Examination Paper: Operation Management
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IIBM Institute of Business Management
Examination Paper MM.100
Operations Research
Section A: Objective Type (30 marks)
•This section consists of Multiple choices/Fill in the blanks/True-False & Short Answer type
questions.
•Answer all the questions.
•Part One questions carry 1 mark each & Part Two questions carry 5 marks each.
Part One:
1. In case of (<=) inequality, to convert the inequality to an equation, we used to add a slack
variable to the left hand side of the constraint, this slake variable should be:
a. Negative
b. Positive
c. May be positive or negative
d. Zero
2. In a set of m Χ n equations (m<n) the maximum number of corner points is given by…………
3. According to penalty rule for artificial variables, the objective coefficient of the artificial variable
represents an appropriate penalty, positive or negative depending on the problem, but the
necessary condition required to hold this is, the value should be:
a. ∞
b. 0
c. 1
d. None of the above
4. The cases of the Simplex method in which the value of the variables may increased indefinitely
without change in the constraints is:
a. Degeneracy
b. Alternative optima
c. Unbounded solutions
d. Nonexisting solutions
5. An arc in network model is said to be ‘Directed’ if it allows positive flow in one direction and
a. Negative flow in negative direction
b. Zero flow in negative direction
c. Negative flow in perpendicular direction
d. None of the above
6. PERT stands for……………………………………………………………………………………..
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7. In preemptive method for goal programming , the optimum value of a higher priority goal is
never degraded by a lower priority goal.(T/F)
8. The column dropping rule does not guarantee the non degradation of higher priority goals.(T/F)
9. The additive algorithm developed by E Balas for solving ILP problems was based on pure binary
variables.(T/F)
10. According to inventory model for commodity possession for smooth business operation, Holding
cost represents:
a. Price per unit of an inventory item.
b. The fixed charge incurred when an order is placed regardless of its size.
c. The cost of maintaining inventory in stock.
d. None of the above
Part Two:
1. What do you understand by ‘Degeneracy’ found in using simplex method?
2. What do know about ‘The Balancing of Transportation Model’? If unbalanced then remedy.
3. Explain ‘Vogel Approximation Model (VAM)’.
4. Explain ‘Dijkstra’s Algorithm’ for routing.
END OF SECTION A
Section B: Practical Problems (40 marks)
•This section consists of Practical Problems.
•Answer all the questions.
•Each Practical Problem is of 10 marks.
1. The stock of WalMark Stores, Inc., trades on the New York Stock Exchange under the symbol
WMS. Historically, the price of WMS goes up with the increase in the Dow average 60% of the
time and goes down with the DOW 25% of the time. There is also a 5% chance that WMS will go
up when the Dow goes and 10% that it will go down when the Dow goes up.
a) Determine the probability that WMS will go up regardless of the Dow.
b) Find the probability that probability that WMS goes up given that the Dow is up?
c) What is the probability WMS goes down given that Dow is down?
2. Prove that if the probability P {A/B} = P {A}, then A and B must be independent.
Examination Paper: Operation Management
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3. Tasco Oil owns a pipeline booster unit that that operates continuously. The time between
breakdowns for each booster is exponential with a mean of 20 hours. The repair time is
exponential with mean 3 hours. In a particular station, two repairpersons attend 10 boosters. The
hourly wage for each repairperson is $18. Pipeline losses are estimated to be $30 per broken
booster per hour. Tasco is studying the possibility of hiring an additional repairperson.
a) Will there be any cost savings in hiring a third repairperson?
b) What is the schedule loss in dollars per breakdown when the number of repairpersons on duty
is two? Three?
4. Cars arrive at a one-bay car wash facility the interarrival time is exponential, with a mean of 10
minutes. Arriving cars line up in a single lane can accommodate at most five waiting cars. If the
lane is full, newly arriving cars will go elsewhere. It takes between 10 and 15 minutes, uniformly
distributed, to wash a car. Simulate the system for 960 minutes, and estimate the time a car spends
in the facility?
END OF SECTION B
Section C: Applied Theory (30 marks)
•This section consists of Applied Theory questions.
•Answer all the questions.
•Each Question carries 15 marks.
•Detailed information should form the part of your answer (Word limit 200 to 250 words)
1. Define Transportation Model and its variant in brief.
2. Explain in detail Game Theory. Support you answer examples.
END OF SECTION C
Examination Paper: Operation Management
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IIBM Institute of Business Management
Examination Paper MM.100
Logistics Engineering and Management
Section A: Objective Type (30 marks)
•This section consists of Multiple choices & Short Answer type questions.
•Answer all the questions.
•Part One questions carry 1 mark each & Part Two questions carry 5 marks each.
Part One:
Multiple Choices:
1. Analysis method in which evaluation of alternative design configuration using multiple criteria is:
a. Level of repair analysis
b. Maintenance task analysis
c. Evaluation of design alternatives
d. None of the above
2. Orientation of Logistic are:
a. Product among organization
b. Total benefits among organization
c. Towards managing of labour
d. Towards managing the physical flow of material & product among organization
3. LMI stands for:
a. Logistics Management Information
b. Legal Management Information
c. Logistics Managerial Information
d. None of the above
4. Technical performance measures (TPMs) is applied for:
a. Evaluation of prime mission related system & elements for expenses
b. Evaluation of prime mission related system & elements for labour
c. Evaluation of prime mission related system & elements for support
d. None of the above
5. System structure should facilitate:
a. Design on an evolutionary basis
b. Design a system within a minimum cost
c. Design on an evolutionary basis & with minimum cost
d. Both (a) & (b)
6. Conceptual design is initiated in response of:
a. Identification of customer need
b. Identification of consumer demand
c. Identification of Industry demand
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d. None of the above
7. Industrial engineering refers to:
a. Design & development of a product
b. Design & development of industrial tools
c. Design & development of expenses
d. Design & development of production capability
8. Contractor logistic support (CLS) refers to:
a. System maintenance activities
b. System evaluation activities
c. Both (a) & (b)
d. None of the above
9. Discounting refers to:
a. Application of selected rate of interest
b. Application of selected difference measure
c. Application of selected of interest & measure differences
d. None of the above
10. A plan which is directed towards covering of logistic support for a system is:
a. System Retirement Plan
b. Post production Support plan
c. Facilities plan
d. Computer Resource plan
Part Two:
1. Personal training requirement are based on what factors?
2. What is meant by Design criteria? Provide some examples.
3. Briefly describe evaluation of logistic’s elements.
4. What are the advantages & disadvantages of functional organization?
END OF SECTION A
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Section B: Caselets (40 marks)
•This section consists of Caselets.
•Answer all the questions.
•Each Caselet carries 20 marks.
•Detailed information should form the part of your answer (Word limit 150 to 200 words).
Caselet 1
Company Profile
Indian Steels Limited (ISL) is a Rs 6000 crore company established in the year 1986. The company
envisaged being a continuously growing top class company to deliver superior quality and cost effective
products for infrastructure development. The company performed with a mission to attain 7 million ton
liquid steel capacity through technological up-gradation, operational efficiency and expansion; to produce
steel with the international standards of cost and quality; to meet the aspirations of the stakeholders. The
production started in the year 1988 and initially, it manufactured Angles, Pig Irons, Beams and Wire Rods
that were mainly used for constructing roads, dams and bridge. The products were mainly supplied to
Public Sector Undertaking such as Railway ,Public Work Department (PWD), Central Public Work
Department (CPWD), Rashtriya Setu Nigam, Audyogik Kendrya Vikas Nigam Ltd.and various foundry
units. The company had its headquarters at Raipur with three stockyards
The company has establish itself well and is said to be considering its expansion plan and proposed
merger with another steel making giant in the country. The company was awarded ISO 9001, ISO 14001
and ISO 18001 certifications. The temperature in the plant premises is reportedly about 6 degrees Celsius
lesser than that of the township, thanks to the greenery being maintained therein.
Logistics Outsourcing
Outbound logistics, which basically connects the source of the supply with the sources of demand with an
objective of bridging the gap between the market demand and capabilities of the supply sources, was
always a problem for companies operating in this industry. Consisting of components like warehousing
network, transportation network, inventory control system and supporting information systems, outbound
logistics was always playing a key role in making the right product available at the right place, at the right
time at the least possible cost. In 1996, owing to the cut throat competition in the emerging dynamic
global markets, ISL emphasized on both effectiveness and efficiency. The company strongly believed in
focusing on its core competency and outsourcing the rest to its reliable partners. Outsourcing of its
outbound logistics was one such move in the direction.
Recognizing the growing demand for its products from the big, diversified and geographically dispersed
customers, the company started expanding the number of warehousing stockyards. From a humble
beginning, the company today has 26 stock yards; most of them is outsourced. Each of the outsourced
stockyards was managed by the third party, which the company referred to sa Consignment Agent in the
area. The CA was selected on the annual basis through competitive bidding process. The performance of
CA was closely monitored by a company representative. The CA was responsible for the entire
distribution of the products within the geographical limits of the allotted market segments and was paid
by the company according to the loads of transaction dealt by him. Based on the sales turnover, CAs were
trifurcated into A, B, and C categories. The CAs with a monthly turnover of Rs 150-200 crore fell under
A category, whereas those with Rs 100-150 crore were B and less than Rs 100 crore were C category.
