Date: 14/08/2020

LEADSTAR COLLEGE OF MANAGEMENT

Max mark: 50%
COLLEGE OF BUSINESS AND LEADERSHIP

DEPARTMENT OF MANAGEMENT

Postgraduate Program (MBA)

Operation and Production Management Final Exam

1. Operation of Manufacturing and service is not similar. Having this fact in

your mind distinguish the difference between manufacturing and service
operation.

Manufacturing operations produce tangible goods, which are physical products that can be
held and seen. On the other hand, service operations provide certain intangible services that
may not be easily identifiable. Service operations can be classified into many industries, such
as banking, hospitality, advertising and consultancy.

There are five main differences between service and manufacturing organizations: the
tangibility of their output; production on demand or for inventory; customer-specific
production; labor-intensive or automated operations; and the need for a physical production
location.

Tangibility of Output

The key difference between service firms and manufacturers is the tangibility of their output.
The output of a service firm, such as consultancy, training or maintenance, for example, is
intangible. Manufacturers produce physical goods that customers can see and touch.

Production on Demand

Service firms, unlike manufacturers, do not hold inventory; they create a service when a
client requires it. Manufacturers produce goods for stock, with inventory levels aligned to
forecasts of market demand. Some manufacturers maintain minimum stock levels, relying on
the accuracy of demand forecasts and their production capacity to meet demand on a just-in-
time basis. Inventory also represents a cost for a manufacturing organization.
Customer Specific Production

Service firms do not produce a service unless a customer requires it, although they design
and develop the scope and content of services in advance of any orders. Service firms
generally produce a service tailored to customers’ needs, such as 12 hours of consultancy,
plus 14 hours of design and 10 hours of installation. Manufacturers can produce goods
without a customer order or forecast of customer demand. However, producing goods that do
not meet market needs is a poor strategy.

Labor Requirements and Automated Processes

A service firm recruits people with specific knowledge and skills in the service disciplines
that it offers. Service delivery is labor intensive and cannot be easily automated, although
knowledge management systems enable a degree of knowledge capture and sharing.
Manufacturers can automate many of their production processes to reduce their labor
requirements, although some manufacturing organizations are labor intensive, particularly in
countries where labor costs are low.

Physical Production Location

Service firms do not require a physical production site. The people creating and delivering
the service can be located anywhere. For example, global firms such as consultants Deloitte
use communication networks to access the most appropriate service skills and knowledge
from offices around the world.

Manufacturers must have a physical location for their production and stock holding
operations. Production does not necessarily take place on the manufacturer's own site; it can
take place at any point in the supply chain.
 2. As an operation strategist, you are expected to advice ABC Company to
have a distinctive competence operation among the existing rivalry. Thus,
what will you orient the company to be a distinctive competence operator?
Give a brief explanation.

A distinctive competency is a competency unique to a business organization, a competency

superior in some aspect than the competencies of other organizations, which enables the
production of a unique value proposition in the function of the business. A distinctive
competency is the basis for the development of an unassailable competitive advantage.

Operations strategy has a long-term concern for how to best determine and develop the firm's
major operations resources.

To determine its distinctive competence or competences, ABC Company should conduct an

internal and external review and find those areas of skill and technology that are in demand in
the marketplace. If these skills are not in demand, they are not areas of competence. An
organization must also consistently change its distinctive competence in a changing business
environment to keep its competitive edge, and its competence must become part of its corporate
strategy. Examples of distinctive competence are fast delivery and the extremely high quality of
an organization's product.

So ABC Company can determine its distinctive competence using these determinants:

 Price/ Cost
 Quality
 Service
 Flexibility

 Tradeoff
 3. It is an indispensible for every organization to design a product at its onset
stage before commercialization. Hence, what are the process/ stages to be
followed for new product development? Explain each process.

In order to stay successful in the face of maturing products, companies have to obtain new ones
by a carefully executed new product development process. Here is eight stages of new product
development:

1. Idea generation

The new product development process starts with idea generation. Idea generation refers to the
systematic search for new-product ideas. Two sources of new ideas can be identified:

 Internal idea sources: the company finds new ideas internally. That means R&D, but also
contributions from employees.

