Operations Management

MBAO 602 Final (Take Home) Exam

Part 1

Complete the following 42 True/False Questions

True

False

Each correct answer is worth ¹/4 of a point (.25).

1. The three fundamental elements of any business operation are Operations, Marketing and Management.

2. Technology growth moves in a linear manner when compared to time.

3. If a data trend were decreasing at a decreasing rate it would be described as exponential.

4. If the maximum production output for a company product is 500 units per hour and the best operating level is 400 units per hour and the design range is 350 to 450 units per hour and the company is working at 120% capacity utilization — then the following would ALL be correct: 1) The company is outside of its upper design range. 2) At 120% of its capacity it is only 20 units from its maximum capacity. 3) If a bottleneck was found in the production process it would have to be at some value greater then 480, but less then 500.

5. The four key groups in operations management are Process, Quality, Capacity and Inventory.

6. The Conversion and Transformation process is a model that describes one of the purposes of Operations.

7. Continuous improvement is a process.

8. Operations is a consistent pattern of decisions for the transformation system and supply chain that are linked to the business and other functional strategies, leading to a competitive advantage for the firm.

9. The objectives of operations are costs, quality, dilevery, and flexibility.

10. Outside fluctuations can be controlled and good planning is the reason.

11. If the data points were moving downward from left to right in a fairly consistent pattern, one might refer to this trend as a positive linear trend.

12. When we talked about maximum capacity the statement “not sustainable” was used.

13. Forecasting is the art and science of predicting future events.

14. Forecasting will almost always be wrong.

15. The best operating level is where the cost to produce is at approximately 100% of capacity utilization.

16. Economies of scale could be defined, at least in part, by the statement, ‘as volume increases the cost to produce decreases’.

17. Sources of random variation in an operation can be controlled.

18. Process oriented would include job shop and continuous operations.

19. There are three ways to develop new products: market pull, technol(W push and interfunctioanal.

20. A good example of a batch process would be the Ford Motor Company.

21. The best operational level for a business is achievable and sustainable when you put really smart people in charge.

22. Increasing volume yielding increasing per unit costs to produce is reflective of the left side of the capacity curve.

23. BPR (Balanced Protocol Reengineering) is a tool for improving operational efficiencies.

24. Quality is defined in this course as “meeting, or exceeding, the customers expectations now and in the future”

25. The house of quality refers specifically to knowing the right elements of a company.

26. These are properly paired terms: a)TQM/Philosophy, b) Paretonool, c)

Deming/QC as continuous improvement, and d) ISO 9XXXAnternational Standard,

27. A qualitative method for predicting failures is Manufacture Tolerance Before Finish (MTBF).

28. Capacity cushion refers to the number of units sold beyond what was produced divided by the cost margin to produce those units.

29. A continuous operation tends to be a capital-intense operation.

30. A management challenge for “continuous” operational processes would be the planning for quality needs.

31. If given two numbers, one the BOL and the other the worse case number, the larger of the two would be the BOL number.

32. When it was said, “if it works, its obsolete” we were referring to techn010ß⁷.

33. If you were talking about quality, all of these terms would be appropriate — continuous improvement, measurement, the cost of quality, cause and effect, benchmarking, run chart, Juran?

34. Quality can both improve revenue and reduce costs,

35. If the cost to produce was going up, profits per unit were falling and volume was decreasing you would be on the left side of the capacity curve.

36. When discussing inventory would it be correct to reference the term — “used as a buffer?”

37. If capacity utilization was 85% for one company and 112% for another company, and all other costs were the same, if we normalized we are effectively talking about the same cost to produce.

38. Five dimensions define service quality: tangibles, reliability, responsiveness, assurance and empathy.

39. This is reflective of a good capacity plan for a company: maximum capacity is 450 units a day, the best operation level is 350 units a day and the design range is between 360 and 390 units a day.