In addition to the company representative, a team of marketing division operated in the town where the
site of CA was located. This department was responsible for estimating the-future demand, translating it
into orders and sending to the manufacturing plant. Material dispatch was done using either one or a
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combination of the two modes: rail, road. While rail as the mode of transportation, the company had a
choice to book a Normal Rake or a Jumbo Rake. At times, the company was engaging the services of the
CONCOR (Container Cooperation of India) where a train of 62 to 70 wagons, each wagon with about
26tonnes capacity was used for transportation. Instead, if the company decided to send the material by
road, the company had a choice between Trailer (25 to 30 tones) and Truck (52 to 20 tones). The choice
of transportation mode was majorly based on the quantity of dispatch.
As soon as the material was dispatched from the manufacturing plant, the respective CA used to get a
Stock Transfer Chalaan electronically through Virtual Private Network, which was develop by a
professional software service provider. In-transit, monitoring was generally done with the help of Indian
railways, if the mode was Rail. Otherwise, truck/trailer drivers were contact through mobile phones.
Transit generally took 5-6 days, providing time for CA took plan for receiving material. The CA use to
utilize this time for arranging material handling devices like: Heavy cranes and required labour. The
material thus unloaded was reaching the warehousing stock yard where CA was responsible for arranging
the material as per the warehousing norms of ISL.
The company broadly classified materials into Long Products and Rounds. Products following into each
category were further classified by their size, shape and utility and the company used a distinct colour
code for this purpose. Each sub category of material had a specific place for down loading. The company
used Bin System for this purpose. While downloading the material in stockyard, the company norms
insisted that CA arrange for providing Dunnage Material. This unable the CA to store material without a
direct contact with land surface and thus reduced the probability of material deterioration. Material was
stored in the stockyard until an authorized representative of the customer used to come and collect it.
While dispatching material to the customer, a Loading Slip was generated against the Delivery Order. The
company also belived in maintaining long-term relationships with the suppliers as well as the buyers. It
always prioritized the needs of its regular and important customers over others and this worked out to be a
win-win strategy.
Operational problems were majorly because of uncertainties in transportation, fluctuations in supply of
electricity and the load bearing capacity of the soil in the stockyard. Some more problems were
encountered whenever there was a change in CA and these were overcome by training the employees of
the new CA and keeping the old CA responsible for the material in his stockyard for six months after the
contract as well. Observations reveal that, at times there were situations wherin CAs had to do those
things which they were not legally supposed to do because of the pressures mounted by political leaders
with selfish interests.
Conclusions
Despite these problems, this model of outsourcing logistics was working out very well for the company.
The practices, which were started in the year 1996 have sustained major changes in the environment and
are being practiced even in 2006. It has enhanced the supply chain competency of the company by
enabling it leverage more on its core competency, which leads to increased productivity.
Questions:
1. Analyze the case in view of the logistics outsourcing practices of the ISL.
2. Discuss the importance of logistics outsourcing with reference to Supply Chain Management.
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Caselet 2
Introduction
S.K Das established ABC Pharma in 1961 in New Delhi, marketed antibiotics and became brand leaders
in Amphicilin and Cephalexin orals. The company went public in the year 1973. In 1983, ABC
established a plant in Mandideep (MP, India) with various dosage form facilities. In 2004, it became
India’s largest pharmaceutical company, manufacturing and marketing world-class generics, branded
generic pharmaceuticals and active pharmaceutical ingredients. It was ranked amongst the top 10 generic
companies worldwide. The company’s products were sold in over 100 countries with manufacturing
operations in 7 countries and ground presence in 44. The company had an expanding international
portfolio of affiliates, joint ventures and representative offices across the globe with joint venture/
subsidiaries in US, UK, Germany, France, Spain, Ireland, Netherlands, India, China, Brazil, South Africa,
etc.While ABC aggressively pursued the internationalization of its business, the growth strategy equally
focused on enhancing market share n India. The company had a strong brand marketing team and
distribution network in India.
Milestones
By the end of December 31, 2004, global sales had reached US $ 1178 million and registered a growth of
21%. Overseas market accounted for 78% of the global sales. US accounted for 36%, while Europe and
BRIC (Brazil, Russia, India and China) countries contributed 16% and 26% to global sales, with a
combined turnover of US $924 million. The company’s vision was to achieve significant business in
proprietary prescription products with a strong presence in developed markets. It also aspired to be
amongst the top 5 generic players with a US $5 billion sale by next decade. To translate these objectives
into reality and to optimize value creation, the Company had adopted a multi-pronged strategy. The major
thrust areas for future were acquisition of brands overseas, emphasis on brand marketing in the US and
Europe and entering high potential new marets with value added product offerings.
The company had established state-of-the-art multi-disciplinary R&D facilities at Gurgaon, India. ABC
was one of the largest investor on R&D in the Indian pharmaceutical industry, with 7% of its sales during
2004. The company’s major research focus was in the areas of Urology, Anti-invectives, Respiratory,
Anti-inflammatory and Metabolic disorders segments. ABC’s continued focus on R&D had resulted in
several approvals in developed markets and significant progress in New Drug Delivery Response
(NDDR).
Fourth Party Logistics (4PL)
The company believes in building strong and long term relationships with limited number of logistics
service providers. They also focoused on outsourcing the activities like warehouse management, packing
and custom clearance through Freight Forwarders. They always believed in their core competencies. The
logistics service providers took care of storage and inventory management and ensured the availability of
the right product at the right place and at right time. Through outsourcing, they achieved focus on the core
competencies, cost saving, effective supply chain management, cross-pollination of better available
practices and wider and effective geographical coverage. The company practiced Fourth Party Logistics
(4PL) services by providing ERP as a backbone system for the third party logistics service providers. The
palette packing services were outsourced from a local company including the packing material. The
responsibility of complete documentation and custom clearance for import and export of goods had also
been outsourced through Custom House Agents (CHA) and Freights Forwarders (FF) under the
supervision of GM – Global Supply Chain.
The warehouse management was done with the help of Bar-code Technology, which facilitied in tracing
of materials on a single click of a mouse resulting into smooth inward and outward flow of materials. In
future, ABC was planning to have Radio Frequency Identification (RFID) Technology to manage the
warehouse activities in a more effective and efficient manner. The company had divided its global
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operations into four regions viz., R1-Middle East with headquarter at India; R2-CIS, Africa and Europe
with headquarter at London; R3-Far East ad Latin America with headquarter at Singapore; R4-US with
headquarters at New York on the basis of convenience, market potential and market share.
Collaborative Relationship
The company established its global supply chain hub at Mandideep (near Bhopal, India). They managed
their operations with one GM-Supply Chain, one Senior Manager Commercial and four Shipment
Officers. Each Shipment Officer had four support employees outsourced through freight forwarders.
These people were responsible for the day-to-day activities under the administrative control of ABC. GMSupply
Chain was responsible for managing the relations with Supply Chain Partners, Freight forwarders
and Custom House Agents (CHA). The company had been a pioneer in launching the genetic versions of
products on the same day at which the product to get off patent, which helped them in getting an edge
over competitors. They managed to maintain the dignity, discipline and business ethics without violating
the laws of patent. This was possible because of the strong and long term relationship with logistic service
providers. There was a strong level of belonging, faith and trust amongst the supply chain partners. To
maintain the good relations, the company practiced making timely payments to the service providers.
They also opened the account in the same bank in which the service providers had their account so that
prompt money transfer could take place. As a result of this, service providers were so concerned about the
shipments of the company that they dedicated 25 refrigerated cargos each equipped with location tracking
facility to track the status of the shipments.
The relationship and commitments of service providers was endorsed on January 10, 2003 when Ramipril
was going off patents in Europe. ABC having strong presence n Germany wanted to encash the
oppournity by making its Rampril available in Germany right on January 11, 2003, so as to take lead in
available generic market. However, ABC did not know the number and size of competition they would be
facing. The underlying fear of getting the shipment late and therby losing the advantage of being first was
very clear on the faces of ABCs top managers. The task was urgent and important; any delay in
availability was to cost heavily. The D-day was January 10, 2003 and the shipment was to be airlifted
from Mumbai so as to reach Germany after midnight of January 10, 2003 but before dawn of January 11,
2003. Two Boeing were chartered to lift the goods from Mumbai Airport, but the task was not simple, as
the goods were to be surface transported from Mandideep to Mumbai in a carvan of 70 cargos. To worsen
the things, the transporters had announced strike during that period.
The urgency was briefed to freight forwarder, who was caught between relationship with ABC and
membership of the Transporters’ Association. He had the option of pleasing any one of them. The long
association and the relationship with ABC got priority and the freight forwarder assured ABC’s Senior
Commercial Manager to carry out the assigned responsibility. Going against the directives of association,
the freight forwarder contacted the police authorities and obtained a security cover throughout
Maharastra. The freight owner consider himself as one of the responsible members of ABC and was
personally receiving the cargo and getting it loaded at Mumbai airport. The scheduled departure had a
lead-time of two days. However, he freight forwarder insisted and stayed at Mumbai at his own cost to
see the goods leaving India successfully. It was a mission for ABC and the freight forwarder in which
collaborative relationship surpassed all limitations and the goods landed in Germany-just-in-time.
