The ICFAI Foundation for Higher Education

Hyderabad
(A Deemed to be University declared under section 3 of UGC Act, 1956)

End Semester Examination

Program MBA Question Booklet no:

Course Code: SLOP502
Class of 2025
Course Title: Operations Management
Seat No:
Semester II

Exam Date 2 2 0 1 2 0 2 3

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Time: 3 Hours Marks: 100

1. a. A retail store had sales of $45,000 in April and $56,000 in May. The store employs eight full-
time workers who work a 40-hour week. In April the store also had seven part-time workers
at 10 hours per week, and in May the store had nine part-timers at 15 hours per week
(assume four weeks in each month). Using sales dollars as the measure of output, what is
the percentage change in productivity from April to May?
(4 marks)
Suggested Answer:
Input is man hours and thus convert man-hours for each month and consider it as input.
Output is sales revenue.
Productivity of Apr and May thus can be calculated and see change wrt April month.
Convert this into percentage.
Solution

Output Productivity
Mont Input
in (Output/Inp Percentage Change
h in Hours
Dollars ut)
(8(40)+7(10))*4
April $45,000 28.85
= 1560
(30.77-28.85)/28.85 =
May $56,000 1820 30.77
6.66%

1. b. Differentiate between Efficient and Responsive supply chain. Give examples of companies
which according to you follow efficient and responsive supply chain strategy.
(6 marks)
The answer should be based on supply uncertainty and demand uncertainty matrix( Hau-
lee’s Supply chain strategy matrix). Efficient will be when both uncertainties are low. Any
company of functional products fall into this OR any product of essential nature fall under
this.
Responsive is when demand uncertainty is high and supply uncertainty is low. Since there
is no problem of suppliers based on demand the products can be arranged from the
suppliers. Any product which has demand which is seasonal or for a specific period or
occasion fall under this. Umbrellas, Raincoats, AC/s, Crackers etc. Example of any
company under this category are acceptable.

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2. A company has three factories A, B, and C with production capacity 700, 400, and 600 units per
week respectively. These units are to be moved for storage in four depots D, E, F, and G with
quantities of 400, 450, 350, and 500 units per week respectively.
The cost per unit for movement between A. B. C and D. E. F is given below:

Factory /Depot  D E F G Capacity

A 4 6 8 6 700

B 3 5 2 5 400

C 3 9 6 5 600

Storage 400 450 350 500 1700/1700

a. Fill to complete the table above.( filled above)
b. Find an initial solution using Vogel’s Approximation Method.
c. Is your solution optimal? If it is not, optimize it using Modified Distribution Method (MODI)
method.
(10 marks)
b.

Factory /Depot  D E F G Capacity

A 4 6(400) 8 6(300) 700

B 3 5(50) 2(350) 5 400

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 C 3(400) 9 6 5(200) 600

Storage 400 450 350 500 1700/1700

Note: Since the difference is same for multiple rows/columns the distribution might differ.
Given is one such combination
c. Check condition of degeneracy. The number of cells occupied are 6.
Rows are 3 and columns are 4. Thus cells occupied are equal to m+n-1 which 6.
Optimal solution through MODI method:-

V1=4 V2=6 V3=3 V4=6

Factory /Depot  D E F G Capacity

U1=0 A 4 6 8 6 700

U2=-1 B 3 5 2 5 400

U3=-1 C 3 9 6 5 600

Storage 400 450 350 500 1700/1700

V1=4 V2=6 V3=3 V4=6

Factory /Depot  D E F G Capacity

U1=0 A =4-0-4 6 =8-0-3 6 700

U2=-1 =5-(-
B =3-(-1)-4 5 2 400
1)-6

U3=-1 =9-(-1)-
C 3 6-(-1)-3 5 600
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Storage 400 450 350 500 1700/1700

Since all cell indices are non-negative, this distribution itself is optimal. The distributions
can differ in the loops where cell improvement indices are 0 like AD,BD,BG

One of the suggested Solution is:

Solution

An initial basic feasible solution is obtained by Matrix Minimum Method and is shown below in table 1.

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Table 1

Depot

Factory D E F G Capacity

A 4 8 700

B 5 5 400

C 9 6 600

Requirement 400 450 350 500 1700

Here, m + n - 1 = 6. So the solution is not degenerate.

Initial basic feasible solution

6 X 450 + 6 X 250 + 3 X 50 + 2 X 350 + 3 X 350 + 5 X 250 = 7350

Table 2

The cell AD (4) is empty so allocate one unit to it. Now draw a closed path from AD. The result of
allocating one unit along with the necessary adjustments in the adjacent cells is indicated in table 2.