40. There really isn’t all that much difference between what a project manager does and what a production manager does when you really look at both of them closely.

41. MRP systems work to improve customer service and better response time to market demands, among other objectives.

42. The process flow view leads to the idea that a business is a set of horizontal processes that are interconnected with the objective of meeting customer needs.

Part 11

Problem Solving: Capacity Planning Analysis

Company Overview:

The Discovery Company (DC) is a collection service organization. When consumers are late with installment payments (car loans, house hold items, mortgages) there is an excellent chance that DC will be sending them nasty letters or executing distributing phone call regarding the late payment obligation.

DC has designed collection operator work cubicles to support a pretty aggressive per hour rate of calls. The company has determined that the over all company design range for all operators combined is between 229,000 to 236,000 calls a month. Again, this is an aggregate of all operators working full shifts throughout a given month. The company refers to this operating range as their design capacity. The company’s best operating level (BOL) has been determined to be 233,000 calls over the course of one month. There are numerous contributing factors used to arrive at this “ideal” number, however, it is the number DC uses to assess capacity utilization, cost drivers and productivity calculations throughout the year. DC has also determined, that in worse case conditions their operators and their supporting systems could support up to 276,000 calls in any given month. The company also knows that the worse case number is not sustainable, and has a written policy to never operate the company at this level continuously for more then one month of operation.

Some additional information about DC:

– In 2002 DC’s overall annually capacity utilization was at 89%.

Table 1:

For the full year 2003 the company achieved the following. This data is raw data and does require normalization to fully understand the company’s performance in 2003 from a month-to-month perspective. Therefore you will need to complete Table 1 found on the next page.

Table 1 — DC Capacity Data for the Year 2003

Months# Of Workin Da s In MonthCalls/DaCalls/Month

Jan	21	12800
Feb	20	11400
Mar	23	12000
	22		202400
Ma	22	8300
Jun	21
Jul	21		165900
Au	22		165000
	20		151980
Oct	23		158723
Nov	20	8000
Dec	19	6100
2003 Totals	254

Now complete questions a thru h based on the information provided about DC (3.5 total points are possible):

a). What was DC’s year-end capacity utilization percentage for 2003 using the BOL?

b). Did DC work at its best operating level (BOL) in any one month in 2003, yes/no? If yes, what was/were the month/s?

. If no, what was the month closest to the

c). Was/where there any month/s when DC worked at a Worse Case output? Yes or No. If yes what month/s?

d), What increase or decrease did DC experience in capacity utilization in 2003 over 2002?

e), In May of 2003 what was DC’s capacity underutilization percentage?

f). Was there any month having a capacity cushion based on the information provided, yes/no?

g). What were the second and third months having the lowest per unit cost per call? 2nd [.15]3rd [.15]

h). What were the first and fifth months having the highest per unit cost per call? 1st [.15]5th [.15]

Part 111

Multiple Choices

Each correct answer is worth .2 points.

• Linear trends are best described as:
  • Trends that increase at a constant rate.
  • Trends that are changing at a constant rate.
  • Trends that increase and decrease.
  • Trends that always stay near the zero reference point.
• A set of qualitative models would be:
  • Delphi, weighted moving average, survey
  • Survey, historical data, causal
  • Historical, expert, market survey
  • Exponential, Delphi, causal
• Productivity would best be described as:
  • P = I/O-Random Issues
• Which one of the following best emulates an asymptotic trend:
  • 2, 4, 6, 8, 10, 12, 14, 16, 18, 20
  • 6, 12, 24, 48, 96, 192, 384, 750
  • 5, 40, 75, 105, 125, 140, 150, 155
  • 8, 23, 45, 2, 78, 90, 100, 2, 45, 67
  • Both a and c
• A set of quantitative models would be:
  • Moving average, exponential decay, econometric
  • Survey, historical data, causal
  • Historical, expert, market survey
  • Exponential smoothing, moving average, weighted
  • Both a and d