Questions:
1. What modification would you suggest in enhancing the existing logistics system?
2. Critically analyze the efforts of ABC in launching generic versions of products going off
patents.
END OF SECTION B
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Section C: Applied Theory (30 marks)
•This section consists of Applied Theory Questions.
•Answer all the questions.
•Each question carries 15 marks.
•Detailed information should form the part of your answer (Word limit 200 to 250 words).
1. Define Logistic support in the context of the production /construction phase. What are the
elements of Logistic support?
2. Define reliability & maintainability. What are their major characteristics?
END OF SECTION C
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Examination Paper: Supply Chain Management
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IIBM Institute of Business Management
Examination Paper MM.100
Supply Chain Management
Section A: Objective Type (30 marks)
•This section consists of Multiple Choice questions& Short Answer type questions.
•Answer all the questions.
•Part One questions carry 1 mark each & Part Two questions carry 2 marks each.
Part One:
Multiple Choices:
1. When demand is steady, the cycle inventory for a given lot size (Q) is given by:
a. Q/4
b. Q/8
c. Q/6
d. Q/2
2. There are two firms ‘x’ and ‘y’ located on a line of distance demand(0-1) at ‘a’ and ‘b’
respectively, the customers are uniformly located on the line, on keeping the fact of splitting of
market, the demand of firm ‘x’ will be given by:
a. (a+b)/2
b. a+(1-b-a)/2
c. (1+b-a)/2
d. a+(a-b)/2
3. Push process in supply chain analysis is also called:
a. Speculative process
b. Manufacturing process
c. Supplying process
d. Demand process
4. If the Throughput be ‘d’ and the flow time be ‘t’ then the Inventory ‘I’ is given by:
a. I *d=t
b. I=t+d
c. d=I*t
d. I =d*t
5. Forecasting method is:
a. Time series
b. causal
c. Qualitative
d. All the above
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6. Component of order cost include:
a. Handling cost
b. Occupancy cost
c. Receiving costs
d. Miscellaneous costs
7. How many distinct types of MRO inventory are there?
a. One
b. Four
c. Three
d. Two
8. Supply chain driver is:
a. Inventory
b. Return ability
c. Fulfillment
d. All of above
9. SRM stands for:
a. Strategic Relationship Management
b. Supply Return ability Management
c. Supplier Relationship Management
d. None of the above
10. Discount factor equals to, where k is the rate of return.
a. 1/1+k
b. 2/1+k
c. 1/1-k
d. 1/2+k
Part Two:
1. Explain “zone of strategic fit”.
2. Explain “scope of strategic fit”.
3. What do you understand by “Stimulation Forecasting Method”?
4. Write a note on “Obsolescence (or spoilage) cost”.
5. Define “Square Law” in safety inventory of supply chain management.
6. What does the word “postponement” signifies in supply chain?
7. What do you understand by the term “tailored sourcing”?
8. Explain the term “Outsourcing”.
9. Write a note on “threshold contracts” for increasing agent efforts.
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10. What is “dynamic pricing”?
END OF SECTION A
Section B: Caselets (40 marks)
•This section consists of Caselets.
•Answer all the questions.
•Each Caselet carries 20 marks.
•Detailed information should form the part of your answer (Word limit 150 to 200 words).
Caselet 1
Orion is a global co. That sells copiers. Orion currently sells 10 variants of a copier, with all inventory
kept in finished-goods form. The primary component that differentiates the copiers is the printing
subassembly. An idea being discussed is to introduce commonality in the printing subassembly so
that final assembly can be postponed and inventories kept in component form. Currently, each copier
costs $1,000 in terms of components. Introducing commonality in the print subassembly will increase
component cost to$1.025.One of the 10 variants represents 80 percent of the total demand. Weekly
demand for this variant is normally distributed ,with a mean of 1,000 and a standard deviation of
200.Each of the remaining nine variants has a weekly demand of 28 with a standard deviation of
20.Orion aims to provide a 95per level of services .Replacement lead time for components is four
weeks. Copier assembly can be implemented in a matter of hours. Orion manages all inventories
using a continuous review policy and uses a holding cost of 20 percent.
Questions:
1. How much safety inventory of each variant must Orion keep without component commonality?
What are the annual holding costs?
2. How much safety inventory must be kept in component form if Orion uses common components
for all variants? What is the annual holding cost? What is the increase in component cost using
commonality? Is commonality justified across all variants?
3. At what cost of commonality will complete commonality be justified.
4. At what cost of commonality will commonality across the low-volume variants be justified.
Caselet 2
An electronic manufacturer has outsourced production of its latest MP3 player to a contract
manufacturer in Asia. Demand for the players has exceeded all expectations whereas the contract
manufacturers sell three types of players- a 40-GB player, a 20-GB player, 6-GB player. For the
upcoming holiday season, the demand forecast for the 40-GB player is normally distributed, with a
mean of 20,000and a standard deviation Dard deviation of 11,000, and the demand forecast for the 6-
GB player has a mean of 80,000 and a standard deviation of 16,000. The 40-GB player has a sale
Examination Paper: Supply Chain Management
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price of $200, a production cost of $100, and a salvage value of $80 .The 20-GB player has a price of
$150, a production cost of $70, and a salvage value of $50.
Questions:
1. How many units of each type of player should the electronics manufacturer order if there are no
capacity constraints?
2. How many times of each type of player should the electronics manufacturer order if the available
is 140,000? What is the expected profit?
END OF SECTION B
Section C: Applied Theory (30 marks)
•This section consists of Applied Theory Questions.
•Answer all the questions.
•Each question carries 15 marks.
•Detailed information should form the part of your answer (Word limit 200 to 250 words).
1. Consider two products with the same margin carried by a retail store. Any leftover units of one
product are worthless. Leftover units of the other product can be sold to outlet stores. Which
product should have a higher level of availability? Why?
2. McMaster-Carr sells maintenance, repair, and operations equipment from five warehouses in the
United States. W.W. Grainger sells products from more than 350 retail locations, supported by
several warehouses. In both cases, customers place orders using the Web or on the phone. Discuss
the pros and cons of the two strategies.
END OF SECTION C
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Examination Paper MM.100
Statistical Quality Control
Section A: Objective Type (30 marks)
•This section consists of Multiple choice questions & Short Answer type questions.
•Answer all the questions.
•Part One questions carry 1 mark each & Part Two questions carry 4 marks each.
Part One:
Multiple choices:
1. If in a hall there are 18 persons then how many handshakes are possible?
a. 18*18
b. 18*17/2
c. 18*17
d. None of the above
2. If the number of trials be ‘n’ and the probability of occurrence be ‘p’ then the standard deviation
with respect to np, is given by:
a. (np)1/2
b. (np(1-p))1/2
c. (np)1/4
d. (np(1-p))1/4
3. For a biased coin the probability of occurrence of head is 0.4 ,if the coin is tossed twice then the
probability of occurrence of at least one head will be:
a. 0.76
b. 0.48
c. 0.64
d. 0.16
4. Factorial of 5 equals:
a. 60
b. 120
c. 24
d. 5
5. Combinatory of (4,2) equals:
a. 12
b. 8
c. 6
d. None of the above
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6. ‘Economic Control of Quality of Manufactured Product’, a book by Walter A Shewhart in:
a. 1931
b. 1941
c. 1930
d. 1956
7. Quality is judged by…………
a. Retailer
b. Government
c. Customer
d. Hole seller
8. A run chart is a special chart of…………
a. Pie chart
b. Line chart
c. R chart
d. C chart
9. Universes may differ :
a. In average
b. In above average
c. At higher level
d. All of the above
10. ASQC and ANSI began in the year:
a. 1956
b. 1976
c. 1978
d. 1960
Part Two:
1. Differentiate between ‘Defect’ and ‘Defective’.
2. Explain the need of ‘short method’.
3. What does ‘Tchebycheff’s inequality theorem’ say?
4. Explain the usability of ‘stochastic limit’.
5. Write a note on ‘Cause and Effect’ diagram.
END OF SECTION A
Examination Paper: Supply Chain Management
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Section B: Caselets (40 marks)
•This section consists of Caselets.
•Answer all the questions.
•Each Caselet carries 20 marks.
•Detailed information should form the part of your answer (Word limit 150 to 200 words).
