Master of Business Administration - MBA Semester 2MB 0044 - Production and Operation Management (4 credits)

(Book ID: B1627 )ASSIGNMENT- Set 1

Marks 60Note: Assignment Set -1 must be written within 6-8 pages. Answer all questions.

Q-1State the important considerations for locating an automobile plant.

Answer:

Q1. State the important considerations for locating an automobile plant.

Ans :Two broad Factors can Influence Plant location i.e.1) General Factors :*Availability of Lands: As if we don’t have lands we can’t build a Factory, though the area is good to work.*Availability of Inputs: Good Quality Raw Materials & Getting Labour at the right time, These are Inputs to be Followed, Plant should be Located, Near Raw Material source, & to Reduce Transport cost & Consistent supply of goods to the customers, Close to Market when Universally available.Communication Facilities: Regions with good facilities of Postal & Tele communication links are Given Priority.Infrastructure: Which plays an important role,The basic needs arePower Supply 24x7Water Supply in huge amount requires in Process Industries like Paper, Chemicals, and Cement.Waste Disposal is the Key factor in Paper & Sugar cane Industries.Government Support needs for Policies of State Government, Local bodies concerning Labour laws, building codes & safety.

2) Special Factors: Economy Stability Cultural Factors Wages Joint Ventures – Support of Big Time Players Location Decision Sequence:First the Country of Choice is to be Selected, Followed by Regional Choices and Finally Community levels have to be selected.

Q-2Explain essentials of Project Management Philosophy.

Ans-Project Management Philosophy

For any technical assistance program to be successful, it is important to have professional management systems in place.

We are guided by a set of principles for the design and implementation of technical assistance projects in developing countries. These emphasize:

Dialogue and Cooperation: We emphasize a consultative, inclusive approach to project implementation. The involvement of counterparts in the design and implementation is essential to ensure that change management programs are effective and supported.

Ownership and Empowerment: It is important to emphasize the development of local talent. We are keen on empowering staff based on solid risk management approaches and motivational strategies..

Integrity and Accountability: Especially in difficult environments such as Afghanistan and many other developing countries, it is important to adhere to the highest standards of professionalism, integrity, client concern and service.

Internal Financial and Risk Controls: Strong internal risk management systems, such as those based on the COSO, AS/NZS  460:2004 and ISO 30001 are critically important to the implementation of programs, especially larger programs.

Quality and Innovation: We try to utilize the latest technology in support of project implementation. Content Management Systems such as joomla and Drupal are examples of how free opensource software that can be used to manage projects' document repository and to provide information on the programs to counterparts in different languages.

Q-3Several different strategies have been employed to assist in aggregate planning. Explain these in brief.

Ans-3 Planning is a primary management responsibility. Aggregate planning is concerned with organizing the quantity and timing of production over a medium period of time up to eight to ten months with undetermined demand. Specifically aggregate planning means combining all of an organization`s resources into one aggregate production schedule for a predetermined intermediate time period. The objective of aggregate planning is to maximize resources while minimizing cost over the planning period.

The aggregate production plan is midway between short-range planning and long-range planning. Aggregate planning includes the following factors:

1. Work force size and composition2. Demand forecasts and orders3. Raw material planning4. Plant capacity management5. Utilizing outside subcontractors6. Inventory management

Aggregate planning is the link between short-term scheduling and long-term capacity planning.

What are aggregate planning strategies?

There are three types of aggregate planning strategies:

Pure Strategy. In this strategy, only one production or supply factor is changed.Mixed Strategy. This strategy simultaneously alters two or more production or supply factors or some combination.Level Scheduling. This strategy has been adopted by the Japanese and it embodies maintaining constant monthly production schedules.

What aggregate planning strategies influence demand?

Aggregate planning can influence demand in the following ways:

1. Pricing strategies. Pricing can be used to increase or reduce demand. All things being equal, increasing prices reduces demand while lowering prices will increase demand.2. Advertising and promotion strategies. Advertising and promotion are pure demand management strategies in that they can increase demand by making a product or service better known as well as positioning it for a particular market segment.3. Delayed deliveries or reserving orders. Managing future delivery schedules is a strategy for managing orders when demand exceeds capacity. The net effect of delayed deliveries, or back ordering, and reservations is to shift demand to a later period of time, often to a more slack period, which provides a smoothing effect for overall demand. However, the negative is that a percentage of orders will be lost as consumers are unwilling or unable to wait the additional amount of time.4. Diversifying the product mix. Product mix diversification is a method used to offset demand seasonality. For example, a lawn mower manufacturing company may diversify into snow removal equipment to offset the seasonality of the lawn mower industry.

