Master of Business Administration- MBA Semester 2 Winter 2013
MB 0044 - PRODUCTION AND OPERATION MANAGEMENT
Q1. What is value engineering? List the main benefits of value engineering?Q2. Case study: SABMiller revamps supply chain management
SABMilller, the $24bn global brewing giant, is revamping its supply chain management system to reduce stock-outs caused by an increasingly complex and hard to predict market. The firm is developing and testing the new system in South Africa with an eye on rolling it out to group companies worldwide, says SABMiller programme manager Rudi van Schoor. The trigger for the revamp came when the company's customers ran out of stocks of popular SABMiller brands during peak periods in two consecutive years, 2007 and 2008. The shortfall on some brands was as high as 22%. "That had a direct impact on the bottom line," Van Schoor says.
Given SABMiller's ambition to be the world's most efficient producer, such a gap was never going to be tolerated. But instead of addressing the symptom, it called in management consultancy McKinsey to look at the entire supply chain system to see where it could be improved and future stock-outs avoided. The study revealed a complex situation, one that wasn't susceptible to a "quick fix", Van Schoor says.
Demand factors
The ethnically and demographically diverse South African market is one of the world's most complex and fast-changing. Van Schoor cites economic growth, more disposable income in new hands, changing and upgrading tastes, new product development and new routes to market among the factors that influence demand for SABMiller's products. Add to that big events such as the British Lions tour and the 2010 World Cup, and climate change, and the picture becomes more complex.
"Our brands are the same as any other brand, especially those at the luxury end," says Van Schoor. "If the customer comes into the shop and can't find our product, he or she has the disposable income and self-confidence to substitute our brand for our competitors'. That's dangerous."
Van Scoor says the group has a average stock availability target of 98%. "But for some premium brands the target is 100%," he says. That means it will live with excess stocks of some products, just to ensure that a thirsty customer can get his or her favourite drink, every time. Maximise profitability But SABMiller also wants to maxmise its profitability. To do all this it must integrate information from a lot of sources. These include sales forecasts for about 2,600 SKU locations or depots for the brewing division and 3,100 for the soft drinks division, as well as planned promotions data from the marketing and promotions division, as well as cost and production data, among others. These data must then be converted into raw material purchases, manufacturing scheduling, distribution and stockholding plans for 12 factories (seven breweries and five soft drink plants) and three tiers of distributors, broken down into between 70 and 80 stock-keeping units (skus) for the brewing division and around 270 for soft drinks. And all this must be optimised for profit.
"There is inherent volatilty of demand in the soft drinks business because of seasonal change, but less in the beer market," Van Schoor says.
Even so, improving the accuracy of demand forecasts and schedules and integrating them to boost profitability was too complex for SABMillers's demand forecast and supply system. The inhouse system, developed over years, had most of the usual problems associated with legacy systems: it was inflexible, complex, hard to communicate with, and hard to integrate with newer systems, Van Schoor says.
Integration with SAP system
After a global search, SABMiller settled on Infor's advanced supply chain management system, in particular Infor's demand forecasting system. This takes information from modules of SABMiller's SAP enterprise resource management system, integrates them with sales forecasts from the field, and feeds back to the manufacturing resource planning system and financial systems to generate production schedules, raw materials orders and volume and financial forecasts. This will let SABMiller make any of its products in the most cost-effective location, given the local demand, manufacturing, transport and inventory costs.
It will also increase its flexibility in responding to changes in demand. Products will no longer be made only in a single plant to optimise production runs, but, based on more holistic data, in the plants that optimise overall profitability.
This flexibility also gives the company greater cover to handle factory downtime and to meet rapid changes in demand. But some parts of the legacy system will still be around. "We are keeping it to manage the return and reuse of empty bottles," Van Schoor says. But even that data will go into the Infor system so that it can create production schedules down to tank, line and minute accuracy.
