Section-A

I
1. What is Operations Management?
Ans) Operation management is the science and art of ensuring that goods and services are
created and delievered successfully to customers.

2. Define value chain.
Ans) A value chain is a network of facilities and processes that describes the flow of goods
,services, information and financial transcations from suppliers through the facilities anfd processes
that create goods and deliver them to customers.

3. What is supply chain?
Ans) A supply chain is the portion of the value chain that focuses primarily on the physical
movement of goods and materials and supporting flows of information and financial transcations,
through the supply, production and distribution process.

5. Define innovation.
Ans) Innovation is the discovery and practical application or commercialization of a device, method
or idea that differs from existing norms.

Section-B

II
1. Explain the similarities & differences between goods and services.
Ans) i. Goods are tangible whereas services are intangible. Goods are consumed, but services are
experienced. Goods-producing industries rely on machines and hard technology to perform work.
Goods can be moved, stored and repaired and generally require physical skills and expertise during
production.
ii. Customers participate in many service processes, activities and transactions. Many
services require that the customer be present either physically, on a telephone or online for service to
commence. In addition, the customer and service provider often coproduce a service, meaning that
they work together to create and simultaneously consume the service, as would be the case with a
bank teller and a customer to complete a financial transaction. This means that many services must
be performed in the presence of the customer and hence operation must respond appropriately. This
is not the case for goods producers. Customers are not involved in manufacturing and operations can
be performed at the convenience of the producer.
iii. The demand for services is more difficult to predict than demand for goods. Customer
arrival rates and demand patterns for such service delivery systems as banks, airlines,
supwermarkets, telephone service centers and courts are very difficult to forecast. The demand for
services is time-dependent, especially over hte short term.
iv. Services cannot be stored as physical inventory. In goods-producing firms, inventory can
be used to decouple customers demand from the production process or between stages of the
production process or between stages of the production process to ensure constant availability
despite fluctuations in demand. Service firms do not have physical inventory to absorb such
fluctuations in demand.
v. Service management skill are paramount to a successful service encounter. Service
providers have a significant effect on the perceived value of the service as viewed by the customer.
Service encounters not only require good operations but also require strong human behaviour and
marketing skills. Service management integrates marketing, human resource and operation function
to plan, create and deliver goods and services and their associated service encounters.
vi. Service facilities typically need to be in close proximity to the customer. When customer
must physically interact with a service facility, For example post offices, hotels and bank. A
manufacturing facility , on the other hand can be located on the other side of the globe, as long as
goods are delievered to customers in a timely fasions.
Vii. Patents do not protect services. A patent on a physical good or software code can provide
protection from competitors. The intangible nature of a service makes it more difficult to keep a
competitors from copying a business concept, facility layout, or service encounter design.

2. Write a short note on a break-even model.
Ans) A BREAK-EVEN MODEL
An industrial electronics manufacturer is considering expanding its production facility to
manufacture an electrical component. To assess the value of the expansion, the plant manager has
been asked to determine how many unit would have to be produced and sold in order to break even.
The cost for new equipment and installation is $100,000. Each unit produced would have a variable
cost of $12 per unit and sell for $20.
The equation for total cost is
Total cost = Fixed cost + Variable cost.
The fixed cost is that portion of total cost that does not vary with the amount produced. If 10,000 units
were produced and sold the total cost would be

Total cost = $100,000 + $12(10,000) = $220,000
The revenue received from selling 10,000 units would be $20(10,000) = $200,000, so at this
production level, the firm would incur a loss of $220,000 - $20,000. However, if 13,000 units were
produced and sold, the projected profit would be $20(13,000) - $12(13,000) = $4,000.
The amount of sales at which the net profit is zero or equivalently, the point where total cost equals
total revenue is called the break-even point. We can find the break-even point by developing a simple
mathematical model. Let x be sales volume at the break-even point. Then,
Total cost = 100,000 + 12x
Total revenue = 20x
Setting the total revenue equal to total cost we have
20x = 100,000 +12x
And hence x= 12,500.
If sales are less than 12,500 units, the firm will incur a loss; if sales are more than 12,500, it will
realize a profit. Such information, when combined with sales forecasts, can assist the manager in
deciding whether or not persue the expansion.