Caselet 1
ADAPTABILITY IN ACTION: A CASE OF RSL
Rajasthan Synthetics Ltd. (RSL) was established in the year 1994 at Bhilwara, Rajasthan to
manufacture synthetic yarn with a licensed capacity of 29,000 spindles. Manish Kumar, a Harvard
Business School graduate, established RSL with 8% equity participation from Itochu Corporation
Japan to manufacture synthetic yarn for shirting, a promising business at that time. The demise of the
NTC textile mills was fresh in the minds of the promoters and therefore, state of the art technology
imported from U.K., Germany, Japan and France was used in the manufacturing facility. By the time
the company started manufacturing yarn the competition in shirting yarn had become fierce and the
returns had diminished. The company incurred losses in the first four years of its operations and the
management was looking for opportunities to turn things around. The manufacturing plant started
functioning with an installed capacity of 26,000 spindles, a small unit considering yarnmanufacturing
industry, in the year 1996 to manufacture synthetic yarn for shirting only. Initially, the
major fabric manufactures of India such as Raymonds, Donear, Grasim, Amartex, Siyaram, Pantaloon
and Arviva were the main customers of the company and the total produce of the company was sold
within the domestic market. These fabric manufactures used to import the premium quality yarn
before RSL started supplying the yarn to them. The company in the first year of its operations
realized that shirting yarn was one of the fiercely competitive products and the company with its high
interest liability was unlikely to earn the desired profits. Also, the company had a narrow product mix
limited to only two more blow room lines were installed in the first quarter of 1997. The addition of
two blow room lines helped RSL to manufacture four different types of yarns at the same time.
Utilizing this added flexibility, RSL began manufacturing yarn for suitings.Since the suiting yarn was
providing better returns, the company was keen to increase manufacturing of suiting yarn but was
hampered by the two for one doubling (TFO) facility, which was limited to only 40% of the total
produce. To remove this bottleneck, 12 more TFO machines were added to the existing 8 TFO
machines. The addition of these machines increased the doubling capacity to 70% of the production
providing additional product mix flexibility to the company. This enabled the company to
manufacture yarn to cater to the requirements of suiting, industrial fabric and carpet manufacturers. In
the initial years of its operations, RSL realized that the promises made by the Government of
Rajasthan to provide uninterrupted power supply of the required quality (stable voltage and
frequency) and ample quantity of water were unlikely to be met through the public distribution
system. The voltage and frequency of electric power provided through the public distribution system
were erratic and frequent announced and unannounced power cuts stopped production on a regular
basis. In these circumstances, meeting quality requirements of the customers and adhering to delivery
schedules was a herculean task. To ensure smooth and uninterrupted operations RSL installed inhouse
power generation facility of 4 megawatts capacity and dug 10 tube-wells.RSL faced stiff
competition in the domestic market from Gujarat Spinning and Weaving Mills, Surat, Rajasthan
Textile Mills, Bhawani Mandi, Charan Spinning Mills, Salem and Indorama Synthetics Ltd.,
Pithampur in all their product categories and the returns were low. In order to combat stiff
competition in the domestic market and improve returns the company started developing export
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markets for their products in the year 1998. Initially, RSL started exporting carpet yarn to Belgium
and till 2001; carpet yarn formed the major component of their exports. A trade agreement was signed
with Fibratex Corporation, Switzerland to share profits equally for expanding their overseas
operations. During the same period, RSL continued to scout for new export markets and was
successful in entering top-of-the-line fancy for premium fashion fabric manufactures of international
repute like Mango and Zara. Rajasthan Synthetics Ltd. also exported fancy yarn to a number of fabric
manufacturers located in Italy, France, England, Spain and Portugal. Yarn manufacturers from
Indonesia, Korea and Taiwan gave stiff competition to RSL when it entered the international market.
The companies from South Asian countries had a major cost advantage over RSL because of cheap,
uninterrupted availability of power and high labour productivity. Currencies had been sharply
devalued during the South Asian financial crisis, which rendered the products manufactured by these
companies still cheaper in international markets. Despite all these disadvantages, RSL was able to
gain a foothold through constant adaption of their products according to the customer requirements in
the highly quality conscious international yarn market and was exporting 95% of its total produce by
the beginning of the year 2002.
Rajasthan Synthetics Ltd. had fine-tuned its distribution channels according to the type of markets
and size of orders from the customers. In line with this policy the export to Middle East, Far East and
Turkey was carried out through agents. Similarly, low volume export of fancy yarn requirements was
also catered through agents. While dealing with importers directly, RSL strictly followed the policy
of exports against confirmed Letter of Credits only. The company directly exported to important
clients in Belgium, England and France. The domestic market was also served through an agency
system. Rajasthan Synthetics Ltd. considered inventories as an unnecessary waste and kept minimum
possible inventories while ensuring required level of service. To ensure that the inventories were held
to a minimum, the manufacturing plan consisted of 60 to 70% against customer orders, 30 to 40%
against anticipated sales and 2% capacity was reserved for new product development. A Strategic
Management Committee (SMC) consisting of MD, CEO, GM (marketing) and GM (technical)
reviewed the production plan of the manufacturing plant on quarterly basis. The SMC also developed
the plans for profitability, product mix and cost minimization. Delivering high-quality products and
meeting delivery commitments for every shipment were essential pre-requisites to be successful in the
global market place. The company had understood this very early and to ensure that the products
manufactured by RSL met the stringent quality requirements of its international customers, the
company had developed a full-fledged testing laboratory equipped with ultra modern testing
machines like User Tester-3 and Class fault. The company had stringent quality testing checks at
every stage of tarn production right from mixing of fiber to packing of finished cones. Its in-house
Research and Development and Statistical Quality Control (SQC) divisions ensured consistent
technical specifications with the help of sophisticated state-of-the-art machines. A team of
professionally qualified and experienced personnel to ensure that the yarn manufactured by the
company was in line with international standards backed the company. The company continuously
upgraded its product mix and at the same time, new products developed by in-house research and
development department were added to the product mix form time to time. RSL’s management was
quick to analyze the potential of these in-house developments and followed a flexible approach in
determining the level of value addition. The company had developed a new yarn recently and was
selling it under the Rajtang brand name. This new yarn was stretchable in three dimensions, absorbed
moisture quickly, was soft and silky and fitted the body. This yarn was extracted from natural
products and being body-friendly, was in great demand in international markets. Looking at the
higher value addition possibilities RSL decided to forward integrate and started manufacturing fabric,
using Rajtang and provided ready-made garments like swimming suit, tracksuit, undergarments, tops,
slacks and kids dresses. The ready-made dresses from the fabric were being manufactured on the
specifications and designs of RSL. The management decided to market these products under the
brand name “Wear-it” through Wearwell Garments Pvt. Ltd., an associate company of RSL, to ensure
that RSL did not lose its focus. The Managing Director of RSL felt that continuous adaptability to
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market requirements through a flexible approach, cost cutting in every sphere of operations and team
approach to management had taken them ahead. However, RSL had become highly dependent on the
volatile export market and if it was not able to retain the international market it would have to reestablish
itself in the domestic market, which was not an easy task.
Questions:
1. What marketing strategy should RSL adopt to remain competitive in the international market?
2. Has the company taken the right decision to forward integrate and enter into the highly volatile
garment market?
Caselet 2
Popular mythology in the United States likes to refer to pre-World War II Japan as a somewhat
backward industrial power that produced and exported mostly trinkets and small items of dubious
quality bought by Americans impoverished by the Great Depression. Few bring up the fact that, prior
to the Pearl Harbor attack, Japan had conquered what are now Korea, Manchuria, Taiwan, and a large
portion of China, Vietnam, and Thailand; and by the end of 1942 Japan had extended its empire to
include Burma, the Philippines, Indonesia, Malaysia, Thailand, Cambodia, New Guinea, plus many
strings of islands in the eastern Pacific Ocean. Its navy had moved a large armada of worships 4,000
miles across the Pacific Ocean, in secret and in silence, to attack Pearl Harbor and then returned
safely home. Manufacturers capable of producing only low-grade goods don’t accomplish such feats.
High-quality standards for military hardware, however, did not extend to civilian and export goods,
which received very low priority during the war years. Thus the perception in the United States for a
long time before and then immediately after the war had nothing to do with some inherent character
flaw in Japanese culture or industrial capability. It had everything to do with Japan’s national
priorities and the availability of funds and material. Following Japan’s surrender in 1945, General
MacArthur was given the task of rebuilding the Japanese economy on a peaceful footing. As part of
that effort an assessment of damage was to be conducted and a national census was planned for 1950.
Deming was asked in 1947 to go to Japan and assist in that effort. As a result of his association with
Shewhart and quality training, he was contacted by representatives from the Union of Japanese
Scientists and Engineers (JUSE), and in 1950, Deming delivered his now famous series of lectures on
quality control. His message to top industry leaders, whom he demanded to attend, and to JUSE was
that Japan had to change its image in the United States and throughout the world. He declared that it
could not succeed as an exporter of poor quality and argued that the tools of statistical quality control
could help solve many quality problems. Having seen their country devastated by the war, industry
and government leaders were eager to learn the new methods and to speed economic recovery.
Experience was to prove to Deming and others that, without the understanding, respect, and support
of management, no group of tools alone could sustain a long-term quality improvement effort.
Questions:
1. How could have the SQC approach, been useful in solving the immediate problems of Japan?
2. If you were among one of the management members, what would have been your first insight.
END OF SECTION B
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Section C: Practical Problems (30 marks)
•This section consists of Practical Problems.
•Answer all the questions.
•Each question carries 15 marks.
1. A sample of 30 is to be selected from a lot of 200 articles. How many different samples are
possible?
2. In Dodge’s CSP-1, it is desired to apply sampling inspection to 1 piece out of every 15 and to
maintain an AOQL of 2%. What should be the value of i?
