Mock Exam Cover Sheet
Program
Year
Block/ Module
Course
Exam- date
Exam- time
Instructor(s)
Number of questions
Type exam (open/ closed)
The following items are
allowed during the exam
:…
: 2023-2024
:…
: Operations Management
:…
:…
: Prof. dr. Sam Solaimani
: 7 Open
: Closed book
: Calculator; Dictionary
General Instruction:
All the required information is provided in each of the questions. If a question is unclear to you, or you
feel some crucial information is missing, make a reasonable assumption, write down your assumption, and
answer the question to the best of your knowledge. For all questions, you are expected to motivate your
answers. However, keep it short, readable, and to the point!
It was a pleasure working with you; Good luck,
Sam
© American University in Bulgaria (AUBG), 2023
Problem 1 [18 points; (A): 9; (B): 9]
TELLME is a service provider that is in the business of running call centers. More specifically,
TELLME has contracts with many different organizations for handling their customer demands,
complaints, help-desks et cetera. At TELLME’s locations, a group of operators is handling
incoming telephone calls from the customers of the contracted clients.
In TELLME’s business strategy the following phrase can be found: “provide excellence in reachability of, and first-time-right answers by, our operators”.
(A)
Develop an Operations Strategy to support this business strategy.
(B)
Indicate how this Operations Strategy could be implemented both in terms of “Design
(productions strategy)” and in “Planning & Control (matching supply and demand)”.
(Address one issue in each of these two categories.)
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Problem 2 [19 points: (A): 5; (B): 5; (C): 5; (D): 4]
ACOMPCO is a supplier of components to several large automobile manufacturers. The parts
that ACOMPCO assembles into the finished components come from two sources: the
ACOMPCO molding department that makes one very critical part, and outside suppliers. The
figure below shows a process flow diagram of the operation.
Raw
materials
Molded parts
inventory
Mold
parts
Finished
components
Final
assembly
Purchase
parts
Purchased parts
inventory
In the molding shop there are 11 machines capable of molding the one part done in-house, but
historically one machine is always been maintained or repaired at any given time. Each machine
requires a full-time (8 hours per day, 5 days a week) operator who earns an hourly wage of Euro
30, though only 50 minutes of a molding operator’s typical hour is occupied with the tasks of
loading, unloading, actively monitoring, and adjusting the machine.
The machines can each produce 20 parts per hour. If required, the workers will work overtime
at a 50% wage premium. There are currently only 6 operators dedicated to molding this
automobile component. An additional 4 operators are available from a labor pool within the
company.
In the final assembly shop, purchased parts and those molded in-house are assembled by 15
workers working an eight-hour shift (5 days per week) on an assembly line that moves at the
rate of 125 components per hour. Each assembly worker earns a wage of Euro 20 per hour;
though on average only 45 minutes of an assembly worker’s typical hour is spent working
directly on components. Management believes that they could hire 15 more workers for a
second shift if necessary. The labor cost of a second shift would be 25% higher than of the first
shift.
Consider the following four scenarios:
(1) Use 6 operators in the molding shop and 1 shift in the assembly shop;
(2) Use 10 operators in the molding shop and 1 shift in the assembly shop;
(3) Use 10 operators in the molding shop and 2 shifts in the assembly shop;
(4) Use 10 operators in the molding shop, each with 25% overtime and 2 shifts in the
assembly shop.
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(A) For each of the above four scenarios calculate the capacity (in components/week) of the
entire component manufacturing operation. (It can be assumed that the purchasing
department has virtually unlimited capacity, i.e. it can provide any reasonable number of
parts each week.)
(B) For each of the above four scenarios calculate the overall labor utilization.
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(C) Assuming that all labor has to be paid always, even if they are not utilized to that maximum
extend, calculate the labor cost per part (taking into account the wages for molding and
assembly only) for each of the above four scenarios.
(D) As the operations manager of ACOMPCO, which of the four scenarios would you prefer?
Why?
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Problem 3 [10 points]
The management of a Museum of Cultural History (that is made particularly attractive for
children) is facing a problem with respect to the spread of the number of people visiting the
museum. On peak days (like children's holidays and the weekend) the museum is usually
packed with people, leading to long queues both at the various expositions and at the
restaurants and shops. On other days, only few people visit the museum, which leads to an
under-utilization.
Which planning strategies (i.e. strategies that match supply with demand) would you
suggest to the management of the museum?
.