What aggregate planning strategies influence supply?

Aggregate planning is also used to manage supply considerations by using the following strategies:

1. Subcontracting (outsourcing). Subcontracting is a method of increasing capacity without incurring large capital investment charges. It can turn the competitive advantage of other corporations to the contracting organization`s advantage. However, subcontracting can be costly, and also reveals part of the business to potential competitors.2. Overtime and idle time. A direct short-term strategy for managing production capacity is to either increase or decrease the number of the work force. This strategy has the advantage of utilizing the currently existing work force. However, overtime is expensive and can produce job burnout if relied upon too extensively. On the other hand, enforcing idle time on the work force can result in resistance as well as a drop in morale.

3. Hiring and laying off employees. Hiring and laying off employees is a medium- to long-term strategy for increasing or decreasing capacity. Hiring employees usually

involves the cost of training while laying off employees can incur severance charges. Laying off employees can also cause labor difficulties with unions and reduce morale4. Stockpiling inventory. Accumulating inventory is a strategy for smoothing variances which may occur between demand and supply.5. Part-time employees. Certain industries have seasonal requirements for lower skilled employees. Aggregate planning can be used to manage these seasonal requirements.

What is the charting method of aggregate planning?

Charting is a highly utilized trial-and-error aggregate planning method. It is relatively simple to use and is easily understood. Essentially, the charting approach uses a few variables in forecasting demand, applying current production capacity. While the charting method does not assure an accurate prediction, it is simple to implement requiring only minimal calculations. But trial and error method does not provide an optimal solution.

The charting method requires five steps to implement:

1. Calculate each period`s demand.2. Calculate each period`s production capacity for regular time, overtime, and subcontracting.3. Determine all labor costs including costs for hiring and layoffs as well as the cost of holding inventory.4. Evaluate organizational employee and stock policies.5. Create optional policies and evaluate their costs.

Q-4 Illustrate the different methods by which quality is sought to be achieved using various tools and techniques

Q-5Explain the basic competitive priorities considered while formulatingoperations strategy by a firm?

Ans-5After collectively considering the products and services demanded by customers, strengths and weaknesses of competitors, the environment, and the firm’s own strengths, weaknesses, cultures, and resources, proficient firms can formulate their vision as expressed through the mission statement. This statement expresses the organization’s values and aspirations; basically its reason or purpose for existence. Based on this mission statement the firm will formulate its business strategy. This business strategy is a long-term plan for accomplishing the mission set forth in the mission statement. Each function within the business can then derive its own strategy in support of the firm’s overall business strategy (financial strategy, marketing strategy, and operations strategy).

Operations strategy is the collective concrete actions chosen, mandated, or stimulated by corporate strategy. It is, of course, implemented within the operations function. This operations

strategy binds the various operations decisions and actions into a cohesive consistent response to competitive forces by linking firm policies, programs, systems, and actions into a systematic response to the competitive priorities chosen and communicated by the corporate or business strategy. In simpler terms, the operations strategy specifies how the firm will employ its operations capabilities to support the business strategy.

 

Operations strategy has a long-term concern for how to best determine and develop the firm’s major operations resources so that there is a high degree of compatibility between these resources and the business strategy. Very broad questions are addressed regarding how major resources should be configured in order to achieve the firm’s corporate objectives. Some of the issues of relevance include long-term decisions regarding capacity, location, processes, technology, and timing.

 

The achievement of world-class status through operations requires that operations be integrated with the other functions at the corporate level. In broad terms, an operation has two important roles it can play in strengthening the firm’s overall strategy. One option is to provide processes that give the firm a distinct advantage in the marketplace. Operations will provide a marketing edge through distinct, unique technology developments in processes that competitors cannot match.