END OF SECTION C
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Examination Paper MM.100
Operations Research
Section A: Objective Type (30 marks)
•This section consists of Multiple choices/Fill in the blanks/True-False & Short Answer type
questions.
•Answer all the questions.
•Part One questions carry 1 mark each & Part Two questions carry 5 marks each.
Part One:
1. In case of (<=) inequality, to convert the inequality to an equation, we used to add a slack
variable to the left hand side of the constraint, this slake variable should be:
a. Negative
b. Positive
c. May be positive or negative
d. Zero
2. In a set of m Χ n equations (m<n) the maximum number of corner points is given by…………
3. According to penalty rule for artificial variables, the objective coefficient of the artificial variable
represents an appropriate penalty, positive or negative depending on the problem, but the
necessary condition required to hold this is, the value should be:
a. ∞
b. 0
c. 1
d. None of the above
4. The cases of the Simplex method in which the value of the variables may increased indefinitely
without change in the constraints is:
a. Degeneracy
b. Alternative optima
c. Unbounded solutions
d. Nonexisting solutions
5. An arc in network model is said to be ‘Directed’ if it allows positive flow in one direction and
a. Negative flow in negative direction
b. Zero flow in negative direction
c. Negative flow in perpendicular direction
d. None of the above
6. PERT stands for……………………………………………………………………………………..
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7. In preemptive method for goal programming , the optimum value of a higher priority goal is
never degraded by a lower priority goal.(T/F)
8. The column dropping rule does not guarantee the non degradation of higher priority goals.(T/F)
9. The additive algorithm developed by E Balas for solving ILP problems was based on pure binary
variables.(T/F)
10. According to inventory model for commodity possession for smooth business operation, Holding
cost represents:
a. Price per unit of an inventory item.
b. The fixed charge incurred when an order is placed regardless of its size.
c. The cost of maintaining inventory in stock.
d. None of the above
Part Two:
1. What do you understand by ‘Degeneracy’ found in using simplex method?
2. What do know about ‘The Balancing of Transportation Model’? If unbalanced then remedy.
3. Explain ‘Vogel Approximation Model (VAM)’.
4. Explain ‘Dijkstra’s Algorithm’ for routing.
END OF SECTION A
Section B: Practical Problems (40 marks)
•This section consists of Practical Problems.
•Answer all the questions.
•Each Practical Problem is of 10 marks.
1. The stock of WalMark Stores, Inc., trades on the New York Stock Exchange under the symbol
WMS. Historically, the price of WMS goes up with the increase in the Dow average 60% of the
time and goes down with the DOW 25% of the time. There is also a 5% chance that WMS will go
up when the Dow goes and 10% that it will go down when the Dow goes up.
a) Determine the probability that WMS will go up regardless of the Dow.
b) Find the probability that probability that WMS goes up given that the Dow is up?
c) What is the probability WMS goes down given that Dow is down?
2. Prove that if the probability P {A/B} = P {A}, then A and B must be independent.
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3. Tasco Oil owns a pipeline booster unit that that operates continuously. The time between
breakdowns for each booster is exponential with a mean of 20 hours. The repair time is
exponential with mean 3 hours. In a particular station, two repairpersons attend 10 boosters. The
hourly wage for each repairperson is $18. Pipeline losses are estimated to be $30 per broken
booster per hour. Tasco is studying the possibility of hiring an additional repairperson.
a) Will there be any cost savings in hiring a third repairperson?
b) What is the schedule loss in dollars per breakdown when the number of repairpersons on duty
is two? Three?
4. Cars arrive at a one-bay car wash facility the interarrival time is exponential, with a mean of 10
minutes. Arriving cars line up in a single lane can accommodate at most five waiting cars. If the
lane is full, newly arriving cars will go elsewhere. It takes between 10 and 15 minutes, uniformly
distributed, to wash a car. Simulate the system for 960 minutes, and estimate the time a car spends
in the facility?
END OF SECTION B
Section C: Applied Theory (30 marks)
•This section consists of Applied Theory questions.
•Answer all the questions.
•Each Question carries 15 marks.
•Detailed information should form the part of your answer (Word limit 200 to 250 words)
1. Define Transportation Model and its variant in brief.
2. Explain in detail Game Theory. Support you answer examples.
END OF SECTION C
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Examination Paper MM.100
Logistics Engineering and Management
Section A: Objective Type (30 marks)
•This section consists of Multiple choices & Short Answer type questions.
•Answer all the questions.
•Part One questions carry 1 mark each & Part Two questions carry 5 marks each.
Part One:
Multiple Choices:
1. Analysis method in which evaluation of alternative design configuration using multiple criteria is:
a. Level of repair analysis
b. Maintenance task analysis
c. Evaluation of design alternatives
d. None of the above
2. Orientation of Logistic are:
a. Product among organization
b. Total benefits among organization
c. Towards managing of labour
d. Towards managing the physical flow of material & product among organization
3. LMI stands for:
a. Logistics Management Information
b. Legal Management Information
c. Logistics Managerial Information
d. None of the above
4. Technical performance measures (TPMs) is applied for:
a. Evaluation of prime mission related system & elements for expenses
b. Evaluation of prime mission related system & elements for labour
c. Evaluation of prime mission related system & elements for support
d. None of the above
5. System structure should facilitate:
a. Design on an evolutionary basis
b. Design a system within a minimum cost
c. Design on an evolutionary basis & with minimum cost
d. Both (a) & (b)
6. Conceptual design is initiated in response of:
a. Identification of customer need
b. Identification of consumer demand
c. Identification of Industry demand
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d. None of the above
7. Industrial engineering refers to:
a. Design & development of a product
b. Design & development of industrial tools
c. Design & development of expenses
d. Design & development of production capability
8. Contractor logistic support (CLS) refers to:
a. System maintenance activities
b. System evaluation activities
c. Both (a) & (b)
d. None of the above
9. Discounting refers to:
a. Application of selected rate of interest
b. Application of selected difference measure
c. Application of selected of interest & measure differences
d. None of the above
10. A plan which is directed towards covering of logistic support for a system is:
a. System Retirement Plan
b. Post production Support plan
c. Facilities plan
d. Computer Resource plan
Part Two:
1. Personal training requirement are based on what factors?
2. What is meant by Design criteria? Provide some examples.
3. Briefly describe evaluation of logistic’s elements.
4. What are the advantages & disadvantages of functional organization?
END OF SECTION A
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Section B: Caselets (40 marks)
•This section consists of Caselets.
•Answer all the questions.
•Each Caselet carries 20 marks.
•Detailed information should form the part of your answer (Word limit 150 to 200 words).
Caselet 1
Company Profile
Indian Steels Limited (ISL) is a Rs 6000 crore company established in the year 1986. The company
envisaged being a continuously growing top class company to deliver superior quality and cost effective
products for infrastructure development. The company performed with a mission to attain 7 million ton
liquid steel capacity through technological up-gradation, operational efficiency and expansion; to produce
steel with the international standards of cost and quality; to meet the aspirations of the stakeholders. The
production started in the year 1988 and initially, it manufactured Angles, Pig Irons, Beams and Wire Rods
that were mainly used for constructing roads, dams and bridge. The products were mainly supplied to
Public Sector Undertaking such as Railway ,Public Work Department (PWD), Central Public Work
Department (CPWD), Rashtriya Setu Nigam, Audyogik Kendrya Vikas Nigam Ltd.and various foundry
units. The company had its headquarters at Raipur with three stockyards
The company has establish itself well and is said to be considering its expansion plan and proposed
merger with another steel making giant in the country. The company was awarded ISO 9001, ISO 14001
and ISO 18001 certifications. The temperature in the plant premises is reportedly about 6 degrees Celsius
lesser than that of the township, thanks to the greenery being maintained therein.
Logistics Outsourcing
Outbound logistics, which basically connects the source of the supply with the sources of demand with an
objective of bridging the gap between the market demand and capabilities of the supply sources, was
always a problem for companies operating in this industry. Consisting of components like warehousing
network, transportation network, inventory control system and supporting information systems, outbound
logistics was always playing a key role in making the right product available at the right place, at the right
time at the least possible cost. In 1996, owing to the cut throat competition in the emerging dynamic
global markets, ISL emphasized on both effectiveness and efficiency. The company strongly believed in
focusing on its core competency and outsourcing the rest to its reliable partners. Outsourcing of its
outbound logistics was one such move in the direction.
Recognizing the growing demand for its products from the big, diversified and geographically dispersed
customers, the company started expanding the number of warehousing stockyards. From a humble
beginning, the company today has 26 stock yards; most of them is outsourced. Each of the outsourced
stockyards was managed by the third party, which the company referred to sa Consignment Agent in the
area. The CA was selected on the annual basis through competitive bidding process. The performance of
CA was closely monitored by a company representative. The CA was responsible for the entire
distribution of the products within the geographical limits of the allotted market segments and was paid
by the company according to the loads of transaction dealt by him. Based on the sales turnover, CAs were
trifurcated into A, B, and C categories. The CAs with a monthly turnover of Rs 150-200 crore fell under
A category, whereas those with Rs 100-150 crore were B and less than Rs 100 crore were C category.