This attention to detail is part of the SABMiller ethos. Measurement and numbers are integral to the company culture. Van Schoor says the Infor system will be tested in three ways: on its "theoretical" answers, against actual results, and against causal factors that may have influenced demand and supply.
Van Schoor says the $1.2m the firm spent on Infor licences was about 60% of the total project cost. But this could be a drop in the ocean if the company adopts it worldwide. And interest from group firms is high. "We have used expertise from all around the group," Van Schoor says. "One of the best people on the project came from our European division, and we have lots of others keen to know how we do."
(Source : http://www.computerweekly.com/feature/Case-study-SABMiller-revamps-supply-chainmanagement) Why did SABMilller revamp its supply chain? Describe the domain application used for SCM integration?
Q3. Write short notes on:
. Ingredients of a business process
. Acceptance sampling
. Work Breakdown Structure
. Productivity
Q4. Collaborative Forecasting Running Smoothly at Brooks Sports Brooks Sports designs and develops high-performance running footwear, apparel and accessories which are sold in 80 countries worldwide. In 2001, when the company shifted from a broad product line to focus on high-performance products targeted at serious runners, it was clear that the forecasting process needed to change to support the strategic direction of the company. The existing forecasting process, based entirely on the judgment of the sales team, was limiting the company’s ability to grow.
The strategy shift created a number of forecasting challenges for Brooks including: ? Inconsistent style growth: the new line of products experience growth rates anywhere from 0 to 50 percent annually.
? Long production planning horizon coupled with short product life: production and capacity decisions are typically made 18 months before a style is launched, average lead time for a style is 6 months and the product life of Brooks’ styles range from 6 to 24 months. This means that planners must sometimes set the entire demand plan for a style prior to ever receiving a customer order, underscoring the importance of accurate forecasts.
? Increasing “at-once” orders: “at once” orders, which are placed for immediate shipment, historically accounted for less than 20 percent of total sales. Since 2001, however, “at once” orders have increased to nearly 50 percent of total sales.
? Evolving size curves: with its new focus on serious runners, the standard footwear size curve would not adequately reflect distribution of sales by sizes.
? No exposure to retail sell-through: the high-performance products are sold primarily through independent specialty stores who don’t have the capability to share sales data with vendors. With a corporate mandate from senior management emphasizing the importance of creating accurate and timely forecasts, Brooks completely revamped its forecasting process. An independent forecasting group, reporting directly to the COO and CFO, was established to coordinate input from various groups—sales, marketing, product development and production— and to remove bias from the forecasting process.
The forecasting group established a collaborative forecasting process with three primary steps: Step 1: Produce monthly statistical forecasts at the SKU level to capture level, trend, seasonality and the impact of events based on historical data. Brooks chose Forecast Pro to create these forecasts due to a number of features available in the software:
? Ability to create accurate forecasts
? Flexibility to choose forecast models or let software automatically select models ? Capability to model events (particularly important for predicting spikes in demand with new product launches)
? Support for multiple-level models to produce consistent forecasts at all levels of aggregation ? Powerful override facility to enable collaborative forecasting “Forecast Pro has been a great solution for Brooks,” says Tom Ross, Financial Analyst. “Implementing Forecast Pro’s event modeling is very simple, which is an essential feature for us because of our moving product launches. We also use event models to address the challenge of forecasting events that don’t occur on a regular basis—such as races—which can have a dramatic impact on the sales of specific products. Another powerful feature of Forecast Pro is the ability to forecast a product hierarchy. This helps us to serve our multiple constituents within Brooks—we review higher-level forecasts with management and easily generate detailed forecasts at the SKU level for demand planning.”
Step 2: On a quarterly basis, get sales management and sales reps to forecast sales for a 12- month horizon, focusing on major accounts. This input is gathered via the Web and then aggregated by the forecasting group.