Please note that the right angle turn in this path is permitted only at occupied cells and at the original
unoccupied cell.

The increase in the transportation cost per unit quantity of reallocation is

+4 – 6 + 5 – 3 = 0.

This indicates that every unit allocated to route AD will neither increase nor decrease the transportation cost.
Thus, such a reallocation is unnecessary.

Choose another unoccupied cell. The cell BE is empty so allocate one unit to it.
Now draw a closed path from BE as shown below in table 3.

Table 3

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The increase in the transportation cost per unit quantity of reallocation is
+5 – 6 + 6 – 5 + 3 – 3 = 0

This indicates that every unit allocated to route BE will neither increase nor decrease the transportation cost.
Thus, such a reallocation is unnecessary.

We must evaluate all such unoccupied cells in this manner by finding closed paths and calculating the net
cost change as shown below.

Unoccupied cells Increase in cost per unit of reallocation Remarks

CE +9 – 5 + 6 – 6 = 4 Cost Increases

CF +6 – 3 + 3 – 2 = 4 Cost Increases

AF +8 – 6 + 5 – 3 + 3 – 2 = 5 Cost Increases

BG +5 – 5 + 3 – 3 = 0 Neither increase nor decrease

Since all the values of unoccupied cells are greater than or equal to zero, the solution obtained is optimal.

Minimum transportation cost is:

6 X 450 + 6 X 250 + 3 X 50 + 2 X 350 + 3 X 350 + 5 X 250 = Rs. 7350

3. a. Deccan Electricals project team decides on the relative weights for the criteria they draw up
to decide which of 3 locations Guntur, Kakinada and Visakhapatnam would be most suitable
for a new factory. The following table as the basis for evaluation, and has assigned weights
also shown in the same table.

Factors Factor Description Weightage Guntur Kakinada Visakhapatnam

1 Labor Cost 20 1 2 3

2 productivity 20 2 3 1

3 supply 10 2 1 3

4 union relations 10 3 3 3

5 material supply 10 2 1 1

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 6 transport costs 25 1 2 3

7 infrastructure 5 2 2 2

a. If a lower score is less favorable which location must they choose?

b. Would their decision change if Guntur received a score of 3 and Visakhapatnam a score of
2 for transport cost?
(6 marks)

Factors Factor Description Weightage Guntur Kakinada Visakhapatnam

1 Labor Cost 20 1 2 3

2 productivity 20 2 3 1

3 supply 10 2 1 3

4 union relations 10 3 3 3

5 material supply 10 2 1 1

6 transport costs 25 1 2 3

7 infrastructure 5 2 2 2

Total Score 165 210 235

a.
Viskhapatnam is preferable as total score is the highest at 235

Factors Factor Description Weightage Guntur Kakinada Visakhapatnam

1 Labor Cost 20 1 2 3

2 productivity 20 2 3 1

3 supply 10 2 1 3

4 union relations 10 3 3 3

5 material supply 10 2 1 1

6 transport costs 25 3 2 2

7 infrastructure 5 2 2 2

215 210 210

b.
Yes . After interchange Guntur will be preferred as it has higher total score of 215

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3. b. Subway makes custom submarine sandwiches to order. It is analyzing the process at its
shop. The general flow of the process is shown as follows. A different person is working at
each of the steps in the process.

Take the order Slice Bun. Add topping and Bag the order
1 minute -> Add Meat/ Cheese condiments 2 min/order
3min/order 4 min/order

--------------------------------------------------------------------------------------------------------------------------------
Subway wants to figure out the following for a typical eight-hour work day.
a. What is the current maximum output of the process?
b. If we add another person, where would we add him or her and what is the benefit?
c. Is there a benefit if we can shift one minute from Bun and Meat to Order Taking? Assume
we do not make the change in part (b) above
d. Is there a benefit if we shift one minute of work from condiments to Bagging? Assume we
do not make the changes in parts (b) and (c).
(4 marks)
Suggested Answer:

a. Current maximum output will be based on cycle time which is 4 mts. 8*60/4=120
b. Add at stage three to reduce the operation time to 2 mts. Output increases to 160.
c. No. Output is still controlled by cycle of time of 4 mts
d. D. yes. The cycle time changes from 4 mts to 3 mts. Output increases to 160.

