NEPAL OPEN UNIVERSITY

Faculty of Management and Law

Office of the Dean
Mid Term Examination
2076 (2019)
Program: Master of Business Administration (MBA) Full Marks: 100
Semester: Third Time: 4 hrs
Subject: MGPOM 592: Operations Management

Group A
1. Read the case carefully given below and solve the questions followed.

Chad’s Creative concepts designs and manufactures wood furniture. Founded by Chad Thomas
on the banks of Lake Erie in Sandusky, Ohio the company began by producing custom-made
wooden furniture for vacation cabins located along the coast of Lake Erie and on nearby Kelly’s
Island and Bass Island. Being an “outdoors” type himself, chad Thomas originally wanted to
bring “a bit of the outdoors” inside. Chad’s Creative Concepts developed a solid reputation for
creative designs and high-quality workmanship. Sales eventually encompassed the entire Great
Lakes region. Along with growth came additional opportunities.

Traditionally, the company had focused entirely on custom-made furniture, with the customer
specifying the kind of wood from which the piece would be made. As the company’s reputation
grew and sales increased, the sales force began selling some of the more popular pieces to retail
furniture outlets. This move into retail outlets led Chad’s Creative Concepts into the production
of a more standard line of furniture. Buyers of this line were much more price sensitive and
imposed more stringent delivery requirements than did clients for the custom line. Custom-
designed furniture, however, continued to dominate sales, accounting for 60 percent of volume
and 75 percent of dollar sales. Currently, the company operates a single manufacturing facility in
Sandusky, where both custom and standard furniture is manufactured. The equipment is mainly
general purpose in nature in order to provide the flexibility needed for producing custom pieces
of furniture. The layout groups saws in one section of the facility, lathes in another, and so on.
The quality of the finished product reflects the quality of the wood chosen and the craftsmanship
of individual workers. Both custom and standard furniture compete for processing time on the
same equipment by the same craftspeople.

During the past few months, sales of the standard line have steadily increased, leading to more
regular scheduling of this line. However, when scheduling trade-offs had to be made, custom
furniture was always given priority because of its higher sales and profit margins. Thus,
scheduled lots of standard furniture pieces were left sitting around the plant in various stages of
completion.

As he reviews the progress of Creative concepts, Thomas is pleased to note that the company has
grown. Sales of custom furniture remain strong, and sales of standard pieces are steadily
increasing. However, finance and accounting have indicated that profits aren’t what they should
be. Costs associated with the standard line are rising. Dollars are being tied up in inventory, both
of raw materials and work in process. Expensive public warehouse space has to be rented to
accommodate the inventory volume. Thomas also is concerned with increased lead times for
both custom and standard orders, which are causing longer promised delivery times. Capacity is
being pushed, and no space is left in the plant for expansion. Thomas decides that the time has
come to take a careful look at the overall impact that the new standard line is having on his
operations.
(Case Source: Krajeswski, and Ritzman, (2002), p.27)
Questions
a) What types of decisions must Chad Thomas make daily for his company’s operations to run
effectively? Over the long run? [8]
b) How has the move to producing standard furniture affected the company’s financial structure? [8]
c) What might Thomas have done differently to avoid some of the problems he now faces? [9]

Group B
Situational Analysis / Problem Solving
2. A company is setting up an assembly line to produce 192 units per eight-hour shift. The following
table identifies the work elements, times, and immediate predecessors. [10]

Work element Time (in second) Immediate predecessors

A 40 -
B 80 A
C 30 D,E,F
D 25 B
E 20 B
F 15 B
G 120 A
H 145 G
I 130 H
J 114 C,I

a) What is the desired cycle time?

b) What is the theoretical minimum number of workstations?
c) What is the efficiency of the system?

3. John Sloan, president of Sloan Toy company, Inc., in Oregon, has just reviewed the design of a new
pull-toy locomotive for 1- to 3- years-old. John’s design and marketing staff are very enthusiastic
about the market for the product and the potential of follow-on circus train cars. The sales manager is
looking forward to a very good reception at the annual toy show in Dallas next month. John too, is
delighted, as he is faced with a layoff if orders do not improve.
John’s production people have worked out the manufacturing issues and produced a successful pilot
run. However, the quality assessment staff suggests that under certain conditions, a hook to attach
cars to the locomotive and the crank for the bell can be broken off. This is an issue because children
can choke on small parts such as these. In the quality test, 1- to 3-year-olds were unable to break off
these parts; these were no failures. But when the test simulated the force of an adult tossing it on the
floor, there were failures. The estimate is that one of the two parts can be broken off 4 times out of
 100,000 throws. Neither the design nor the material people know how to make the toy safer and still
perform as designed. The failure rate is low and certainly normal for this type of toy, but not at the
Six Sigma level that John’s firm strives for. And, of course, some one, someday may sue. A child
choking on the broken part is a serious matter. Also, John was recently reminded in a discussion with
legal counsel that U.S. case law suggests that new products may not be produced if there is “actual or
foreseeable knowledge of a problem” with the product.
The design of successful, ethically produced new products, as suggested while designing the product,
is a complex task. What should John do? [15]

Group C
Long Answer Questions [25]
4. “Operations management is taken as competitive weapon” Elucidate this statement.
Or
“Designing the system has strategic importance in operations management” Discuss indetail.

Group D
Short Answer Questions (Attempt any five) (5×5=25)
5. Briefly explain the five operation performance objectives.
6. Explain the three role of operation strategy from implementing to driving strategy.
7. What is the use of quality function deployment?
8. Discuss the operational issues in product life cycles.
9. Explain the different types of process.
10. What is location decision? Discuss the factors influencing location selection.
11. What does 4 D means? Explain them briefly.