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Problem 4 [17 points: (A): 8; (B): 9]
PRES-SURE is a company that is building machines for industrial use. Its main product is the
industrial press FCP100 that is build-to-order. One of the components in the FCP100 is an
electronic device called TEC25. Four TEC25 devices are built in each FCP100 unit. The TEC25 is
not made by PRES-SURE but purchased from an external supplier. PRES-SURE keeps an
inventory of TEC25 units to be sure that no time is lost once an order for a FCP100 comes in.
The demand for the FCP100 is approximately 50 units per week. The ordering cost for the
TEC25 amount to 500 Euro per order placed and is independent of the order size. The
purchasing costs of the TEC25 are 250 Euro per unit. For calculating the annual holding cost,
PRES-SURE uses a percentage of 25% of the purchasing price (i.e. if an item costs C, then
holding this item in inventory for a year costs 0.25*C). Assume there are 50 weeks per year.
(A) Determine the economic order quantity for the TEC25.
(B) Provide at least 3 reasons why PRES-SURE should strive to optimize their inventory.
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Problem 5 [16 points]
Stemming from its origin at Toyota, it is no surprise that Lean is widely applied in the
automotive industry. In studying Lean, one of the key issues, both in academia and in
practice, is to which extent the various aspects of Lean (perspectives, principles and tools)
are also applicable in other industries.
Consider the entertainment services offered in a cinema / movie theatre (offering a wide
variety of films in multiple rooms each with different number of seats and with features like
3D, IMAX et cetera).
Which Lean principles would be applicable to this setting? Name three.
Also name one tool of Lean that might be very hard (or impossible) to implement in this
setting. (Motivate your answers by referring to the situation at a cinema / movie theater.)
Page 8 / 16
Problem 6 [20 points]
Below some characteristics of the PHOTOCO organization and its main products are given:
• One of PHOTOCO’s key product groups are Chemicals for photofinishing;
• Photofinishing Chemicals (PChems for short) are highly standardized, high volume – low
variety products;
• Over the last five years there has been an ever increasing level of competition in the PChem
market due to the declining market (through the digitalization, traditional photos are less
used, leading to a lower overall demand for PChems). Due to the overcapacity in the
market, there is a severe price pressure;
• PHOTOCO has various European production sites for PChems and a distribution center in
each of the larger European countries;
• The PHOTOCO organization uses a very strict Control system; each department (like
Purchasing, Logistics, Manufacturing, Distribution and Sales) has their own set of tasks and
responsibilities and also their own set of performance measures which are constantly
monitored;
• Rewards of the directors of the various departments are variable and depending largely on
the department performance;
• Decision making at PHOTOCO is highly decentralized to ensure a good connection to the
local markets;
• PHOTOCO’s customer base follows the well-known Pareto-rule: 80% of the PHOTOCO
volume is shipped to 20% of the customers. The same applies to PHOTOCO’s supplier base;
80% of the purchased raw materials come from 20% of the suppliers;
• The Operations Managers at PHOTOCO pride themselves in their “flexibility”; they always do
their level best to be responsive to the customer’s needs even if that would increase cost.
Place yourself in the role of the newly appointed Supply Chain Manager at PHOTOCO. What
would be your plans for the future? Name four things that you would do or would like to
change.
==End of the exam ==
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Answers
*Note that the answers below are indicative and other arguments and ideas could have been
discussed as well; as long as it is related to the provided context and is based on discussed
theories and frameworks. Also, here the answers are not fully worked out; in the exam you are
expected to be complete in your argumentation while being careful with the ‘waste of
overproduction/overprocessing’ ;-)
Problem 1
(A) A possible answer is your argumentation regarding the following prioritization:
1. Quality (with an example KPI being first-time right);
2. Flexibility (with an example KPI being excellence in reachability);
3/4/5/6. Sustainability/Dependability / Cost / Speed.
* Note that it suffices to argue why which one or two performance measures are prioritized;
there is no need to discuss why the remaining measures are not prioritized!
(B) Provide your argumentation on:
Design: explaining why assemble-to-order is most suitable….
