the
consequences by means of checklists of possible risks, surveys, meetings and
brainstorming, and reviews of plans, processes and products. We can also use the
process database to get information about risks and risk management on similar
projects. Risk Assessment occurs at each stage of the project life cycle. To identify
risks, we must first define risk. The best and most common methodology for risk
identification is done using a brainstorming session but collecting known problems
and probable future problems.
Risk control : Identify the actions needed to minimize the risk consequences.
Develop plan, Focus on the highest prioritised risks. Here use quantitative
assessment of risk probability and the risk consequences. For each risk, see rate of
its occurrence and indicate if risk is low, medium or of high category. If necessary,
assign probability values in the ranges & assign a weight on scale of 1 to 10.
Risk prioritising: Rank risks based on the probability. e.g, high probability, high
impact item will have higher rank than a risk item with a medium probability and
high impact.
Risk mitigation: Select the top few risk items for mitigation and tracking. Refer to
a list of commonly used risk mitigation steps for various risks from the previous
risk logs maintained by firm & select suitable . Execute steps by incorporating
them into project schedule. Besides, see progress of the planned risk mitigation
steps, periodically revisit the risk perception .
Q.No. 6 Why redesign of layouts may be necessary? List the differences
between product and process layout.
ANS.6 The most common reason for redesign of layouts include inefficient
operations, accident or safety hazards, changes in the design of a products or
services, introduction of new products and services, changes in the volume of
output, changes in methods of equipment, changes in environmental or other legal
requirements and morale problems. In factory, we need to arrange machines &
also space to store materials, tools, & also provide support services like dining,
parking &

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space to interact with buyers. Such arrangement is called layout means floor
plan etc. It is physical arrangement of work centers. A floor plan means length &
breadth for different functional need but layout is 3 dimensional need as it also
looks for utilization of volumetric space.
L raise productivity via
i) Reducing work-in-process
ii) Shortening manufacturing time
iii) Supervising better
iv)Adjusting as per changing conditions
v) Minimizing material handling costs
vi) Raising throughput etc
A few differences between product and process layout are:
Product layout
Minimum requirement of in-

Process layout
Maximum requirement of in-

process inspection
Use of special purpose machines
Production of stock i.e. for steady

process inspection
Use of general purpose machines
Production for individual orders

demand
Possibility of achieving good

Difficult to achieve good

equipment and labour balances

equipment and labour Balances

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