3. Write in detail on Offshoring.
Ans) Off shoring is the building, acquiring, or moving of process capabilities from a domestic
location to another country location while maintaining ownership and control. According to one
framework, foreign factories can be classified to six categroies:
1. Off shore facories are established to gain access to low wages and other ways to reduce
costs such as avoiding trade tariffs. Such a factory is not expected to be innovative and its people
follow the standard process procedures dictated by the corporation. Off shore factories usually include
some primary manufacturing and secondary support processes. An offshore factory is the way most
multinational firms begin their venture into global markets and value chains.
2.Output factories are established primarily to gain access to local employee skills and
knowledge,. Such skills and knowledge might include software programming, machining, sales or call
center service management. AOLs call center in india is an example of an outpost facility.
3. Server factories are established to supply specific national or regional markets. Cococola
bottling factories receive concentrated Coke syrup and follow specific procedures to make final
products. Because of high transportation costs, these bottling plants service local and regional
markets.
4. Source factories like offshore factories, are established to gain access to ,ow cost
production but also have the expertise to design and produce a component part for the companys
global value chain. Sony, for example, built a factory in wales in the earlt 1970s and defined its
strategy to produce television sets and replacement component parts for its European markets. It
customized its design for the eurpoean markets.
5. Contributor factories are established to serve a local market and conduct activities like
product design and customization. NCRs factory in Scotland started in the 1960s and played the role
of a server factory producing and today is a lead factory designing and manufacturing automatic teller
machines. Primary manufacturing, accounting, engineering design and marketing and sales
processes often reside at contributor factories.
6, Lead factories are established to innovate and create new processes, products and
technologies. Hewlett packward for example established an offshore factory in 1970 in Singapore. A
decade later it had evolved into a source factory for calculators and keyboards. By the 1990s the
Singapore factory was a lead factory in keyboard and inkjet printer design and manufacturing. Lead
factories must have the skills and knowledge to design and manufacturer the next generation of
products

4. Write a short note on: The balanced scorecard model.
Ans) Robert Kaplan and david Norton of the Harvard business school, in response to the
limitations of traditional accounting measures, popularized the notion of the balanced scorecard,
which was first developed a analog devices. Its purpose is to translate strategy into measures that
uniquely communicate your vision to the organization.
i. Fianacial perspective: Measure the ultimate value that the business provides to its share
holders. This includes profitably, revenue growth, stock price, cash flows, return on investment,
economic value added(EVA) and share holder value.
ii. Customer perspective: Focuses on customer wants and needs and satisfaction as well as
market share and growth in market share. This includes safety, service levels, satisfaction ratings,
delivery reliability, number of cooperative customer- company design initiatives, values of a loyal
customer, customer retention, percent of sales from new goods and services and frequency of repeat
business.
iii. Innovation and learning perspective: Directs attention to the basis of a future success- the
organizations people and infrastructure. Key measures might include intellectual and research
assets, time to develop new goods and services, number of improvement suggestions per employee,
employee satisfaction, market innovation, training hours per employee, hiring process effectiveness,
revenue per employee, and skill development.
iv. Internal prespective: Focuses attention on the performance of the key internal processes
that drive the business. This include such measures as goods and service quality levels, productivity,
flow time, design and demand flexibility, assest utilization, safety, environmental quality, rework and
cost.

5. Discuss the strategic planning process.
Ans) The strategic planning process consists of two main parts: development and implementation.
Strategy development refers to a companys approach, formal or informal , for making key longterm
business decisions. The process typically takes into account customer and market requirements, the
competitive environment, industry structure and non industry competitors, financial and social risks,
human resource capabilities and needs, technological capabilities and supplier capabilities. This
strategy development process might include environmental scanning and global and local business
intelligence, market or sales forecasts, target market characteristics and analysis, quantitative models
or simulations, evaluating alternative what if scenarios and other tools to develop strategies to
bridge the gap between where the organization is now and where it wants to be in2.4. or 10 yrs.
Strategies might involve developing new goods or services, expanding existing or entering new
markets, growing revenue, adding new peripheral chain, providing great service or establishing global
alliances. Strategies might also be directed toward making the company a preferred supplier, a low-
cost producer, a technology leader or a market innovator.