 

The second role that operations can play is to provide coordinated support for the essential ways in which the firm’s products win orders over their competitors, also known as distinctive competencies. The firm’s operations strategy must be conducive to developing a set of policies in both process choice and infrastructure design (controls, procedures, systems, etc.) that are consistent with the firm’s distinctive competency. Most firms share access to the same processes and technology, so they usually differ little in these areas. What is different is the degree to which operations matches its processes and infrastructure to its distinctive competencies.

 

KEY SUCCESS FACTORS

 

Industries have characteristics or strategic elements that affect their ability to prosper in the marketplace (i.e., attributes, resources, competencies, or capabilities). The ones that most affect a firm’s competitive abilities are called key success factors (KSFs). These KSFs are actually what the firm must be competent at doing or concentrating on achieving in order to be competitively and financially successful; they could be called prerequisites for success. In order to determine their own KSFs, a firm must determine a basis for customer choice. In other words, how do customers differentiate between competitors offering the same or similar products or services and how will the firm distinguish itself from these competitors? Once this is determined, the firm

has to decide what resources and competitive capabilities it needs in order to compete successfully, and what will it take to achieve a sustainable competitive advantage. These KSFs can be related to technology, operations, distribution, marketing, or to certain skills or organizational capability. For example, the firm may derive advantages from superior ability to transform material or information (technology or operations), to quickly master new technologies and bring processes online (technology or organizational capability), or to quickly design and introduce new products, service a broad range of products, customize products or services on demand, or provide short lead times (skills).

 

The set of KSFs that are delegated totally or substantially to the operations function has been termed the manufacturing mission. It represents what top management expects from operations in terms of its strategic contribution. All decisions made relative to system design, planning, control and supervision must aim at accomplishing the manufacturing mission. As such, the manufacturing mission is the principal driver of the operations function and gives it its reason for existence. All world-class manufacturers have an explicit, formal manufacturing mission.

 

From the manufacturing mission the operations function derives its distinctive competencies (also called competitive priorities or competitive weapons). Distinctive competence is defined as the characteristic of a given product/service or its producing firm that causes the buyer to purchase it rather than the similar product/service of a competitor. It is generally accepted that the distinctive competencies are cost/price, quality, flexibility, and service/time. Various experts include other competencies, such as location, but these can usually be categorized within one of the generally accepted four. Some experts also feel that innovation is quickly becoming a fifth distinctive competency, if it hasn’t already. It should be noted that a firm’s position on the product-process matrix is a controlling factor for the manufacturing mission and the firm’s competitive priority or priorities.

 

DISTINCTIVE COMPETENCIES

 

Details relative to each distinctive competency are provided, along with the implications of each and some examples.

 

PRICE/COST.

 

A firm competing on a price/cost basis is able to provide consumers with an in-demand product at a price that is competitively lower than that offered by firms producing the same or similar

good/service. In order to compete on a price basis, the firm must be able to produce the product at a lesser cost or be willing to accept a smaller profit margin. Firms with this competency are generally in a position to mass produce the product or service, thereby giving the firm economies of scale that drive the production cost per unit down considerably. Commodity items are mass-produced at such volume that they utilize a continuous process, thus deriving tremendous economies of scale and very low prices Consumers purchasing commodity-type products are usually not greatly aware of brand difference, and will buy strictly on the basis of price; e.g., as long as it is a major brand of gasoline and location is not a factor, consumers will opt for the lowest price. Wal-Mart is able to offer low prices by accepting a lower profit margin per unit sold. Their tremendous volume more than makes up for the lower profit margin.

Q-6Explain briefly the four classification of scheduling strategies?Answer :6 Scheduling strategiesA typical scheduling strategy used in Argentinian radio and television is called “pase” (Spanish for a “pass” as in a player passing the ball to another player of the same team). A few minutes before the end of a live broadcast show, followed by another live broadcast show, people from both programmes will share some air time together. This may be used for people from the starting programme to anticipate its contents of the day, or to participate in an ongoing discussion in the previous show, or simply for an entirely independent debate or chat that will not be furthered after the “pase”. On the radio, where newscasts are usually broadcast every thirty minutes, often in coincidence with the end of a show, the “pase” may take some minutes before the news, and sometimes some minutes afterwards, too.