Operations Management

PGP 2010-12, Section B

Mid-term Examination
October 25, 2010
Devanath Tirupati
PLEASE READ CAREFULLY:
1.
2.
3.
4.
5.

The duration of the examination is 3 hours.

This is an open book, open notes examination.
Be brief and precise. State assumptions, if any, clearly and provide a brief
justification.
For obtaining full credit, clearly show all your supporting work.
Total marks = 50

Question
No.
I
II
III

Topic

Weight (Marks)

Austin Book Stores

Office Products Ltd.
Annalakshmi Pickles Ltd.

7
19
24

Suggested Time
(minutes)
15
60
75

I Austin Book Stores (7 Marks)

Austin Book Stores (ABS) procures special note books from an outside supplier. These note
books are very popular and have steady demand at a rate of 1000 units / year. The current
ordering process at ABS is such that the cost of an order is about $50 and independent of the
order quantity. The inventory holding cost of the special note books is estimated to be
$9/unit/year. A $500 investment in automating the ordering process is expected to reduce the
order cots to $25 per order. What is the payback period for this investment?
II Walk-In Interview at OfficeProducts Ltd. (OPL) (19 marks)
OfficeProducts Ltd. (OPL) markets various office products like staplers, files, computer
stationary etc. Primarily based in Western India, OPL has drawn up plans to enter the southern
markets. It has advertised vacancies for the posts of sales representatives (SR) and office
assistants (OA) in its upcoming Chennai office. Walk-in interviews would be held on First
Come First Served (FCFS) basis on 29th October at a hotel in Chennai.
A five member team has been entrusted to conduct the interviews. This team comprises a
secretary, two Deputy Managers (DM) (Sales) and two Deputy Managers (DM) (H.R.).
Candidates would first register their personal details with the secretary and then wait for their
interviews. There would be two interview panels, each consisting of one DM (Sales) and one
DM (HR). Candidates will be interviewed in the order in which they arrive, by one of the two
panels.
OPL has past experience in conducting such Walk-In interviews. The details of candidate
arrival pattern are presented in Exhibit 1. The data describing registration and interview
durations is presented in Exhibit 2.
Exhibit 1: Arrival Pattern
Type of Candidate
Sales Representative
Office Assistant

Mean Inter-arrival Time (mins)

24
12

Form of distribution
Exponential
Exponential

Exhibit 2: Service Time Details

Process
Registration
Interview

Mean Service Time (mins)

5
12

Form of distribution
Exponential
Exponential

(a) Determine the average time taken for a candidate to complete the interview process (from
arrival to completion of interview). (5 marks)
(b) How many candidates would be present, on average, waiting either for registration or
interview? Estimate the average number of SR candidates in this group. (4 marks)
(c) Candidates awaiting registration can wait in the main lobby with adequate space.
However, only limited space is available for candidates awaiting their interviews. OPL would
like to ensure that chairs provided in this (interview) area are occupied at least 50% of
the time. (The objective is to provide chairs for candidates in line to be called for interview
very shortly. Waiting candidates beyond this threshold could spend time elsewhere in the

hotel and return in time for their interviews.) How many chairs should OPL provide in the
interview area? (5 marks)
(d) OPL management is considering the option of reconfiguring the interview panels by
function. Under this scheme there would be two interview panels, one interviewing the SRs
and the other interviewing the OAs. The SR interview panel would comprise the two D.M.
(Sales) while the OA interview panel would comprise the two D.M. (H.R.). As a result of this
rationalization OPL expects that interview times would become less variable. Exhibit 3
below provides interview time characteristics under the modified scheme.
Exhibit 3: Service Time Details Under the Proposed Scheme
Process
Interview (Sales)
Interview (Office Assistant)

Mean (mins)
15
10

Standard deviation (mins)