In addition to the company representative, a team of marketing division operated in the town where the
site of CA was located. This department was responsible for estimating the-future demand, translating it
into orders and sending to the manufacturing plant. Material dispatch was done using either one or a
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combination of the two modes: rail, road. While rail as the mode of transportation, the company had a
choice to book a Normal Rake or a Jumbo Rake. At times, the company was engaging the services of the
CONCOR (Container Cooperation of India) where a train of 62 to 70 wagons, each wagon with about
26tonnes capacity was used for transportation. Instead, if the company decided to send the material by
road, the company had a choice between Trailer (25 to 30 tones) and Truck (52 to 20 tones). The choice
of transportation mode was majorly based on the quantity of dispatch.
As soon as the material was dispatched from the manufacturing plant, the respective CA used to get a
Stock Transfer Chalaan electronically through Virtual Private Network, which was develop by a
professional software service provider. In-transit, monitoring was generally done with the help of Indian
railways, if the mode was Rail. Otherwise, truck/trailer drivers were contact through mobile phones.
Transit generally took 5-6 days, providing time for CA took plan for receiving material. The CA use to
utilize this time for arranging material handling devices like: Heavy cranes and required labour. The
material thus unloaded was reaching the warehousing stock yard where CA was responsible for arranging
the material as per the warehousing norms of ISL.
The company broadly classified materials into Long Products and Rounds. Products following into each
category were further classified by their size, shape and utility and the company used a distinct colour
code for this purpose. Each sub category of material had a specific place for down loading. The company
used Bin System for this purpose. While downloading the material in stockyard, the company norms
insisted that CA arrange for providing Dunnage Material. This unable the CA to store material without a
direct contact with land surface and thus reduced the probability of material deterioration. Material was
stored in the stockyard until an authorized representative of the customer used to come and collect it.
While dispatching material to the customer, a Loading Slip was generated against the Delivery Order. The
company also belived in maintaining long-term relationships with the suppliers as well as the buyers. It
always prioritized the needs of its regular and important customers over others and this worked out to be a
win-win strategy.
Operational problems were majorly because of uncertainties in transportation, fluctuations in supply of
electricity and the load bearing capacity of the soil in the stockyard. Some more problems were
encountered whenever there was a change in CA and these were overcome by training the employees of
the new CA and keeping the old CA responsible for the material in his stockyard for six months after the
contract as well. Observations reveal that, at times there were situations wherin CAs had to do those
things which they were not legally supposed to do because of the pressures mounted by political leaders
with selfish interests.
Conclusions
Despite these problems, this model of outsourcing logistics was working out very well for the company.
The practices, which were started in the year 1996 have sustained major changes in the environment and
are being practiced even in 2006. It has enhanced the supply chain competency of the company by
enabling it leverage more on its core competency, which leads to increased productivity.
Questions:
1. Analyze the case in view of the logistics outsourcing practices of the ISL.
2. Discuss the importance of logistics outsourcing with reference to Supply Chain Management.
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Caselet 2
Introduction
S.K Das established ABC Pharma in 1961 in New Delhi, marketed antibiotics and became brand leaders
in Amphicilin and Cephalexin orals. The company went public in the year 1973. In 1983, ABC
established a plant in Mandideep (MP, India) with various dosage form facilities. In 2004, it became
India’s largest pharmaceutical company, manufacturing and marketing world-class generics, branded
generic pharmaceuticals and active pharmaceutical ingredients. It was ranked amongst the top 10 generic
companies worldwide. The company’s products were sold in over 100 countries with manufacturing
operations in 7 countries and ground presence in 44. The company had an expanding international
portfolio of affiliates, joint ventures and representative offices across the globe with joint venture/
subsidiaries in US, UK, Germany, France, Spain, Ireland, Netherlands, India, China, Brazil, South Africa,
etc.While ABC aggressively pursued the internationalization of its business, the growth strategy equally
focused on enhancing market share n India. The company had a strong brand marketing team and
distribution network in India.
Milestones
By the end of December 31, 2004, global sales had reached US $ 1178 million and registered a growth of
21%. Overseas market accounted for 78% of the global sales. US accounted for 36%, while Europe and
BRIC (Brazil, Russia, India and China) countries contributed 16% and 26% to global sales, with a
combined turnover of US $924 million. The company’s vision was to achieve significant business in
proprietary prescription products with a strong presence in developed markets. It also aspired to be
amongst the top 5 generic players with a US $5 billion sale by next decade. To translate these objectives
into reality and to optimize value creation, the Company had adopted a multi-pronged strategy. The major
thrust areas for future were acquisition of brands overseas, emphasis on brand marketing in the US and
Europe and entering high potential new marets with value added product offerings.
The company had established state-of-the-art multi-disciplinary R&D facilities at Gurgaon, India. ABC
was one of the largest investor on R&D in the Indian pharmaceutical industry, with 7% of its sales during
2004. The company’s major research focus was in the areas of Urology, Anti-invectives, Respiratory,
Anti-inflammatory and Metabolic disorders segments. ABC’s continued focus on R&D had resulted in
several approvals in developed markets and significant progress in New Drug Delivery Response
(NDDR).
Fourth Party Logistics (4PL)
The company believes in building strong and long term relationships with limited number of logistics
service providers. They also focoused on outsourcing the activities like warehouse management, packing
and custom clearance through Freight Forwarders. They always believed in their core competencies. The
logistics service providers took care of storage and inventory management and ensured the availability of
the right product at the right place and at right time. Through outsourcing, they achieved focus on the core
competencies, cost saving, effective supply chain management, cross-pollination of better available
practices and wider and effective geographical coverage. The company practiced Fourth Party Logistics
(4PL) services by providing ERP as a backbone system for the third party logistics service providers. The
palette packing services were outsourced from a local company including the packing material. The
responsibility of complete documentation and custom clearance for import and export of goods had also
been outsourced through Custom House Agents (CHA) and Freights Forwarders (FF) under the
supervision of GM – Global Supply Chain.
The warehouse management was done with the help of Bar-code Technology, which facilitied in tracing
of materials on a single click of a mouse resulting into smooth inward and outward flow of materials. In
future, ABC was planning to have Radio Frequency Identification (RFID) Technology to manage the
warehouse activities in a more effective and efficient manner. The company had divided its global
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operations into four regions viz., R1-Middle East with headquarter at India; R2-CIS, Africa and Europe
with headquarter at London; R3-Far East ad Latin America with headquarter at Singapore; R4-US with
headquarters at New York on the basis of convenience, market potential and market share.
Collaborative Relationship
The company established its global supply chain hub at Mandideep (near Bhopal, India). They managed
their operations with one GM-Supply Chain, one Senior Manager Commercial and four Shipment
Officers. Each Shipment Officer had four support employees outsourced through freight forwarders.
These people were responsible for the day-to-day activities under the administrative control of ABC. GMSupply
Chain was responsible for managing the relations with Supply Chain Partners, Freight forwarders
and Custom House Agents (CHA). The company had been a pioneer in launching the genetic versions of
products on the same day at which the product to get off patent, which helped them in getting an edge
over competitors. They managed to maintain the dignity, discipline and business ethics without violating
the laws of patent. This was possible because of the strong and long term relationship with logistic service
providers. There was a strong level of belonging, faith and trust amongst the supply chain partners. To
maintain the good relations, the company practiced making timely payments to the service providers.
They also opened the account in the same bank in which the service providers had their account so that
prompt money transfer could take place. As a result of this, service providers were so concerned about the
shipments of the company that they dedicated 25 refrigerated cargos each equipped with location tracking
facility to track the status of the shipments.
The relationship and commitments of service providers was endorsed on January 10, 2003 when Ramipril
was going off patents in Europe. ABC having strong presence n Germany wanted to encash the
oppournity by making its Rampril available in Germany right on January 11, 2003, so as to take lead in
available generic market. However, ABC did not know the number and size of competition they would be
facing. The underlying fear of getting the shipment late and therby losing the advantage of being first was
very clear on the faces of ABCs top managers. The task was urgent and important; any delay in
availability was to cost heavily. The D-day was January 10, 2003 and the shipment was to be airlifted
from Mumbai so as to reach Germany after midnight of January 10, 2003 but before dawn of January 11,
2003. Two Boeing were chartered to lift the goods from Mumbai Airport, but the task was not simple, as
the goods were to be surface transported from Mandideep to Mumbai in a carvan of 70 cargos. To worsen
the things, the transporters had announced strike during that period.
The urgency was briefed to freight forwarder, who was caught between relationship with ABC and
membership of the Transporters’ Association. He had the option of pleasing any one of them. The long
association and the relationship with ABC got priority and the freight forwarder assured ABC’s Senior
Commercial Manager to carry out the assigned responsibility. Going against the directives of association,
the freight forwarder contacted the police authorities and obtained a security cover throughout
Maharastra. The freight owner consider himself as one of the responsible members of ABC and was
personally receiving the cargo and getting it loaded at Mumbai airport. The scheduled departure had a
lead-time of two days. However, he freight forwarder insisted and stayed at Mumbai at his own cost to
see the goods leaving India successfully. It was a mission for ABC and the freight forwarder in which
collaborative relationship surpassed all limitations and the goods landed in Germany-just-in-time.