Section-C
Iii

1. Define value chain with an example of a value chain.
Ans) A value chain is a network of facilities and processes that describes the flow of goods
,services, information and financial transcations from suppliers through the facilities anfd processes
that create goods and deliver them to customers.
An example of a value chain: BUHKRE INDUTRIES,INC.
Buhrke industries inc located in Arlington heights, Illinois provides stamped metal parts to
many industries, including automotive, appliance, computer, electronics, hardware, housewares,
power tools, medical and telecommunications. Decades ago, as a tool and die shop, the company
revolutionized the container- manufacturing industry by developing the first die to blank, form, and curl
an aluminium foil and curl an aluminium foil tray in one stroke. Then, as beverage industry converted
to easy-open ends (pull tabs), buhrke supplied the manufacturers with complete systems- including
dies and special machinery- to fulfil their needs.
Buhrkes objectives is to be a customers best total value producer with on-time delivery,
fewer rejects, and high-quality stampings. However, the company goes beyond manufacturing goods;
it prides itself in providing the best service available as part of its customer value chain. Service is
more than delivering a product on time- its also partnering with customers by providing
i. personilized service for fast, accurate response
ii. Customized engineering designs to meet customer needs
iii. Preventive maintenance systems to ensure high machine uptime,
iv. Experienced, highly trained, longterm employees and
v. Troubleshooting by a knowledgeable sales staff
many customers have strict quality and documentation requirements. Buhrke helps them
meet those requirement by providing a variety of reporting services and material certifications, Such
as Statistical process control (SPC), capability reports, and many others. Buhrke meets the strict
quality and documentation requirements of the international standard organization(ISO) and the big
three automakers- general motors, ford and Daimlerchrysler. Many manufacturing systems and much
of the maintenance equipment were custom- designed by buhrke engineers and tailored to cutomers
specific needs. Maintenance engineers created a computerized preventive maintenance system, a
control console that centralizes and monitors the maintenance schedules of all presses, increasing
quality and productivity and virtually eliminating costly equipment breakdowns.



Estimating -------------> Sales ------> Engineering------> Tooling ----->



Inspection ---------> Production -----------> Finishing ------> Assebling& packaging ------>



Final Audit Inspection ----------> Shipping.

The valuechain at buhrke industries


The above diagram illustrates the components of Buhrkes value chain. The process
begin with a customer request for a quotation. The estimating department processes such job
parameters as specifications, metals, finishing or packaging services, the presses that it may run on,
and customer dead lines in developing a quote. Next, a sales engineer is assigned to monitor each
stamping job from start to finish, so the customer may have the convenience of a single point of
contact. Sales engineers work closely with engineering staff to convey customer needs. Engineer
then design the best tooling for the job, using computer- assisted design processes to ensure precise
designs and timely completion. After a tool is designed and built, it is maintained in an onsite tool
room. Buhrkes tool makers have decades of experience constructing tools for metal stamping and
they are put on a strict maintenance regimen to assure long life and consistent stampings.



2. What are the management issues in Global value chain?
Ans) Management Issues in Global Value chains
Global supply chains face higher level of risk and uncertainty, requiring more
inventory and day-to-day monitoring to prevent product shortages. Work force disruptions such as
labor strikes and government turmoil in foreign countries can create inventory shortages and
disrupting surges in orders. Extra finished goods inventory may be carried close to the customers
location if the supply chain includes overseas suppliers. Ensuring that foreign factories have a
reliable supply of raw materials and component parts may also involve carrying higher levels of
inventory.
Transportation is more complex in global value chains. For example tracing global
shipments normally involves more than one mode of transportation and foreign company. One
Chinese company is becoming the worldwide leader in shipping containers- a basic piece of
equipment for global transportation firms and supply chains. The company set up six factories in the
1990s along the coast of china to manufacture shipping containers. Quickly learning how to
manufacture refrigerated containers, it soon became the leader in the design and manufacture of
containers for air, sea, road and rail transportation services.
The transportation infrastructure may vary considerably in foreign countries. The
coast of china, for example, enjoys much better transportation, distribution and retail infrastructures
than the vast interior of the country. Moving goods to the interior of the country can be slow,
expensive, and sometimes impossible. Each country has its own unique transporation
characteristics, including the threat of terrorism, political and border disruptions and changes in
import/export laws, tariffs and regulations.
Global purchasing can be difficult process to manage when sources of supply ,
regional economies and even government change. Daily changes in international currencies
necessitate careful planning and in the case of commodities , consideration of futures contracts. New
sources of supply frequently enter the global mix, requiring purchasing managers to re evaluate their
decisions. These decisions can have fat reaching implications for operations, particularly when quality
and delivery performance are considered.
International purchasing can lead to disputes and legal challenges relating to such
things as price fixing and quality defects. A legal case on global price-fixing of vitamins is now on the
docket of the u.s . Supreme court international quality, cost, and delivery disputes have few legal
options and therefore it is imperative that global supplier relationships be well established.
Privatizing companies and property is another major change in global rate and
regulatory issues. India is an example of how many countries are redefining their approach to
business with a wave of privitization. The Indian government , for example , recently sold Bharat
aluminium co to a private investor. This was one of over 250 companies owned by the central
government that it plans to sell. India has already sold its state-owned telephone companies and
biggest auto manufacturer to private investors. East Europe, china, brazil, and Russia are also
initiating private ownership of assests such as land, equipment and businesses. This privatization
movement also helps improve the efficiency and effectiveness of global supply chains.