 External idea sources: the company finds new ideas externally. This refers to all kinds of
external sources, e.g. distributors and suppliers, but also competitors. The most important
external source are customers, because the new product development process should
focus on creating customer value

2. Idea screening

The next step in the new product development process is idea screening. Idea screening means
nothing else than filtering the ideas to pick out good ones. In other words, all ideas generated are
screened to spot good ones and drop poor ones as soon as possible. While the purpose of idea
generation was to create a large number of ideas, the purpose of the succeeding stages is to
reduce that number. The reason is that product development costs rise greatly in later stages.
Therefore, the company would like to go ahead only with those product ideas that will turn into
profitable products. Dropping the poor ideas as soon as possible is, consequently, of crucial
importance.
 3. Concept development and Testing

To go on in the new product development process, attractive ideas must be developed into a
product concept. A product concept is a detailed version of the new-product idea stated in
meaningful consumer terms. You should distinguish

 A product idea an idea for a possible product

 A product concept a detailed version of the idea stated in meaningful consumer terms

 A product image the way consumers perceive an actual or potential product.

4. Marketing strategy development

The next step in the new product development process is the marketing strategy development.
When a promising concept has been developed and tested, it is time to design an initial
marketing strategy for the new product based on the product concept for introducing this new
product to the market.

5. Business analysis

Once decided upon a product concept and marketing strategy, management can evaluate the
business attractiveness of the proposed new product. The fifth step in the new product
development process involves a review of the sales, costs and profit projections for the new
product to find out whether these factors satisfy the company’s objectives. If they do, the product
can be moved on to the product development stage.

6. Product development

The new product development process goes on with the actual product development. Up to this
point, for many new product concepts, there may exist only a word description, a drawing or
perhaps a rough prototype. But if the product concept passes the business test, it must be
developed into a physical product to ensure that the product idea can be turned into a workable
market offering. The problem is, though, that at this stage, R&D and engineering costs cause a
huge jump in investment.
 7. Test marketing

The last stage before commercialization in the new product development process is test
marketing. In this stage of the new product development process, the product and its proposed
marketing program are tested in realistic market settings. Therefore, test marketing gives the
marketer experience with marketing the product before going to the great expense of full
introduction. In fact, it allows the company to test the product and its entire marketing program,
including targeting and positioning strategy, advertising, distributions, packaging etc. before the
full investment is made.

8. Commercialization

Test marketing has given management the information needed to make the final decision: launch
or do not launch the new product. The final stage in the new product development process is
commercialization. Commercialization means nothing else than introducing a new product into
the market. At this point, the highest costs are incurred: the company may need to build or rent a
manufacturing facility. Large amounts may be spent on advertising, sales promotion and other
marketing efforts in the first year.
 4. Describe briefly, product flow characteristics.

Batch Flow

•Production of batches or lots

•Batches flow as a unit (set) from one work center to another •Process layout of
work centers (by tasks)

•Flow is jumbled and intermittent

•Flexible labor and equipment (general purpose)

•Low volume, variety of products

•Many types of products (furniture, dishes, boats)

Job Shop

•Customized to customer order

•Production of small batches or lots

•Layout/Flow similar to Batch Flow

•Flexible labor and equipment (general purpose)

•Many different types of made-to-order products (plastic parts, machine

components, sheet metal parts, custom signage, etc.)
Project

•Production of customized single products

•Labor and materials brought to site

•Planning, scheduling challenges

•Little automation, general purpose equipment

•Highly skilled and flexible labor

•Unique, one of a kind products (bridges, building construction, large aircraft, etc.)
 5. Briefly describe the basic production layout formats

There are four basic production layout formats:

1. Process Layout

The first layout to look at is the process layout. In this layout, similar items are grouped together.
This type of layout is commonly seen in auto shops and department stores. Looking into an auto
shop, you might see that screwdrivers are located in one location, while the car parts are located
in a different location. In a department store, you will probably see the women's clothes in one
area, the men's clothes in another area, and the toys in yet another area.

This type of layout is ideal for facilities that perform custom jobs. Auto shops, for example, are
usually asked to perform a different job with each customer. Department stores serve many
people at a time, each with a different need.

