INDIAN INSTITUTE OF MANAGEMENT Operations Management I Mid-Term Examination, PGP I, PGP-ABM I, & FPM I November 02, 2011 Duration:

2 hours (9:30am 11:30am) Chetan Soman and Sachin Jayaswal

PLEASE READ CAREFULLY: 1. 2. 3. 4. This is an open book, open notes examination. Be brief and precise. State assumptions, if any, clearly with a brief justification. For obtaining full credit, clearly show all your supporting work. Use of non-scientific calculators is allowed. Question No. I II III Total Topic Ahmedabad Consulting ABC Contract Manufacturer Patel & Shah Computer Consultants Maximum Marks 08 10 12 30

I. Ahmedabad Consulting [8 Marks] Ahmedabad Consulting, started by IIMA students, is a strategy consulting firm, which divides its consultants into three classes: associates, managers and partners. The firm has been stable in size for the last 20 years, ignoring growth opportunities in the 21st century, but at the same time not suffering from a need to downsize in the recent recession. Specifically, it has maintained around 200 associates, 60 managers and 20 partners, and expects to keep the same level of workforce. The work environment at Ahmedabad Consulting is rather competitive. On an average, an associate stays in her position for 4 years, after which she is either promoted as a manager or is fired from the company. Similarly, a manager spends 6 years, on an average, in her position before she becomes a partner or is dismissed. A partner, on an average, stays with the company for another 10 years (a total of 20 years with the company). The company recruits MBAs, mainly from IIMA, as associate consultants; no hires are made at the manager or partner level. a. [2 Marks] How many new MBA graduates does Ahmedabad Consultancy have to hire every year? b. [3 Marks] What are the odds that a new hire at Ahmedabad Consultancy will become a manager as opposed to being dismissed? c. [3 Marks] What are the odds that a new hire at Ahmedabad Consultancy will ultimately become a partner as opposed to being dismissed?

II. ABC Contract Manufacturer [10 Marks] ABC is a contract manufacturer of critical sub-assemblies for XYZ mobile. It currently manufactures only a single type of sub-assembly exclusively for XYZ mobile. Table 1 lists the sequence of operations in the manufacturing of these sub-assemblies at ABC. ABC operates 1 shift (8 hours) a day, and needs to setup its machines every day it has to start production. ABC is a new start-up, and has of late been finding it difficult to meet the growing demand from XYZ mobile. ABC is now considering ramping up its capacity to be able to meet the growing demand from XYZ mobile. a. [2 Marks] Where should it first increase capacity? b. [3 Marks] Now suppose that operation C-1 produces 15% defective items, which are detected only after all the operations are over. All such defects need to be reworked at C-1 and all the subsequent operations. Rework does not produce any defect. At which operation should ABC first increase capacity if it needs to increase the overall capacity? c. [5 Marks] Now suppose XYZ mobile is planning to launch a new model of its mobile, which needs a different subassembly for which the sequence of operations and the corresponding setup times and run times are given in Table 2. It is clear from Table 2 that the new subassembly does not need the C-2 operation. XYZ mobile has now placed an order for 50/day of the new sub-assembly along with 100/day of the older type. ABC is planning to produce the older and the newer sub-assembly types in batches of 100 and 50, respectively. Does ABC have enough capacity to meet these new demand requirements? If not, where should it consider adding capacity? Assume 15% defects for older sub-assembly type as described in (b), and no defects for newer sub-assembly type.

Operation A B C C-1 C-2 C-3 D

Setup time (min) 30 35

Run time/unit(min) 2 2.5

Operation

Setup time (min) 35 40

Run time/unit(min) 2.5 3.2

A B C

45 20 50 0

1.5 2.3 1.25 1 D

C-1 C-2 C-3

50 0 60 0

2 0 1.4 1

Table 1: Setup and Run Times for Old Assembly

Table 2: Setup and Run Times for New Assembly

III. Patel & Shah Computer Consultants [12 Marks] Jignesh Patel and Mayank Shah, both computer consultants, are considering embarking on a joint project that will involve development of an application for Android based tablet PCs. Jignesh and Mayank have broken down the project into 9 tasks. The first task is to undertake a market survey in order to determine exactly what the potential clientele will require and what features of the software are likely to be most attractive. Once this stage is completed, the actual development of the programs can begin. The programming requirements fall into two broad categories: graphics and source code. Because the system will be interactive and icon driven, the first task is to identify and design icons. After the programmers have completed the icon designs, they can proceed with the second part of the graphics development, design of the input/output screens. These include the various menus and report generators required in the system. The second part of the project is coding the modules that make up the application. The first step is to develop a detailed flowchart of the system. After they complete the flowchart, the programmers can begin work on the modules. There are a total of four modules. The work on modules 1 and 2 can begin immediately after completion of the flowchart. Module 3 requires parts of module 1, so the work on module 3 cannot begin until module 1 is finished. The programming of module 4 cannot start until both modules 1 and 2 are completed. Once the graphics potion of the project and the modules are completed, the two separate phases of the system must be merged and the entire system tested and debugged. Jignesh has managed to obtain some funding for the project, but his source requires that the application be completed and ready to market in 25 weeks. In order to determine whether this is feasible, Jignesh and Mayank have divided the project into 9 indivisible tasks and have estimated the time required for each task. The list of these tasks, the times required, and the precedence relationships are given in Table 3. a. [2 Marks] Is it possible to complete the project in 25 weeks? b. [1 Mark] What is the latest time that the development of input/output screens can be completed without delaying the project?

c. [1 Mark] Suppose that Jignesh discovers a bug in the coding of module 2, so that the time required to complete module 2 is longer than anticipated. Will this necessarily delay the project? d. [ 1 Mark] Suppose that a similar problem is discovered in coding of module 1. Will the project necessarily be delayed in this case?
3

e. [2 Marks] If Mayank is responsible for the coding of modules and Jignesh is responsible for screen development, and all time estimates are accurate, will they be able to complete the project within 25 weeks? f. [5 Marks] Jignesh and Mayank expect that once they complete the project and place the application in the market, it will fetch them an average of Rs. 15,000 per week for the first three years that the product is available. By completing the project earlier, they hope to be able to realize the income earlier. They carefully consider each task and the possibility of reducing the task time and the associated costs. Most of the activities can be expedited by subcontracting parts of the programming. Expediting costs vary based on the nature of the task. They obtain the estimates given in Table 4. What is the optimal expediting strategy (i.e., which activities should be expedited and by how much)?
Task Immediate Predecessor Time Required (Weeks) 3 4 2 6 5 3 7 5 8 Task A B C D E F G H I Expedited Time (Weeks) 1 3 2 4 4 2 4 4 5 Normal Cost 10,000 40,000 20,000 30,000 25,000 15,000 45,000 30,000 80,000 Cost to Expedite/Week 10,000 20,000 15,000 13,000 15,000 12,000 2,000 15,000

A. Perform market survey B. Design graphic icons A C. Develop flowchart A D. Design input/output B, C screens E. Module 1 coding C F. Module 2 coding C G. Module 3 coding E H. Module 4 coding E,F I. Merge modules and graphics D, G, H and test application Table 3: Activity precedence and normal time

Table 4: Expedited times and costs