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OM0010-Operations Management

OM0010-Operations Management


Summer 2013

Master of Business Administration- MBA Semester 3

OM 0010-Operations Management


Q.1  It is the job of operations managers to convince the stakeholders that the investment in plant and equipment is going to enhance the value of the investments already held by them in the organisation. Explain some of the concepts that can be considered in analyzing the investment.

 (ROI;EBIT; ROA; cash flow; EVA- 5 X2 marks =10 marks) 10 marks


Answer : Concepts in analyzing the investment :


1. ROI :

Return on investment (ROI) is the concept of an investment of some resource yielding a benefit to the investor. A high ROI means the investment gains compare favorably to investment cost. As a performance measure, it is used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. In purely economic terms, it is one way of considering profits in relation to capital invested. In business, the purpose of the “return on investment” metric is to measure, per period, rates of return on money invested in an economic entity in order to decide whether or not to undertake an investment.


Q.2  Explain the regional factors that affect location decision.

(Location of raw materials; Location of markets; Labour factors; Climate and taxes – 4 X 2.5 marks= 10 marks) 10



Answer :  Regional factors that affect location decision :

Every firm must use location planning techniques. There are many options for location planning. Corporations choose from expanding an existing location, shutting down one location and moving to another, adding new locations while retaining existing facilities, or doing nothing. There are a variety of methods used to decide the best location or alternatives for the corporation. Methods such as identifying the country, general region, small number of community alternatives, and site alternatives.


Q.3  Explain the nine fundamental propositions about organisational effectiveness.

(Explanation of 9 fundamental propositions — 9 marks; conclusion — 1 mark) 10 marks


Answer :  Fundamental propositions about organisational effectiveness :


1. Organizational effectiveness is always a matter of comparison.


When determining the effectiveness of an organization, to what are you comparing the organization to conclude whether it is effective or not? For example, are you comparing to a certain set of best practices or to another highly respected organization?


Q.4  Describe the seven forms of waste. Explain how 5S’s are used to eliminate them.

(Seven forms of waste — 7.5 marks; 5 S — 2.5 marks) 10 marks


Answer : Seven forms of waste :


1) Transportation :


The term “transportation” is used here to mean handling and moving materials or people during the production process. Moving materials around does not add value for the customer and it increases the risk of damage, incorrectly routed items, lost items, and delays affecting other parts of the production process.



Q.5  Discuss the Independent demand item techniques.

(Reorder point (or Perpetual) Model — 5 marks; Periodic review models — 5 marks) 10 marks


Answer :  Independent demand item techniques :


The two classic systems for managing independent demand inventory are periodic review and perpetual review systems.


1. Reorder point model :


A perpetual inventory tracking system is a method of immediately accounting for inventory sales in the inventory account, if there is no theft or spoilage. It is an inventory management system where store balances of inventory are recorded after every transaction. It eliminates the need for the store to close down constantly for inventory stock-taking as perpetual inventory systems allow for continuous stock-taking. Perpetual inventory systems keep a running account of the company’s inventory.


Q.6  Explain the types of failures that occur in operations.

 (Design failures; Facilities failures; Staff failures; Supplier failures – 4 X 2.5 marks = 10 marks)


Answer :  Types of failures that occur in operations :


1. Design failures:


The overall design of the operation can prove to be the cause of failure. In its design stage , an operation might look fine on paper, only when it has to cope with real circumstances . Some design failure occur because a characteristics of demand was overlooked or miscalculated .A production line might have been installed in a factory which in practice cannot cope with the demands placed on it. Other design related failure occur because the circumstances under which operation has to work  are not as expected.

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