The drawback to this type of layout is its inefficiency. It takes time to gather all the needed tools
and there is a lot of backtracking as products and tools are shuffled from place to place.

2, Product or Line layout

In an industrial set up, sometime, the machines and equipments are arranged in one line
depending upon the sequence of operations required for the product. The raw materials and semi-
finished materials move from one workstation to another sequentially without any backtracking
or deviation.

Under this, machines are grouped in one sequence. Therefore materials are fed into the first
machine and finished goods travel automatically from machine to machine, the output of one
machine becoming input of the next, e.g. in a paper mill, bamboos are fed into the machine at
one end and paper comes out at the other end.

The raw material moves very fast from one workstation to other stations with a minimum work
in progress storage and material handling. The grouping of machines is done on following
general principles.
3. Fixed position or location layout

Fixed position layout involves the movement of manpower and machines to the product which
remains stationary. The movement of men and machines is advisable as the cost of moving them
would be lesser. This type of layout is preferred where the size of the job is bulky and heavy.
Example of such type of layout is locomotives, ships, boilers, generators, wagon building,
aircraft manufacturing, etc.

4. Combined or group layout

Certain manufacturing units may require all three processes namely intermittent process (job
shops), the continuous process (mass production shops) and the representative process combined
process [i.e. miscellaneous shops]. In most of industries, only a product layout or a process
layout or a fixed location layout does not exist. Thus, in manufacturing concerns where several
products are produced in repeated numbers with no likelihood of continuous production,
combined layout is followed.
6. The following task must be performed on an assembly in the sequence and times
specified;
Task Task time (in second) Task that precedes
A 50 -----
B 40 -----
C 20 A
D 45 C
E 20 C
F 25 D
G 10 E
H 35 B, F, G

Required;
a. Draw the schematic diagram
b. What is the theoretical minimum number of stations required to meet a forecast demand
of 400 units per eight hour day?

C= production times per period

Required output period
 = 489 X 60 Sec
400 units
= 72 sec/unit
The theoretical min number of work station
Nt= sum of task times (T)
Cycle times(C)
= 245 min/sec
72min/sec
3.4

c. Use the longest task time and balance the line in the minimum number of stations to
produce 400 units per day.

d. Calculate efficiency of the line.

Efficiency = Sum of tasks

Na X T
= 245 x 100
4 x 72
= 85%

7. Elucidate the seven tools of Total quality Management.

Many organizations use quality tools to help monitor and manage their quality initiatives. There
are several types of tools that can be used. However, there are seven management tools for
quality control that are the most common.

1. Flowchart

Most of us are familiar with flowcharts. You have seen flowcharts of reporting relationships
in organizational structures. Flowcharts are also used to document work process flows. This tool
is used when trying to determine where the bottlenecks or breakdowns are in work processes.
Flow-charting the steps of a process provides a picture of what the process looks like and can
shed light on issues within the process.

Flowcharts are also used to show changes in a process when improvements are made or to show
a new workflow process.

2. Check Sheet

A check sheet is a basic quality tool that is used to collect data. A check sheet might be used to
track the number of times a certain incident happens.

3. Cause and Effect (fish bone) Diagram

A cause and effect diagram, also known as a fish-bone diagram shows the many possible causes
of a problem.

To use this tool, you need to first identify the problem you are trying to solve and simply write it
in the box (head of the fish) to the right

4. Pareto Chart

A Pareto chart is a bar graph of data showing the largest number of frequencies to the smallest.

5. Control Charts

Control charts or run charts are used to plot data points over time and give a picture of the
movement of that data.

These charts demonstrate when data is consistent or when there are high or low outliers in the
occurrences of data.

It focuses on monitoring performance over time by looking at the variation in data points.

6. Histograms

Histograms are bar chart pictures of data that shows patterns that fall within typical process
conditions.
7. Scatter Diagrams

Scatter diagrams are graphs that show the relationship between variables. Variables often
represent possible causes and effect.
 8. Explain briefly determinants of service quality.