4. a. Complete the Service System Design Matrix diagram below identifying its elements as well
as the Dimensions (from High to Low) of Process Efficiency, Sales Opportunity and Degree
of Customer/Service Contact.
Depict the following service processes in the Service System Design Matrix below:
i. Back-office processes of ICICI Bank( bottom left)
ii. McDonald’s Burger outlets (center Face-to Face loose or tight specs))
iii. Teller operations in a bank( top right but left of ii)
iv. Process for ticket booking on MakeMy Trip website.(bottom left but to the right and
above i)
v. A Boutique restaurant in Taj Hotel( top right-face to face total customization)

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 (5 marks)
Suggested Answer: Horizontal from left to right Degree of customer contact.
Vertical left side from bottom to top Sales Opportunity( Low to high)
Vertical Right side from top to bottom Process efficiency from low to high.

4. b. Translate the customer requirements with the following ratings -

i. No double exposures 1
ii. Easy to hold steady 2
iii. Lightweight 3
iv. Easy to use 4

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 v. Reliable 5
The 6 Technical Design Specifications that can be configured are
i. Ergonomic design,
ii. Auto focus
iii. Auto exposure
iv. Aluminium components
v. Auto film advance and
vi. Low Electricity Requirements.
While logically correlating the parameters in the roof of the framework for designing a digital
camera, develop the Importance Weights using this framework.
Note: Body Ranking System: Strong is 5.
Assume data for competitors as required
Suggested answer: Fill customer requirements with their importance on the left side in row
fashion.
Technical design specification on top in column fashion.
Fil the table with reasonable logic to choose from any of “STRONG”, “MODERATE” or
WEAK
With corresponding signs.
Calculate total score for each of design specifications under relative importance. It is sum
under each column by multiplying customer importance number with body ranking system
number.

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 (5 marks)

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5. a. You and your team are working on 5 Deliverables to your company’s clients whose
Deadlines and Work Requirements are as in the table below

Deliverables Assignment Duration Due Date(days)

(In order of (Days)
Arrival)
A 30 55
B 40 46
C 20 27
D 60 69
E 100 102
i. Sequence the Deliverables according to Shortest Processing Time.
ii. Calculate Average Flow Time and Average Lateness.
(5 marks)

Deliverables Assignment Duration Flow Time Due Date(days) Delay/lateness

SPT first (Days)
C 20 20 27 --
A 30 50 55 --
B 40 90 46 44
D 60 150 69 81
E 100 250 102 148
560 273

Average flow time = 560/5=112 days; Average delay=273/5=54.6 days

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5. b. You are the Regional Manager of a well-known retail bank. Data from your existing bank
branches in the region tells you that a single ATM of your bank can handle customers at an
average rate of 20 per hour, while your customers arrive randomly, averaging 15 per hour.
Customers are known to balk if there are more than 3 people in the system. If customers are
served on a first-in-first-out basis, answer the following questions
i. To what extent would your ATM remain idle?
ii. What are the chances that a customer will at a maximum have to wait behind only one
other person when he/she arrives at your ATM?
iii. If an average customer spends 3 minutes transacting at the ATM how much time can a
customer expect to spend in the system?
iv. Would the expense of housing 2 Automated Teller Machines in place of one in order to
facilitate customers be justified? Why/Why not?
(5 marks

Suggested Answers

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6. A shoe manufacturer produces a high quality but expensive shoe for formal wear which
contains an air-cushion that provides more stability and better protection against knee, foot, and
back injuries. Manufacturing the shoe requires 8 separate tasks. The plant works an 8 hour shift
daily. The daily demand is for 400 pairs. The task information is as follows.

Task A B C D E F G H
Task that must precede - A - C B D, E F G
Task time (minutes) 0.2 0.2 0.8 0.6 0.3 1 0.4 0.3
a. Calculate the cycle time and theoretical minimum number of workstations
b. Assign the tasks to the workstations using the ‘greatest number of followers’ priority rule
and breaking ties with the secondary rule ‘longest processing time first’
c. Calculate the percent idleness for the assembly line and the line efficiency
(4 + 4 + 2 = 10 marks)

Suggested Answer
Stevenson test book, page no: 265

Efficiency= 79.17%
Percent idle time= 20.83%.

