Master of Business Administration. Examinations for 2008 Semester 2

Transcription

1 Master of Business Administration Cohort: MBA/08/PT - Year 1 Examinations for 2008 Semester 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. Page 1 of 10

2 QUESTION 1: (50 MARKS) SECTION A: COMPULSORY 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 Jamaica, China, Bangladesh, Malaysia and Vietnam, set up its first unit in Mauritius in 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 80 s. 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, JC 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 Page 2 of 10

3 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 1990 s 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 In 1995 Dr Lo took over as managing director. As a shrewd businessman, he reassessed the organisation s 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 Environment management system was put in place in 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 Page 3 of 10

4 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 June They met all expectations. In order to take advantage of AGOA, a spinning and weaving mill was set up at La Tour Koenig in 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) Page 4 of 10

5 (b) (i) Identify the type of production system which was prevalent in the late 1980 s. Justify your answer. (3 marks) (ii) Enumerate five characteristics of the production system identified in (i). (c) Differentiate between core and support processes for a garment manufacturing organization. Illustrate your answer with examples (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. Page 5 of 10

6 SECTION B: ANSWER ANY TWO QUESTIONS 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. (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? (ii) Calculate the total cost of the component for one year. (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? Page 6 of 10

7 QUESTION 3: (25 MARKS) (a) With reference to examples you are familiar with, explain the terms dependent demand and independent demand. (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) Page 7 of 10

8 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? (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. (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) Page 8 of 10

9 Activity Code Activity Duration (weeks) Activity in first column must be completed before the one below can start A Redesign product 7 C B Redesign packaging 3 D C D Order and receive components for product 4 E Order and receive materials for packaging 2 F E Assemble product 5 G F Make up packaging 2 G G H I J K Package redesigned product Test market redesigned product Revise redesigned product Revise redesigned packaging Present results to the board 2 H 7 J 8 K 4 K 1 - Page 9 of 10

10 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. (b) Differentiate between quality assurance and quality control. (3 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 (i) Using the above data, calculate the Upper and lower control limits for a C-Control chart. ( Use any appropriate formula ) (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*** Page 10 of 10