5
3

Assess the impact of the proposed scheme. You need to consider both candidate and OPL
perspectives and determine the effect on candidate waiting times. (5 marks)
III Annalakshmi Pickles Ltd. (APL) (24 marks)
Ms. Shweta Bhargava, the owner-CEO of Annalakshmi Pickles Ltd. (APL) is concerned
about the companys investment in its facility dedicated to production of 4 kinds of mango
pickles with and without Garlic, with and without jaggery. In addition, the company offers
each of these four pickles in four flavors. The demand for the sixteen product variants is
approximately equal and evenly distributed throughout the year. APL offers its products in
three different sizes jars of 100 gms, 200 gms and 500 gms. Recent sales records indicate
that the distribution of sales by package size is as follows: 50% of the jars sold are of size 100
gms. The corresponding numbers for 200 gm and 500 gm sizes are 30% and 20%
respectively.
Production of mango pickles is a rather straight forward operation and begins with withdrawal
of the days requirement from the raw material stores located on the premises. First, the
mangoes are washed as they move on a conveyor. The washing operation requires a daily
setup of 15 minutes, which could be completed the previous evening to permit processing at
the start of the day. The washed mangoes are sorted by size and then sliced before mixing in
the main Mixer. The sorting operation is automatic and has a processing rate of 500 kg per
hour. The plant is equipped with 4 slicers, each capable of processing at the rate of 100 kg
per hour, exclusive of setup time. Mangoes come in 3 sizes small, medium and large, and
the present practice is to procure approximately equal amount in each size. The slicers
require a size specific setup and changing between sizes takes about one hour. The current
practice is to use only three slicers, one for each size and avoid setup changes. The fourth
slicer is kept as a standby in case of breakdown of one of the slicers.
Flavor preparation involves mixing of salt, spices and other specific ingredients in oil and
mixing for about 60 minutes. This is done in a small pre-mixer with a capacity of 20 kg. The
facility has provision to hold in storage 4 batches of flavor. However, the premix is consumed
the same day and is not carried over for next days operations. The end product (the pickle) is
made by mixing the appropriate flavor mix with the sliced mangoes and a few other additives
in the main Mixer for a little more than one hour. Then a sample is drawn and tested for
quality of several parameters. Sometimes, further mixing with additional ingredients is
necessary to bring the product within the specs and be of acceptable quality. On average, it

takes about 1.5 hours for mixing and getting approval from quality control. The Mixer has a
capacity of 240 kg of output of final product. The flavor mix and sliced mangoes respectively
constitute 10% and 90% of the input to the Mixer. (For the purpose of this examination you
may ignore the requirements of other additives and losses in the mixer.)
Once the batch is approved, the pickle is ready for filling by connecting the mixer to one of
the two filling stations. The mixer can be connected to only one filling station at any time.
The filling stations are multipurpose and can be used for any size jars. Each station can be
setup for a particular size (100gms, 200 gms or 500 gms) and changing the size requires 30
minutes of change over time. After the setup each station can fill 20 jars per minute of the
100 gm variety. For larger sizes the rate is 15 and 8 jars per minute for 200 and 500 gm jars
respectively. Switching the Mixer from one filling station to the other is quite easy and can
be done very quickly.
After filling, the jars are sealed, labeled appropriately and packed in cartons. The cartons are
then shifted to finished-goods storage area from where they are shipped directly to large
customers and to dealers.
The table below provides a summary of the setup times and additional information on
processing rates at various operations of the plant.

Operation

Processing rate
(exclusive of any
setups)

Setup Time

Nature of setup

Washing

300 kg / hr

15 minutes

Daily setup, either at the start of the

day or at the end of the day, for
next day.

Sorting

500 kg / hr

Nil

Slicing

100 kg / hr / slicer

1 hour

Pre-mixing
(flavor preparation)

1 hour per batch*

15 minutes

(Main) Mixer

1.5 hours per

batch*

15 minutes

Filling

Labeling and
Packing

0.5 hour
1000 jars per
hour, independent
of size, type,
flavor of pickle

For change in size of mangoes,

independent of flavor and type of
pickle
Daily setup, either at the start of the
day or at the end of the day, for
next day.
Daily setup, either at the start of the
day or at the end of the day, for
next day.
Setup required for changing
package size. No need for setup
for change in flavor, type of pickle,
if the size is the same.

Nil

* The batch processing times represent the average-time required for the operation, including
any cleaning of the vessel. The actual times are product dependent and vary with changes in
flavor and pickle type. For the purpose of this examination, you may ignore these variations
and work with the average times.

The plant currently operates six days a week with one 8 hour shift per day, exclusive of lunch
time. The work schedules are staggered to permit plant operation over an extended time and
increase its capacity. The current schedule, with flexible lunch hour (to maximize
production), is as follows:
Workers in washing, sorting, slicing and pre-mixing: 6:00am 3:00pm
Workers in Mixing and related activities:
8:00am 5:00pm
Workers in Filling, Labeling & Packing
9:30am 6:30pm

(a) Prepare a process flow diagram for APLs plant clearly showing the flow of material and
indicating the capacities at various stages. (8 marks)
(b) Consider the plant operation while it is producing only one flavor of one type of pickle.
What is the daily capacity of the plant? Assume that the plant is producing only small jars
(100 gms size). How does your answer change if the plant switches to production of large
jars (500 gms each)? (12 marks)
(c) Demand for pickles has increased substantially and Shweta is considering alternatives to
increase the plant capacity. Suggest suitable options for her consideration. Be sure to provide
options for both short and long term and identify the pros and cons for each option you
suggest. (4 marks)