s
Business School
Undergraduate Programmes
BA(Hons) Business Studies/Management with Finance
Level Two Examination
May/June 2013
OP282: Business Operations and Systems
___________________________________________________________________________
Instructions:
Time allowed: 2 hours
Rubric: You are required to answer THREE questions in total
Nature of examination: Unseen
Allowable material: None
Attached:
Formula Sheet
Normal Distribution Table
Supplied: Graph Paper
Page 1 of 9
OP282: Business Operations & Systems
Question 1
Megga Co. manufactures a small range of similar test instruments that are marketed to electricians to test
wiring installations. The factory layout is illustrated in Figure 1. The first process for all models is ‘kitting’,
which means collecting a kit of parts from the components warehouse and putting them into a box that
travels from department to department as the product is built-up.
Assembly
Test
Labelling
Calibrate
Components
warehouse
Kitting
Figure 1. Factory layout
Page 2 of 9
OP282: Business Operations & Systems
Question 1 continued….
The distances travelled by kits (and instruments) between departments are as follows:
Horizontally or vertically adjacent: 20m
Diagonally adjacent: 15m
Separated by one department: 40m
Separated by two departments: 60m
The average number of inter-departmental movements per week are given in the from-to matrix below:
Kit
Kit
Assy
Test
Labelling Calibrate
1000
Assy
1000
Test
200
Labelling
400
600
200
Calibrate
a)
Calculate the total number of kit/instrument-metres travelled per week on the existing layout.
(10 marks)
b)
The company feels that the existing layout may be inefficient. Develop an improved layout within the
existing building, calculate the weekly kit/instrument-metres travelled on your new layout, and
quantify the level of improvement.
(15 marks)
Please note that the components warehouse has a loading bay and road access, and cannot easily be
moved. The kitting department must therefore be positioned so that it is adjacent to the
components warehouse.
c)
How would you classify the layout type employed by Megga Co? Considering the volumes involved,
suggest and justify an alternative layout type.
(8 marks)
Page 3 of 9
OP282: Business Operations & Systems
Question 2
a)
A fruit ‘smoothy’ manufacturer has undertaken an exercise to calculate the monthly demand
forecast over forthcoming year for their premium tropical smoothy, as shown in Table 1. Their
production facility can normally achieve 20,000 litres per day utilising two shifts without overtime.
Use the cumulative demand/capacity planning technique to calculate the projected inventory level
for each month and draw a graph of the planned demand, production and inventory on the basis of a
level capacity plan. The opening inventory level is zero.
(20 marks)
Month
January
February
March
April
May
June
July
August
September
October
November
December
Demand
forecast
000s litres
100
110
110
130
550
700
700
800
550
500
250
200
Productive
days
in month
22
20
19
21
21
19
21
21
20
22
22
16
Table 1. Demand forecast for Tropical Smoothy
b)
Interpret your findings to comment on the implications of a level capacity plan, considering both
product availability and costs.
(6 marks)
c)
Suggest a more appropriate approach to demand/capacity planning for the Tropical Smoothy.
Page 4 of 9
OP282: Business Operations & Systems
Question 3
An airline is experiencing an unacceptable number of late departures. A log of the apparent cause of late
departures and the reported frequencies has been compiled, as shown in Table 2.
Cause of late departure
Frequency
Acceptance of late passengers
7
Check in delayed due to list of passengers arriving late
3
Shortages of flight deck crew/cabin crew
1
Fuel truck arriving late
2
De-icing equipment malfunction
1
Poorly trained check-in staff taking too long
9
Food delivered late by catering company
12
Staff shortages in check-in
4
Technical problem with aircraft requiring emergency repair
3
Security alert leading to longer security checks
2
Table 2. Reported causes of late aircraft departure
a)
Draw a correctly labelled Ishikawa (fishbone) diagram to illustrate the cause and effect relationships.
(10 marks)
b)
Employ another relevant improvement technique further analyse the data in Table 2.
(10 marks)
c)
Employ another suitable improvement technique to ‘drill down’ into the causes and sub-causes, and
to develop two plausible solutions to help reduce the number of delayed flights.
(13 marks)
Page 5 of 9
OP282: Business Operations & Systems
Question 4
Designer One are a successful UK based furniture retailer. The products are imported from a manufacturer
in the Czech Republic to the company’s warehouse in Watford. The company aims to satisfy customer
orders from stock from their range of 100 different products. Designer One market their furniture over the
internet, using a courier to transport the products in ‘flat pack’ to their customers throughout the UK.
Product B343 has an average demand of 20 units per week with a standard deviation (σ) of 5units per
week. The lead-time for replenishment is 4 weeks. The fixed order quantity (Q) is 160 units.
a)
The company employ a continuous review re-order level system. Calculate the safety stock that
would be required to achieve the company’s existing service level policy of 93% for Product B343.
(7 marks)
b)
The company are finding that they are losing business to competitors due to poor availability, and
wish to increase their service level to 99.5%. Re-calculate the safety stock for item B343
(3 marks)
c)
Use graph paper to draw a fully annotated inventory profile for product B343 with a 99.5% service
level, and comment on the business implications of increasing the safety stock to achieve this.
(10 marks)
d)
The company are considering moving to a periodic review system of inventory management with a
review period (P) of 1 week. Calculate the level S for product B343 for a service level of 99.5%.
(5 marks)
e)
Comparing the two replenishment systems, which do you think would be the most suitable for
Designer One? Give reasons for your answer.
