Glencore has some funds to invest in developing a new coal mine.  However, due to recent events it can only afford to make one investment. The choices and pay-offs depend on the size of the coal find and are described in Table 1.

            Quantity of coal found                                                          Med                       Australia                80               110               130                    −20               150       

            India                  − 150              50               200       

      Probability              0.4               0.1               0.5        

Table 1. Payoff table for Glencore’s investment decision

1a) Identify which decision would be taken with each of the “decision making under uncertainty” criteria:

.    Maximax;

.    Maximin;

.   Laplace;

.   Minimax; Hurwitz (with α = 0.6 );

.   and Maximum Likelihood.                                                                                    (60%)

1b)  Using the “decision making under risk” criteria, calculate all of the following:

.    Expected Monetary Value (EMV);

.    Expected Opportunity Loss;

.    Expected Profit from a Perfect Predictor;

.   Expected Value of Prefect Information.                                                              (40%)

QUESTION 2.

Quick Repair Garages are a specialist tyre replacement garage. They replace car tyres on an  “as required” basis and offer a 15 minute service to customers. Because of this they need to  hold an inventory of tyres at the garage. One particular tyre has an annual demand of 800 units and it costs Quick Repair Garages £35 to place the order for tyres and have them delivered by the supplier, regardless of the number of tyres ordered. Quick Repair Garages fund their business with a commercial loan with an interest of 20% per year. The supplier, in order to increase sales, offers a price discount depending on the quantity of tyres in each order. The percentage price discount from the nominal tyre price of £10 is given in Table 2.

Table 2.  Quantity discounts offered by Tyre Supplier

2a)  How many tyres should Quick Repair Garages order in each delivery to minimise total annual costs?                        (40%)

2d)  Describe some of the managerial implications of the Economic Order Quantity model. (40%)

QUESTION 3.

3a) Derive from first principles, listing all assumptions and defining all variables, the Economic Production Quantity model. Show all workings and use illustrations to support your discussion. (50%)

3b) Describe five measures of customer service in inventory management.             (50%)

QUESTION 4.

4a) The marketing and sales team for Dapple Corporation feel there is room in the market to introduce alternative designer branded merchandise into its range of laptops. This would mean outsourcing the manufacturing of accessories such as laptop covers.  Due to the quick response times required to meet the demands of Dapple’s customer orders, the designer brand manufacturer is proposing to set up a new manufacturing business unit close to Dapple Corporation to produce six new designs for designer laptop covers.  Operations and purchasing are not convinced this arrangement will be cost effective and so wish to conduct a breakeven analysis of the situation to ensure the designer brand manufacturer’s operation is profitable.

The fixed costs for rent and labour are £5,000 per month.  The Forecasted Sales Price, Variable Cost and Forecasted Monthly Sales Quantity for the six new products are given in Table 3 below.

Table 3. Data for Dapple Corp’s outsourcing decision

Using the information provided in the table calculate the following:

•    The forecasted monthly revenue for each product,

•    The unit contribution of each product,

•    The forecasted monthly contribution for each product,

•    The breakeven point in terms of monthly sales,

•    The profit (or loss) of the business proposal,

•    The quantity breakeven point for each item. (70%)

4b) Derive from first principles the “make verses buy” breakeven point.  Define all notation and state all assumptions.        (30%)

QUESTION 5.

Days after Hurricane Sandy hit New York meteorologists predict that a severe weather storm will be  hitting your local area within the next five days. This weather storm is expected to cause major flooding and structural damage to buildings and roads, affecting businesses and homes. Three regions of your city have to be evacuated!

You have been tasked as the project manager to prepare the community for the likely disaster and have developed the following precedence table.

Table 4.  The activities, their duration & precedence relationship in the project of evacuating a city

5a) Consider the activities listed in Table 4 and determine;

•    The earliest and latest times each activity can start and finish

•    The critical path activities

•    The duration in hours for the planned evacuation (project) (80%)

5b) If you deemed the duration of the project was too long, describe how you would go about

reducing the project duration.                          (20%)

QUESTION 6.

6a)   Discuss the advantages and disadvantages of Gantt Charts for analysing and communicating a project plan.                                        (30%)

6b)  Convert the  following project network diagram into  a  Gantt  Chart.  Schedule the non-critical activities so as to maximise the Net Present Value of the cash flow of the project. (50%)

Figure 1.  A project network diagram

6c) Discuss the RACI principles and how they relate to projects.                                         (20%)

QUESTION 7.

7a) Explain the purpose of process mapping.                                                            (20%)

7b) The following paragraph describes a pit stop in an F1 race.  Draw a process map of this activity that describes the roles of the different people and how they interact (that is a process map with “swim lanes”).

An F1 Pit Stop

A) The pit stop starts by inflating the new tyres with nitrogen. Nitrogen is used instead of air as it copes with the temperature changes better.

B) Then the tyres are placed in a heating blanket that will bring the tyres up to an optimal temperature. At this temperature they are very sticky and hold the car on the road very well.

C) During the race, the pit stop activities start a few minutes before, the tyres are removed from their heating blanket, tools are manned, the pit crew take their positions.