Step 3: Compare the statistical and judgmental forecasts, and make adjustments to create the final monthly forecast. Ninety percent of the final forecasts are the same as the statistical forecasts—changes are most commonly made to the forecasts for new styles where the sales organization has important knowledge to add. These final forecasts are then automatically fed into Brooks’ ERP system. “Forecast Pro allows us to easily apply judgmental overrides, which is critical for us,” notes Ross. “We now can systematically track changes, giving us a better understanding of our forecasting performance.”
The commitment to forecasting has paid off at Brooks. Forecast accuracy has improved on average by 40 percent, unfulfilled demand has been lowered from approximately 20 percent to less than 5 percent, and closeouts have been reduced by more than 60 percent. The improved forecasting has also helped to smooth out production, resulting in lowered costs and better margins.
Source :http://www.forecastpro.com/pdfs/Success%20Story-Brooks%20Sports.pdf
Q5What is the main issue of the case study? Analyse the forecasting solution
Q6.Why redesign of layouts may be necessary? List the differences between product and process layout.
MB0045 – Financial Management
Q1. Capitalisation of a firm refers to the composition of its long –term
funds debt and equity. Discuss the theories of capitalization.Q2. A) The share of Megha Ltd is sold at Rs 500 a share. The dividend likely to be declared by the company after one year is Rs 25 per share. Hence, the price after one year is expected to be Rs 550. What is the return at the end of the year on the basis of likely dividend and price per share?
B) A bond of face value of Rs 1000 and a maturity of 3 years pays 15% interest annually. What is the market price of the bond if YTM is also 15 %.
Q3. Discuss the sources of capital of a company. Analyse the factors that affect the capital structure.
Q4. A project costs Rs 50,000. It is expected to generate cash inflows as shown in table. If the risk free rate is 10%, compute NPV.
Year Cash inflows Certainty equivalent 1 32000 0.9 2 27000 0.6 3 20000 0.5 4 10000 0.3
Q5. a) Annual demand of a company is 30,000 units. The ordering cost per order is Rs 20 (fixed) along with a carrying cost og Rs 10 per unitper anum. The purchase cost per unit i.e., price per unit is Rs 32 per unit. Determine EOQ, total number of orders in a year and the time gap between two orders. Q6. Discuss the dividend policy of Dabur India Ltd for the last three years.
MB0046 – Marketing Management
Q1. “Planning is a process of designing the Blueprint for the future”. In this context, explain Marketing Planning in detail.Q2. Explain Henry Assael Model of buying decision behaviour along with the diagram”.
Q3. “Packaging includes all the actions that involve the development of a container and a graphic design for a product “.In the light of the statement, explain packaging and labelling.
Q4. Explain Brand Extension and its kind.
Q5. “Logistics has always been a central and essential feature of all economic activities”. In this context, explain logistics management and its major functions.
Q6. Write short notes on: a) Integrated Marketing Communication b) Direct Marketing
MB0047 –Management Information System
Q1. Professor A. Van Cauwenbergh of Antwerp University, in a paper presented at the Tenth
Anniversary Conference of the European Institute for Advanced Studies in Management,
presented four revisions to traditional Management Theory. In summary, the revisions are:(1) The initiative for the renewal and adjustment of the activities of a firm should come from the different levels in the management hierarchy. “Strategy is not a privilege of top management”.
(2) Firms, especially big firms, are incoherent systems (goals of the different component systems are not simply subdivisions of an overall goal; there are individual, conflicting goals as well). Some of these differences are manifestations of organizational initiative and vitality. Using information systems and central planning and rule-making to suppress all differences is destructive to organizations.
(3) The most vital “fluid” of an enterprise is the aggregate of its entrepreneurial values. The most fundamental and motivation and control come through these shared values relative to work, quality, efficiency, etc. Management often neglects these values and assumes that the collection and dissemination of information will provide sufficient motivation and control.
(4) Enterprises are open systems; their structure and operating processes are determined by their environment. This means organizations must be designed to continually adjust to the environment. a. If these revisions are correct, how is planning to be organized? b. How should the information system support the planning organization?