(8 marks)
Page 6 of 9
OP282: Business Operations & Systems
Question 5
a)
Copy Co. UK supplies photocopiers and other office equipment to many businesses. Normally, the
mean time for Copy Co’s service engineers to respond to customers’ requests for assistance is 180
minutes, and the mean time between the quickest and slowest response times is 30 minutes.
Each week, Copy Co’s Operations Manager checks the response times achieved in a random sample
of four of the service calls made by the company’s engineers. The times from the calls sampled
recently are shown in Table 3 below.
Sample
Call A
Call B
Call C
Call D
1
150
175
210
165
2
180
205
160
195
3
195
180
160
145
Week No.
4
5
175
205
175
170
215
195
175
190
6
195
210
190
185
7
180
210
210
210
8
215
195
195
215
Table 3: Copy Co’s service call response times (minutes)
Use the graph paper provided to draw TWO fully labelled Statistical Process Control charts of the
sample means and sample range. (20 marks)
b)
Comment on Copy Co’s customer service performance during this 8-week period and briefly explain
how monitoring the sample ranges could enhance Copy Co’s ability to control their customer service
response times.
(13 marks)
Question 6
a)
According to Slack et al., the nature of the operations management task is shaped by four variables
(the 4 Vs). Explain the nature of the four variables, giving examples.
(13 marks)
b)
Choose two real world processes, and explain some of the factors affecting the process choice,
including the 4 Vs.
(20 marks)
Page 7 of 9
OP282: Business Operations & Systems
OP282 Formula Sheet
Re-order level in a continuous review inventory management system
ROL =
SS + (LT x D)
Safety stock (for a given service level policy) in a continuous review system
SS
=
Z
. .
LT
Safety stock (for a given service level policy) in a periodic review system
SS
=
Z
. .
(LT + P)
Economic order quantity
EOQ =
2 x Co x D
Ch
Average stock level in a continuous review system
Avge Stock = SS + Q/2
The level S in a periodic review system
S = SS + P.D + LT.D
Using the service level model for the safety stock element, this becomes:
S = Z.. (LT + P) + D.(P + LT)
The order quantity in a periodic review system
Q=
S – Actual Stock – ‘On order’
Page 8 of 9
OP282: Business Operations & Systems
PROBABILITIES FOR THE NORMAL DISTRIBUTION
Probability
zσ
μ
X
Normal
Derivative
z
0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
.5000
.4602
.4207
.3821
.3446
.3085
.2743
.2420
.2119
.1841
.4960
.4562
.4168
.3783
.3409
.3050
.2709
.2389
.2090
.1814
.4920
.4522
.4129
.3745
.3372
.3015
.2676
.2358
.2061
.1788
.4880
.4483
.4090
.3707
.3336
.2981
.2643
.2327
.2033
.1762
.4840
.4443
.4052
.3669
.3300
.2946
.2611
.2296
.2005
.1736
.4801
.4404
.4013
.3632
.3264
.2912
.2578
.2266
.1977
.1711
.4761
.4364
.3974
.3594
.3228
.2877
.2546
.2236
.1949
.1685
.4721
.4325
.3936
.3557
.3192
.2843
.2514
.2206
.1922
.1660
.4681
.4286
.3897
.3520
.3156
.2810
.2483
.2177
.1894
.1635
.4641
.4247
.3859
.3483
.3121
.2776
.2451
.2148
.1867
.1611
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
.1587
.1357
.1151
.0968
.0808
.0668
.0548
.0446
.0359
.0287
.1562
.1335
.1131
.0951
.0793
.0655
.0537
.0436
.0351
.0281
.1539
.1314
.1112
.0934
.0778
.0643
.0526
.0427
.0344
.0274
.1515
.1292
.1093
.0918
.0764
.0630
.0516
.0418
.0336
.0268
.1492
.1271
.1075
.0901
.0749
.0618
.0505
.0409
.0329
.0262
.1469
.1251
.1056
.0885
.0735
.0606
.0495
.0401
.0322
.0256
.1446
.1230
.1038
.0869
.0721
.0594
.0485
.0392
.0314
.0250
.1423
.1210
.1020
.0853
.0708
.0582
.0475
.0384
.0307
.0244
.1401
.1190
.1003
.0838
.0694
.0571
.0465
.0375
.0301
.0239
.1379
.1170
.0985
.0823
.0681
.0559
.0455
.0367
.0294
.0233
2.0
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
3.0
.0228
.0179
.0139
.0107
.0082
.0062
.0047
.0035
.0026
.0019
.0013
.0222
.0174
.0136
.0104
.0080
.0060
.0045
.0034
.0025
.0018
.0013
.0217
.0170
.0132
.0102
.0078
.0059
.0044
.0033
.0024
.0018
.0013
.0212
.0166
.0129
.0099
.0075
.0057
.0043
.0032
.0023
.0017
.0012
.0207
.0162
.0125
.0096
.0073
.0055
.0041
.0031
.0023
.0016
.0012
.0202
.0158
.0122
.0094
.0071
.0054
.0040
.0030
.0022
.0016
.0011
.0197
.0154
.0119
.0091
.0069
.0052
.0039
.0029
.0021
.0015
.0011
.0192
.0150
.0116
.0089
.0068
.0051
.0038
.0028
.0021
.0015
.0011
.0188
.0146
.0113
.0087
.0066
.0049
.0037
.0027
.0020
.0014
.0010
.0183
.0143
.0110
.0084
.0064
.0048
.0036
.0026
.0019
.0014
.0010
Page 9 of 9
OP282: Business Operations & Systems