4. What are the 5 keys of competitive priorities?

Ans) The Five keys of competitive priorities are
1. Cost

2. Quality

3. Time

4. Flexibility

5.Innovation


1. Cost:
Many firms gain competitive advantage by establishing themselves as the low cost
leader in an industry. These firms handle high volumes of goods and services and achieve their
competitive advantage through low prices. Examples of firms that practice a low cost strategy are
Honda motor co., Marriotts Fairfield Inns, Merck medco online pharmacy and wal-marts sams club.
Almost every industry has a low-price market segment. Although prices are generally
set outside the realm of operations, low prices cannot be achieved without strict attention to cost and
the design and management of operations. Costs accumulate through the value chain and include
the costs of raw materials and purchased parts, direct manufacturing cost, distribution, postsale
services, and all supporting processes. Design significantly affects the costs of manufacturing,
warranty and field repair and such non-value added costs as redesign and rework.
A low cost can result from high productivity and high capacity utilization. More
importantly , improvements in quality lead to improvements in productivity, which in turn lead to lower
costs. Thus , a strategy of continuous improvement is essential to achieving a low-cost competitive
advantage. Lower costs also result from innovations in product design and process technology that
reduce the costs of production and from efficiencies gained through meticulous attention to
operations.


2. Quality:
The role of quality in achieving competitive advantage was demonstrated by several
research studies. PIMS Associates, INC , a subsidiary of the strategic Planning Institute . For
example, Maintains a datatbase of 1,200 manufacturing companies and studies the impact of goods
quality on corporate performance. PIMS researchers have found the following:
Business offering premium quality goods usually have large market shares and were early
entrants into their markets.
Quality is positively and significally related to a higher return on investment for almost all
kinds of market situations. PIMS studies have shown that firms with superior goods quality can more
than triple return on sales over goods perceived as having inferior quality.
A strategy of quality improvement usually leads to increased market share but at cost in
terms of reduced short- run profitably.
High goods quality producers can usually charge premium prices.


3. Time:
In today s society , time is perhaps the most important source of competitive
advantage. Customers demand quick response , short waiting times, and consistency in
performance. Many firms such as Charles Schwab Clarke American checks, CNN , Dell , fedex and
walmart know how to use time as a competitive weapon to create and deliver superior goods and
services.
Reduction in flow time serve two purposes. First , they speed up work processes so that
customer response is improved. Deliveries can be made faster and more than often on time. Second,
reductions in flow time can only be accomplished by streamlining and simplifying processes and value
chains to eliminate non-value added steps such as rework and waiting time. This force improvements
in quality by reducing the opportunity for mistakes and errors. By reducing non-value added steps,
costs are reduced as well.

4. Flexibility:
Success in globally competitive markets requires a capacity for both design and
demand flexibility. The automobile industry, for example is constantly developing new models .
Companies that can exploit flexibility by building several different vehicles on the same assembly line
at one time, enabling them to switch output as demand shifts, will be able to sell profitably at lower
volumes. This is one key advantage that Japanese manufacturer have over u.s. automakers. Honda
pilot can produce sport utility vehicle and the less -expensive Honda pilot can produce any
combination of 300,000 MDX, Pilot, and Odyssey minivians.
Flexibility is manifest in mass customization strategies that are becoming increasingly
prevalent today. Mass customization is being able to make whatever goods and services the
customer wants, at any volume, at any time for anybody, and for a global organization, from any place
of the world.

5. Innovation:

Innovation is the discovery and practical application or commercialization of a device,
method or idea that differs from existing norms. Innovations in all forms encapsulate human
knowledge . Over the years, innovations in goods and services have improved the overall quality of
life. Within business organizations, innovations in manufacturing equipment and management
practices have allowed organizations to be more efficient and better meet customers needs.
Many Firms focus on research and development for innovation as a core component
of their strategy. Such firms are on the leading edge of product technology , and their ability to
innovate and introduce new products is a critical success factor. Product performance , Not proce is
the major selling feature. When competition enters the market and profit margins fall , these
companies often drop out of the market while continuing to introduce innovative new products. These
companies focus on outstanding product research, design and development; high product quality and
the ability to modify production facilities to produce new products frequently.