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7. a. A printer shop processed 148,000 prints last week. This was a deviation from its typical
output of 175,000 prints per week. The production line can operate at a maximum rate of
1200 prints an hour.
i. Determine the Design Capacity and Effective Capacity
ii. What is the Utilisation and Efficiency of the printer shop?
iii. If a second production line is added to meet increased demand do you think Utilization and
Efficiency of the printer shop will increase or decrease? Make logical assumptions and
show your calculations to explain why.
(1 + 1 + 3 = 5 marks)
Suggested answer:
The actual output is compared with design capacity to check utilization and with rated
capacity to know efficiency. In this problem the design capacity can be 7 days/24 hrs/1200
per hour.
If one more line is added we need to get data on its other parameters to check overall
efficiency and utilization

7. b. Explain the difference between Flow time and cycle time. Suggest some of the options in
case the work station cycle time is less than the individual task time in a “assembly line
balancing problem”
(5 marks)
. Suggested answers:
Flow time is the time spent in system which includes value added time and al other times
like waiting, transfer, inspection etc.
Cycle time is the time gap between successive outputs after the system stabilizes. It is also
the longest process time of all the processes. Output is dictated by cycle time.
Use experienced workers,
Divide the task,
Increase the time available
Reduce the expected out put
Check if activities can be shared or done in parallel

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8. Manufacturers Inc. (MI) can produce 50 units per month per worker. The cost of labor is 2400
per month per worker. The company has a long-standing rule that does not allow overtime. In
addition, the product cannot be subcontracted due to the specialized machinery that MI uses to
product it. As a result, MI can only increase/decrease production by hiring or laying off workers.
The cost to either hire or fire a worker is 5000. Inventory carrying costs are 100 per unit
remaining at the end of each month. The beginning inventory is 300 units.
Assume that all workers can be hired and fired and that MI has no workers currently.
The forecasted demand for 6 months is given below:

January February March April May June

Aggregate Demand 630 520 410 270 410 520
Compute below the costs of a chase strategy with varying man power
Suggested Answer:

January February March April May June

630-
Aggregate Demand
300=330

330/50=7(
rounded
Number of workers
off to
required
higher
value)

Units produced 7X50=350

350-
Ending Inventory
330=20

Cost of labor 7*2400

Hiring/Layoff costs 7*5000

Inventory carrying 20*100

cost

Cost per period

Total Costs

(10 marks)
It is chase strategy with varying manpower.
Calculate man power required for month on month by taking demand, initial /carry forward
inventory and capacity of worker( 50 per day).
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If number required is more than available, hire and include hiring cost.
If the number required is less then layoff and include that cost.
Fill up the table with relevant calculations as shown for Jan. Cost of material is not
provided and thus can be ignored.

9. Digitron Computer Corporation purchases 8,000 transistors each year as components in

minicomputers. The cost of carrying one transistor in inventory for a year is Rs. 3. Ordering cost
is Rs. 30 per order.
a. Calculate the EOQ.
b. How many times per year does the store replenish stock?
c. What is the total annual cost if the EOQ quantity is ordered?
d. Calculate the impact on EOQ if ordering cost is doubled.
(2 + 2 + 3 + 3= 10 marks)

Suggested Answer

2 Ds
a) EOQ = = 400
h

b) D/Q= 20

c) TC= 1200

d) Qnew= Q* ×1.414= 565.68

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10. a. Product M is made of two units of N and three units of P. N is made up of two units of R and
four units of S. R is made of one unit of S and three units of T. P is made of two units of T
and four units of U.
Draw the product structure tree showing levels and quantities and using low-level coding
(5 marks)
Suggested Answer:

Answer :
(a) Product Structure
M

N ((2) P (3)

R (2) S (4) T (2) U (4)

S (1) T (3)

M = 100 S= 800 + 400 = 1200

N = 200 T = 600 + 1200 = 1800
P = 300 U = 1200
R = 400

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10. b. Lead Time for M. P and S is 1 week, Lead Time for N, R and T is 2 weeks while the Lead
Time for U is 3 weeks
Construct the MRP schedule for the production of 500 Ms by the beginning of week 10. Show
the entry for Products M, N and P only.
Lead
Time On-
(weeks) Hand Item Week 1 2 3 4 5 6 7 8 9 10
Gross
1 100 M Requirements 500
Scheduled
Receipts
Projected On
Hand 100 100 100 100 100 100 100 100 100 100
Net
Requirements 400
Planned Order
Receipts 400
Planned Order
Releases 400
Lead
Time On-
(weeks) Hand Item Week 1 2 3 4 5 6 7 8 9 10
Gross
2 150 N Requirements 800
Scheduled
Receipts
Projected On
Hand 150 150 150 150 150 150 150 150 150 150
Net
Requirements 650
Planned Order
Receipts 650
Planned Order
Releases 650
Lead
Time On-
(weeks) Hand Item Week 1 2 3 4 5 6 7 8 9 10
Gross
1 200 P Requirements 1200
Scheduled
Receipts
Projected On
Hand 200 200 200 200 200 200 200 200 200 200
Net
Requirements 1000
Planned Order
Receipts 1000
Planned Order
Releases 1000
(5 marks)

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