Questions:
1. What modification would you suggest in enhancing the existing logistics system?
2. Critically analyze the efforts of ABC in launching generic versions of products going off
patents.
END OF SECTION B
Examination Paper: Operation Management
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Section C: Applied Theory (30 marks)
•This section consists of Applied Theory Questions.
•Answer all the questions.
•Each question carries 15 marks.
•Detailed information should form the part of your answer (Word limit 200 to 250 words).
1. Define Logistic support in the context of the production /construction phase. What are the
elements of Logistic support?
2. Define reliability & maintainability. What are their major characteristics?
END OF SECTION C
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Examination Paper: Supply Chain Management
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IIBM Institute of Business Management
Examination Paper MM.100
Supply Chain Management
Section A: Objective Type (30 marks)
•This section consists of Multiple Choice questions& Short Answer type questions.
•Answer all the questions.
•Part One questions carry 1 mark each & Part Two questions carry 2 marks each.
Part One:
Multiple Choices:
1. When demand is steady, the cycle inventory for a given lot size (Q) is given by:
a. Q/4
b. Q/8
c. Q/6
d. Q/2
2. There are two firms ‘x’ and ‘y’ located on a line of distance demand(0-1) at ‘a’ and ‘b’
respectively, the customers are uniformly located on the line, on keeping the fact of splitting of
market, the demand of firm ‘x’ will be given by:
a. (a+b)/2
b. a+(1-b-a)/2
c. (1+b-a)/2
d. a+(a-b)/2
3. Push process in supply chain analysis is also called:
a. Speculative process
b. Manufacturing process
c. Supplying process
d. Demand process
4. If the Throughput be ‘d’ and the flow time be ‘t’ then the Inventory ‘I’ is given by:
a. I *d=t
b. I=t+d
c. d=I*t
d. I =d*t
5. Forecasting method is:
a. Time series
b. causal
c. Qualitative
d. All the above
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6. Component of order cost include:
a. Handling cost
b. Occupancy cost
c. Receiving costs
d. Miscellaneous costs
7. How many distinct types of MRO inventory are there?
a. One
b. Four
c. Three
d. Two
8. Supply chain driver is:
a. Inventory
b. Return ability
c. Fulfillment
d. All of above
9. SRM stands for:
a. Strategic Relationship Management
b. Supply Return ability Management
c. Supplier Relationship Management
d. None of the above
10. Discount factor equals to, where k is the rate of return.
a. 1/1+k
b. 2/1+k
c. 1/1-k
d. 1/2+k
Part Two:
1. Explain “zone of strategic fit”.
2. Explain “scope of strategic fit”.
3. What do you understand by “Stimulation Forecasting Method”?
4. Write a note on “Obsolescence (or spoilage) cost”.
5. Define “Square Law” in safety inventory of supply chain management.
6. What does the word “postponement” signifies in supply chain?
7. What do you understand by the term “tailored sourcing”?
8. Explain the term “Outsourcing”.
9. Write a note on “threshold contracts” for increasing agent efforts.
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10. What is “dynamic pricing”?
END OF SECTION A
Section B: Caselets (40 marks)
•This section consists of Caselets.
•Answer all the questions.
•Each Caselet carries 20 marks.
•Detailed information should form the part of your answer (Word limit 150 to 200 words).
Caselet 1
Orion is a global co. That sells copiers. Orion currently sells 10 variants of a copier, with all inventory
kept in finished-goods form. The primary component that differentiates the copiers is the printing
subassembly. An idea being discussed is to introduce commonality in the printing subassembly so
that final assembly can be postponed and inventories kept in component form. Currently, each copier
costs $1,000 in terms of components. Introducing commonality in the print subassembly will increase
component cost to$1.025.One of the 10 variants represents 80 percent of the total demand. Weekly
demand for this variant is normally distributed ,with a mean of 1,000 and a standard deviation of
200.Each of the remaining nine variants has a weekly demand of 28 with a standard deviation of
20.Orion aims to provide a 95per level of services .Replacement lead time for components is four
weeks. Copier assembly can be implemented in a matter of hours. Orion manages all inventories
using a continuous review policy and uses a holding cost of 20 percent.
Questions:
1. How much safety inventory of each variant must Orion keep without component commonality?
What are the annual holding costs?
2. How much safety inventory must be kept in component form if Orion uses common components
for all variants? What is the annual holding cost? What is the increase in component cost using
commonality? Is commonality justified across all variants?
3. At what cost of commonality will complete commonality be justified.
4. At what cost of commonality will commonality across the low-volume variants be justified.
Caselet 2
An electronic manufacturer has outsourced production of its latest MP3 player to a contract
manufacturer in Asia. Demand for the players has exceeded all expectations whereas the contract
manufacturers sell three types of players- a 40-GB player, a 20-GB player, 6-GB player. For the
upcoming holiday season, the demand forecast for the 40-GB player is normally distributed, with a
mean of 20,000and a standard deviation Dard deviation of 11,000, and the demand forecast for the 6-
GB player has a mean of 80,000 and a standard deviation of 16,000. The 40-GB player has a sale
Examination Paper: Supply Chain Management
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price of $200, a production cost of $100, and a salvage value of $80 .The 20-GB player has a price of
$150, a production cost of $70, and a salvage value of $50.
Questions:
1. How many units of each type of player should the electronics manufacturer order if there are no
capacity constraints?
2. How many times of each type of player should the electronics manufacturer order if the available
is 140,000? What is the expected profit?
END OF SECTION B
Section C: Applied Theory (30 marks)
•This section consists of Applied Theory Questions.
•Answer all the questions.
•Each question carries 15 marks.
•Detailed information should form the part of your answer (Word limit 200 to 250 words).
1. Consider two products with the same margin carried by a retail store. Any leftover units of one
product are worthless. Leftover units of the other product can be sold to outlet stores. Which
product should have a higher level of availability? Why?
2. McMaster-Carr sells maintenance, repair, and operations equipment from five warehouses in the
United States. W.W. Grainger sells products from more than 350 retail locations, supported by
several warehouses. In both cases, customers place orders using the Web or on the phone. Discuss
the pros and cons of the two strategies.
END OF SECTION C
Examination Paper: Supply Chain Management
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IIBM Institute of Business Management
Examination Paper MM.100
Statistical Quality Control
Section A: Objective Type (30 marks)
•This section consists of Multiple choice questions & Short Answer type questions.
•Answer all the questions.
•Part One questions carry 1 mark each & Part Two questions carry 4 marks each.
Part One:
Multiple choices:
1. If in a hall there are 18 persons then how many handshakes are possible?
a. 18*18
b. 18*17/2
c. 18*17
d. None of the above
2. If the number of trials be ‘n’ and the probability of occurrence be ‘p’ then the standard deviation
with respect to np, is given by:
a. (np)1/2
b. (np(1-p))1/2
c. (np)1/4
d. (np(1-p))1/4
3. For a biased coin the probability of occurrence of head is 0.4 ,if the coin is tossed twice then the
probability of occurrence of at least one head will be:
a. 0.76
b. 0.48
c. 0.64
d. 0.16
4. Factorial of 5 equals:
a. 60
b. 120
c. 24
d. 5
5. Combinatory of (4,2) equals:
a. 12
b. 8
c. 6
d. None of the above
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6. ‘Economic Control of Quality of Manufactured Product’, a book by Walter A Shewhart in:
a. 1931
b. 1941
c. 1930
d. 1956
7. Quality is judged by…………
a. Retailer
b. Government
c. Customer
d. Hole seller
8. A run chart is a special chart of…………
a. Pie chart
b. Line chart
c. R chart
d. C chart
9. Universes may differ :
a. In average
b. In above average
c. At higher level
d. All of the above
10. ASQC and ANSI began in the year:
a. 1956
b. 1976
c. 1978
d. 1960
Part Two:
1. Differentiate between ‘Defect’ and ‘Defective’.
2. Explain the need of ‘short method’.
3. What does ‘Tchebycheff’s inequality theorem’ say?
4. Explain the usability of ‘stochastic limit’.
5. Write a note on ‘Cause and Effect’ diagram.
END OF SECTION A
Examination Paper: Supply Chain Management
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Section B: Caselets (40 marks)
•This section consists of Caselets.
•Answer all the questions.
•Each Caselet carries 20 marks.
•Detailed information should form the part of your answer (Word limit 150 to 200 words).
Caselet 1
ADAPTABILITY IN ACTION: A CASE OF RSL
Rajasthan Synthetics Ltd. (RSL) was established in the year 1994 at Bhilwara, Rajasthan to
manufacture synthetic yarn with a licensed capacity of 29,000 spindles. Manish Kumar, a Harvard
Business School graduate, established RSL with 8% equity participation from Itochu Corporation
Japan to manufacture synthetic yarn for shirting, a promising business at that time. The demise of the
NTC textile mills was fresh in the minds of the promoters and therefore, state of the art technology
imported from U.K., Germany, Japan and France was used in the manufacturing facility. By the time
the company started manufacturing yarn the competition in shirting yarn had become fierce and the
returns had diminished. The company incurred losses in the first four years of its operations and the
management was looking for opportunities to turn things around. The manufacturing plant started
functioning with an installed capacity of 26,000 spindles, a small unit considering yarnmanufacturing
industry, in the year 1996 to manufacture synthetic yarn for shirting only. Initially, the
major fabric manufactures of India such as Raymonds, Donear, Grasim, Amartex, Siyaram, Pantaloon
and Arviva were the main customers of the company and the total produce of the company was sold
within the domestic market. These fabric manufactures used to import the premium quality yarn
before RSL started supplying the yarn to them. The company in the first year of its operations
realized that shirting yarn was one of the fiercely competitive products and the company with its high
interest liability was unlikely to earn the desired profits. Also, the company had a narrow product mix
limited to only two more blow room lines were installed in the first quarter of 1997. The addition of
two blow room lines helped RSL to manufacture four different types of yarns at the same time.
