MSCI 231 INTRODUCTION TO OPERATIONS MANAGEMENT PART l 2016 EXAMINATIONS
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2016 EXAMINATIONS
PART l(Second Year, Third and Final Year)
MANAGEMENT SCIENCE
MSCI 231 INTRODUCTION TO OPERATIONS MANAGEMENT
SECTION A- Please answer only two questions from this section.
Q1.
The Papery Cup Company is considering setting up a new production facility overseas and has identified three alternative sites (sites A, B and C) for the possible new location. Each site has been evaluated against the same set of seven factors (rated out of 10), and the weight or importance of each factor has been determined (with 4 being the most important and 1 being the least important) The factors, importance and the ratings for each of the three sites are summarised in the table below.
Factor |
Importance |
Site A |
Site B |
Site C |
Potential for expansion |
2 |
9 |
7 |
10 |
Good transport infrastructure/links |
1 |
4 |
8 |
3 |
Availability of relevant skills |
3 |
10 |
8 |
9 |
Low site costs |
3 |
9 |
5 |
8 |
Good local supply base |
4 |
4 |
5 |
8 |
Close proximity to key customers |
4 |
5 |
8 |
7 |
Low labour costs |
3 |
2 |
10 |
6 |
(i) Use the information in the table above to apply the weighted score method for determining
the best site for the new production facility. Clearly state the highest scoring site. (30% of marks)
(ii) What would happen if the importance of 'good transport infrastructure/links' increased from an importance of 1 to the most importance rating of 4? (15% ofmarks)
The close proximity of key customers is an important part of location decisions, reflected in its high importance ranking in the table above. A Sales Director has put together some data on the locations of the company's key customers and their annual demand (across the various components produced by the company). These are shown in the following table with (x) and (y) coordinates.
Customer |
Location |
Demand (1000s) |
|
Coordinate (x) |
Coordinate(y) |
||
1 |
20 |
30 |
15 |
2 |
15 |
30 |
20 |
3 |
10 |
20 |
15 |
4 |
25 |
35 |
17 |
5 |
60 |
80 |
500 |
6 |
20 |
15 |
10 |
7 |
30 |
20 |
50 |
8 |
25 |
30 |
20 |
(i) Use the above table to find the best location for the site if the key objective is to minimise the cost of transporting the goods to customers. Comment on the impact of Customer 5 on the location that you have identified. (35% of marks)
Q1,cont'd
(iv) Briefly explain how useful quantitative techniques, such as those applied in parts (i) and (i), are for making major strategic decisions - such as where to locate a factory. Describe at least two limitations and two benefits of using quantitative techniques for strategic location decisions (20% ofmarks)
Q2.
Aldi Auto manufactures automobile generators and purchases a component used in the manufacturing process directly from the supplier. Aldi Auto's generator production operation, which is operated at a constant rate, will require 100,000 components per month throughout the year. Assume that the ordering costs are f25 per order, the unit cost is f25 per component and annual holding costs are 20% of the value of the inventory.
Based on the information given above, answer the following inventory policy questions:
(i) What is the Economic Order Quantity (EOQ) for this component? (20% of marks)
(ii) Assuming that the policy outlined in question (i) is adopted, how many orders will have to be placed in a year? (10% of marks)
(i) Describe the main costs associated with inventory. What are the annual holding and ordering costs associated with your recommended EOQ? (30% ofmarks)
(iv) As a direct result of a recent rise in building rental and energy costs, the company's board of Directors have immediately increased the rate of return required on any future capital investments. This has meant that the actual cost of holding stock has increased to 22% of the item purchase cost per year, rather than the previous 20%. The company also found that the actual cost of placing an order for new supplies was in fact f60. The company has continued with the policy determined in part (i) for the whole year. With this in mind, calculate how much Aldi Auto will have lost over the last year as a consequence of using the wrong cost information to determine their policy? (20% of marks)
(v) You have been asked to explain the difference between push and pull planning and control systems to a new employee of the company. Give a definition, and describe the context of applicability for both push and pull planning and control systems. (20% ofmarks)
Q3.
The master production schedule at the chair assembly workstation at Gregory Seating calls for 50 units of A in week 4, then 65 units in week 7 and a further 80 units in week 10. To manufacture a finished unit A requires 2 units of B, 1 unit of C and 2 units of D. Each unit of B requires 3 units of E and 1 unit of F. Each unit of C requires 2 units of F. Finally, each unit of D requires 1 unit of F. Gregory Seating manufactures all items.
Item C is produced to make A, and also to meet the forecast demand for replacement parts. Previous replacement part demand has been 20 units per week (add 20 units to C's weekly gross requirements).
(i) Construct a product structure for assembly A, identifying all levels, parents and components. (20% ofmarks)
(ii) Using the inventory information given in the following table, develop a material requirement plan for weeks 1-10 for items A, B and E.
Component Code |
On- Hand [units] |
Safety Stock [units] |
Lot Size |
Lead Time [weeks} |
Sched.Receipts |
|
Quantity |
Week |
|||||
A |
|
|
Lot-for-lot |
2 |
|
|
B |
50 |
|
Lot-for-lot |
2 |
50 |
2 |
C |
50 |
30 |
Lot-for-lot |
1 |
|
|
D |
120 |
|
EQ=250 units |
2 |
|
|
E |
70 |
|
EQ=600 units |
3 |
|
|
F |
250 |
|
Lot-for-lot |
1 |
|
|
Your answer should include a table similar to the following one for each of the three items.
Week |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
10 |
Gross Requirements [units] |
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Scheduled Receipts |
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Available |
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Net Requirements |
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2023-06-16