Ten Determinants of Service Quality

1. RELIABILITY: consistency of performance and dependability, accuracy in billing,

keeping records correctly, performing the service right at the designated time.

2. RESPONSIVENESS: willingness or readiness of employees to provide service,

timeliness of service such as mailing a transaction slip immediately, calling the customer back
quickly, giving prompt service.

3. COMPETENCE: possession of the required skills and knowledge to perform the service,
knowledge and skill of the contact and support personnel, research capability of the organization.

4. ACCESS: approachability and ease of contact, the service is easily accessible by

telephone, waiting time to receive service is not extensive, convenient hours of operation,
convenient location of service facility.

5. COURTESY: politeness, respect, consideration, friendliness of contact personnel,

consideration for the consumer's property, clean and neat appearance of public contact personnel.

6. COMMUNICATION: keeping customers informed in language they can understand and

listening to them, explaining the service itself and its cost, assuring the consumer that a problem
will be handled.

7. CREDIBILITY: trustworthiness, believability, honesty, company reputation, having the

customer's best interests at heart, personal characteristics of the contact personnel.

8. SECURITY: freedom from danger, risk, or doubt, physical safety, financial security,
confidentiality.

9. UNDERSTANDING/KNOWING THE CUSTOMER: understanding customer needs,

learning the customer's specific requirements, providing individualized attention, recognizing the
regular customer.

10. TANGIBLES: physical evidence and representations of the service, other customers in
service facility.

9. Briefly describe all key elements of JIT.

It originally referred to the production of goods to meet customer demand exactly, in time,
quality and quantity, whether the `customer' is the final purchaser of the product or another
process further along the production line.

It has now come to mean producing with minimum waste. "Waste" is taken in its most general
sense and includes time and resources as well as materials. Elements of JIT include:

Continuous improvement

o Attacking fundamental problems - anything that does not add value to the
product.

o Devising systems to identify problems.

o Striving for simplicity - simpler systems may be easier to understand, easier to

manage and less likely to go wrong.

o A product oriented layout - produces less time spent moving of materials and
parts.

o Quality control at source - each worker is responsible for the quality of their own
output.

o Poka-yoke - `foolproof' tools, methods, jigs etc. prevent mistakes

o Preventative maintenance, Total productive maintenance - ensuring machinery

and equipment functions perfectly when it is required, and continually improving
it.

Eliminating waste.

There are seven types of waste:

o waste from overproduction.

o waste of waiting time.

o transportation waste.

o processing waste.

o inventory waste.

o waste of motion.

o waste from product defects.

Good housekeeping - workplace cleanliness and organisation.

Set-up time reduction - increases flexibility and allows smaller batches. Ideal batch size is
1item. Multi-process handling - a multi-skilled workforce has greater productivity, flexibility and
job satisfaction.

Levelled / mixed production - to smooth the flow of products through the factory.

Kanbans - simple tools to `pull' products and components through the process.

Jidoka (Autonomation) - providing machines with the autonomous capability to use judgement,
so workers can do more useful things than standing watching them work.

Andon (trouble lights) - to signal problems to initiate corrective action.

Case Part: Growth at Software Technology Parks of India (STPI)

Until the late 1990s, Noida, a suburb north of Delhi was sleepily haven for pensioners wishing to
escape the hustle and bustle of Indians capital city. Now it is a boom town wish shopping malls,
multiplex cinemas and chaotic traffic reflecting its growth and the lifestyle that its well educated
workforce is demanding.

At the center of Noida’s rapid expansion is the office that houses software technology parks of
India (STPI), the quango at the center of Indias rapid IT growth. STPI is the licensing authority
for companies wanting to export IT or IT- enabled services. Formed in 1991, STPI has been
central to the rapid growth in Indias it service exports, which in 2015-16 are forecast to rise to as
$112 billion. As well as its licensing roles, STPI has pushed hard on developing the necessary IT
infrastructure, including setting up broad band networks across the country. IT now receives 10
applications per week from companies wanting to join the IT phenomenon. While it expects this
rate to increase in the future, it is sure that it can still turn the paper work around inside a month.

10. Based on the above facts stated, analyze the case and relate with the factors affecting the
choice of continent/region, country and area/city.