Utilizing this added flexibility, RSL began manufacturing yarn for suitings.Since the suiting yarn was
providing better returns, the company was keen to increase manufacturing of suiting yarn but was
hampered by the two for one doubling (TFO) facility, which was limited to only 40% of the total
produce. To remove this bottleneck, 12 more TFO machines were added to the existing 8 TFO
machines. The addition of these machines increased the doubling capacity to 70% of the production
providing additional product mix flexibility to the company. This enabled the company to
manufacture yarn to cater to the requirements of suiting, industrial fabric and carpet manufacturers. In
the initial years of its operations, RSL realized that the promises made by the Government of
Rajasthan to provide uninterrupted power supply of the required quality (stable voltage and
frequency) and ample quantity of water were unlikely to be met through the public distribution
system. The voltage and frequency of electric power provided through the public distribution system
were erratic and frequent announced and unannounced power cuts stopped production on a regular
basis. In these circumstances, meeting quality requirements of the customers and adhering to delivery
schedules was a herculean task. To ensure smooth and uninterrupted operations RSL installed inhouse
power generation facility of 4 megawatts capacity and dug 10 tube-wells.RSL faced stiff
competition in the domestic market from Gujarat Spinning and Weaving Mills, Surat, Rajasthan
Textile Mills, Bhawani Mandi, Charan Spinning Mills, Salem and Indorama Synthetics Ltd.,
Pithampur in all their product categories and the returns were low. In order to combat stiff
competition in the domestic market and improve returns the company started developing export
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IIBM Institute of Business Management
markets for their products in the year 1998. Initially, RSL started exporting carpet yarn to Belgium
and till 2001; carpet yarn formed the major component of their exports. A trade agreement was signed
with Fibratex Corporation, Switzerland to share profits equally for expanding their overseas
operations. During the same period, RSL continued to scout for new export markets and was
successful in entering top-of-the-line fancy for premium fashion fabric manufactures of international
repute like Mango and Zara. Rajasthan Synthetics Ltd. also exported fancy yarn to a number of fabric
manufacturers located in Italy, France, England, Spain and Portugal. Yarn manufacturers from
Indonesia, Korea and Taiwan gave stiff competition to RSL when it entered the international market.
The companies from South Asian countries had a major cost advantage over RSL because of cheap,
uninterrupted availability of power and high labour productivity. Currencies had been sharply
devalued during the South Asian financial crisis, which rendered the products manufactured by these
companies still cheaper in international markets. Despite all these disadvantages, RSL was able to
gain a foothold through constant adaption of their products according to the customer requirements in
the highly quality conscious international yarn market and was exporting 95% of its total produce by
the beginning of the year 2002.
Rajasthan Synthetics Ltd. had fine-tuned its distribution channels according to the type of markets
and size of orders from the customers. In line with this policy the export to Middle East, Far East and
Turkey was carried out through agents. Similarly, low volume export of fancy yarn requirements was
also catered through agents. While dealing with importers directly, RSL strictly followed the policy
of exports against confirmed Letter of Credits only. The company directly exported to important
clients in Belgium, England and France. The domestic market was also served through an agency
system. Rajasthan Synthetics Ltd. considered inventories as an unnecessary waste and kept minimum
possible inventories while ensuring required level of service. To ensure that the inventories were held
to a minimum, the manufacturing plan consisted of 60 to 70% against customer orders, 30 to 40%
against anticipated sales and 2% capacity was reserved for new product development. A Strategic
Management Committee (SMC) consisting of MD, CEO, GM (marketing) and GM (technical)
reviewed the production plan of the manufacturing plant on quarterly basis. The SMC also developed
the plans for profitability, product mix and cost minimization. Delivering high-quality products and
meeting delivery commitments for every shipment were essential pre-requisites to be successful in the
global market place. The company had understood this very early and to ensure that the products
manufactured by RSL met the stringent quality requirements of its international customers, the
company had developed a full-fledged testing laboratory equipped with ultra modern testing
machines like User Tester-3 and Class fault. The company had stringent quality testing checks at
every stage of tarn production right from mixing of fiber to packing of finished cones. Its in-house
Research and Development and Statistical Quality Control (SQC) divisions ensured consistent
technical specifications with the help of sophisticated state-of-the-art machines. A team of
professionally qualified and experienced personnel to ensure that the yarn manufactured by the
company was in line with international standards backed the company. The company continuously
upgraded its product mix and at the same time, new products developed by in-house research and
development department were added to the product mix form time to time. RSL’s management was
quick to analyze the potential of these in-house developments and followed a flexible approach in
determining the level of value addition. The company had developed a new yarn recently and was
selling it under the Rajtang brand name. This new yarn was stretchable in three dimensions, absorbed
moisture quickly, was soft and silky and fitted the body. This yarn was extracted from natural
products and being body-friendly, was in great demand in international markets. Looking at the
higher value addition possibilities RSL decided to forward integrate and started manufacturing fabric,
using Rajtang and provided ready-made garments like swimming suit, tracksuit, undergarments, tops,
slacks and kids dresses. The ready-made dresses from the fabric were being manufactured on the
specifications and designs of RSL. The management decided to market these products under the
brand name “Wear-it” through Wearwell Garments Pvt. Ltd., an associate company of RSL, to ensure
that RSL did not lose its focus. The Managing Director of RSL felt that continuous adaptability to
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market requirements through a flexible approach, cost cutting in every sphere of operations and team
approach to management had taken them ahead. However, RSL had become highly dependent on the
volatile export market and if it was not able to retain the international market it would have to reestablish
itself in the domestic market, which was not an easy task.
Questions:
1. What marketing strategy should RSL adopt to remain competitive in the international market?
2. Has the company taken the right decision to forward integrate and enter into the highly volatile
garment market?
Caselet 2
Popular mythology in the United States likes to refer to pre-World War II Japan as a somewhat
backward industrial power that produced and exported mostly trinkets and small items of dubious
quality bought by Americans impoverished by the Great Depression. Few bring up the fact that, prior
to the Pearl Harbor attack, Japan had conquered what are now Korea, Manchuria, Taiwan, and a large
portion of China, Vietnam, and Thailand; and by the end of 1942 Japan had extended its empire to
include Burma, the Philippines, Indonesia, Malaysia, Thailand, Cambodia, New Guinea, plus many
strings of islands in the eastern Pacific Ocean. Its navy had moved a large armada of worships 4,000
miles across the Pacific Ocean, in secret and in silence, to attack Pearl Harbor and then returned
safely home. Manufacturers capable of producing only low-grade goods don’t accomplish such feats.
High-quality standards for military hardware, however, did not extend to civilian and export goods,
which received very low priority during the war years. Thus the perception in the United States for a
long time before and then immediately after the war had nothing to do with some inherent character
flaw in Japanese culture or industrial capability. It had everything to do with Japan’s national
priorities and the availability of funds and material. Following Japan’s surrender in 1945, General
MacArthur was given the task of rebuilding the Japanese economy on a peaceful footing. As part of
that effort an assessment of damage was to be conducted and a national census was planned for 1950.
Deming was asked in 1947 to go to Japan and assist in that effort. As a result of his association with
Shewhart and quality training, he was contacted by representatives from the Union of Japanese
Scientists and Engineers (JUSE), and in 1950, Deming delivered his now famous series of lectures on
quality control. His message to top industry leaders, whom he demanded to attend, and to JUSE was
that Japan had to change its image in the United States and throughout the world. He declared that it
could not succeed as an exporter of poor quality and argued that the tools of statistical quality control
could help solve many quality problems. Having seen their country devastated by the war, industry
and government leaders were eager to learn the new methods and to speed economic recovery.
Experience was to prove to Deming and others that, without the understanding, respect, and support
of management, no group of tools alone could sustain a long-term quality improvement effort.
Questions:
1. How could have the SQC approach, been useful in solving the immediate problems of Japan?
2. If you were among one of the management members, what would have been your first insight.
END OF SECTION B
Examination Paper: Supply Chain Management
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Section C: Practical Problems (30 marks)
•This section consists of Practical Problems.
•Answer all the questions.
•Each question carries 15 marks.
1. A sample of 30 is to be selected from a lot of 200 articles. How many different samples are
possible?
2. In Dodge’s CSP-1, it is desired to apply sampling inspection to 1 piece out of every 15 and to
maintain an AOQL of 2%. What should be the value of i?
END OF SECTION C
S-2-210311
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