Pl&C: why a chase approach is recommendable, for instance, with flexible workforce, etc…
Problem 2
(A)
I
II
III
IV
Molding
Assembly
#people * (hours/week)*(parts/hour)
#shifts*(hours/week)*(comp/hour) components/week
Capacity
6 * 40 * 20 = 4,800
10 * 40 * 20 = 8,000
10 * 40 * 20 = 8,000
12.5 * 40 * 20 = 10,000
1 * 40 * 125 = 5,000
1 * 40 * 125 = 5,000
2 * 40 * 125 = 10,000
2 * 40 * 125 = 10,000
Molding: 4,800
Assembly: 5,000
Molding: 8,000
Both: 10,000
(B)
Labor utilization = People used / people available
I : { [(50/60) * 6] + [(4800/5000) * 15 * (45/60)] } / (6 + 15) = 75%
II: { [(5000/8000) * (50/60) * 10] + [15 * (45/60)] } / (10 + 15) = 66%
III: { [(50/60) * 10] + [(8000/10000) * (2*15) * (45/60)] } / (10 + (2*15)) = 66%
IV: { [(50/60) * 12.5] + [ (2*15) * (45/60)] } / (12.5 + (2*15)) = 78%
Explanation at Scenario I:
• (50/60) because in the molding department out of each hour there is only 50 minutes of
work
• 6 because there are 6 workers in the molding department
• (4800/5000) because assembly is a non-bottleneck, i.e. of the 5000 of capacity only 4800
is used
• 15 because there are 15 workers in the assembly department
• (45/60) because in the assembly department out of each hour there is only 45 minutes of
work
For the other scenarios this is more-or-less the same
Page 10 / 16
(C)
Cost = (#molding workers)* (hours/week)*(Euro/hour) +
(#assembly workers)*(hours/week)*(Euro/hour)
I:
II:
III:
IV:
Cost = (6 * 40 * 30) + (15 * 40 * 20) = 19,200;
Number of parts, see (A): 4,800;
Cost / part = 4.00
Cost = (10 * 40 * 30) + (15 * 40 * 20) = 24,000;
Number of parts, see (A): 5,000
Cost / part = 4.80
Cost = (10 * 40 * 30) + (15 * 40 * 20) + (15 * 40 * 20 * 1.25) = 39,000;
Number of parts, see (A): 8,000
Cost / part = 4.875
Cost = (10 * 40 * 30) + (15 * 40 * 20) + (2.5 * 40 * 30 * 1.5) +
(15 * 40 * 20 * 1.25) = 43,500;
Number of parts, see (A): 10,000
Cost / part = 4.35.
(D)
Obviously Scenario (I) is the lowest cost scenario. However, in order to determine the best
scenario, first we need to know what demand is!
Problem 3
In essence the overall capacity of the museum is fixed so that a Level strategy seems
inevitable. However, some efforts can be made to adjust the available capacity to demand;
for instance to schedule the available workforce according to demand, having variable
opening times and have extra booths for eating & drinking and possibilities to shop during
peak hours.
Next to that, the museum might want to stimulate demand during the ‘slow’ periods, e.g. by
pricing policies, by giving extra lectures, by opening the museum for special celebrations or
company-outings or to promote that school-classes visit the museum.
To summarize, both demand management and aggregate planning management can (and
should) be used.
Problem 4
(A)
D = (4 TEC25/FCP) * (50 weeks/year) * (demand FCP/week) = 4 * 50 * 50 = 10,000;
CO = 500;
CH = 0.25 * 250 = 62.5.
EOQ = Sqrt ( [2 * 10,000 * 500] / 62.5) = 400
(B)
Discussing arguments along the lines of:
1. gaining cost reduction…
2. delay in process…
3. hiding problems (malfunctioning parts)…
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Problem 5
Discussing some Lean tools such as :
• Stability: for instance change-over time reduction to ensure that theater rooms are
available….
• Heijunka to level the arrival of customers throughout the day by arranging the movie starttimes (to level the use of ticket machines and sodas/popcorn shop)….
• Employees at the center: e.g. use suggestions from staff to improve operations…
Less usable:
• Kanban w.r.t. customers arrival…
Problem 6
Some possible points to discuss are:
• Focus on Cost as key performance measure (the company currently has a ‘responsive
supply chain’ for a very mature product, which in the ‘Fisher matrix’ is a mismatch);
• Consolidate # warehouses;
• Centralize planning;
• Make the KPIs uniform (and where possible aligned);
• Establish Supply Chain Partnerships wrt the 20% key customers and suppliers;
• Rewards should be based on team efforts.
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FORMULAS & TABLES
Inventory Models
Q* =
2DCO
CH
Q : order size
D : annual demand
CH : holding cost per unit per year
CO : ordering/set up cost per order
Re-order level
s=D*L
s
D
L
: reorder level
: annual demand
: Lead time (in years)
Little’s Law
Total/Expected Annual Variable
Cost:
TV(Q) = ½ (Q CH) + (D CO)/Q
Overall Equipment Effectiveness
OEE = a x p x q
a: availability loss
p: speed (performance) loss
q: quality loss
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L=*W
L : Average number of jobs in WIP
 : Arrival rate (number of jobs per
unit time)
W : Throughput time (time per job)