Q2. Information Technology and Computers have brought information age. The spread of Internet & relative ease of access made Information Breach easier. Our future is not secure, if our information is not secure. Information Resources need to be guarded, protected and controlled. List the precautionary measures to be considered to prevent cybercrime?
Q3. a. While implementing MIS in any organization change can occur in number of ways. List and explain the steps in the process as suggested by Lewin’s model. b. Compare between prototype approach and Life Cycle approach
Q4. There is an information explosion in today’s society. There are lot of advantages of DBMS like proper maintenance of the data and maintaining security. Explain the process of data transition using diagram and an example of your own.
Q5. Write short note on a. World wide web b. Voice over IP c. Intranet d. Extranet
Q6. Artificial intelligent system functions like a human being and helps a manager in taking quick decisions. Explain the different applications AI using diagram.
MB0048 –Operations Research
Q1. Discuss the various stages involved in the methodology of Operations
Research. Briefly explain the techniques and tools of Operations
Research.Q2. a. Explain the steps involved in linear programming problem formulation. Discuss in brief the advantages of linear programming. b. Alpha Limited produces & sells two different products under the brand names black & white. The profit per unit on these products in Rs. 50 & Rs. 40 respectively. Both the products employ the same manufacturing process which has a fixed total capacity of 50,000 man-hours. As per the estimates of the marketing research department of Alpha Limited, there is a market demand for maximum 8,000 units of Black & 10,000 units of white. Subject to the overall demand, the products can be sold in any possible combination. If it takes 3 hours to produce one unit of black & 2 hours to produce one unit of white, formulate the model of linear programming.
Q3. a. What is degeneracy in transportation problem? How it can be resolved? b. Solve the following transportation problem using Vogel’s approximation method.
Factories Distribution Centres Supply
C1 C2 C3 C4
F1 3 2 7 6 50
F2 7 5 2 3 60
F3 2 5 4 5 25
Requirements 60 40 20 15
Q4. a. Explain the steps in Hungarian method. Differentiate between Transportation and Assignment problem. b. Find the optimal assignment of four jobs and four machines when the cost of assignment is given by the following table:
J1 J2 J3 J4
M1 10 9 8 7
M2 3 4 5 6
M3 2 1 1 2
M4 4 3 5 6 Q5. Define Simulation. Explain the Simulation procedure. Discuss the use of Simulation with an example.
Q6. Explain the following: a. Integer programming model b. PERT and CPM c. Operating Characteristics of a Queuing System
MB0049 - PROJECT MANAGEMENT
Q1. Write short notes on
a. Project break-even point
b. Need for project planning
c. Project type organization
d. Rules for network constructionQ2. Describe and compare the project appraisal methods NPV and IRR with example? Which one is better method in estimating returns on investment in a particular project?
Q3. Microsoft Project AMS The company
AMS is a global business and IT consulting firm to the government, financial services, and communications industries. AMS applies both proprietary and partner technologies and provides solutions through business consulting, system integration, and outsourcing. Founded in 1970, AMS is headquartered in Fairfax, Virginia, and has offices worldwide. The company has approximately 6300 employees.
The challenge
Several years ago, AMS developed an internal project management system called Project in a Box. Based on Lotus Notes, the homegrown system was becoming inefficient and costly to operate, particularly because it was designed as a standalone, non-collaborative product. When a new consulting project was set up, a new instance of the database was created, leading to a chaotic system with literally hundreds of separate databases. Without any kind of centralised information sharing, it was difficult to use information from one project on another project. The system also prevented AMS’s managers from viewing companywide metrics, such as project completion rates and whether projects were being completed on time and on budget. AMS’s executives needed a system to allow them to have a portfolio view of the health of the company’s projects in progress. A collaborative project management system would allow AMS managers to: ? Measure project performance and Earned Value Metrics (EVM) allowing for improvements in on-time and on-budget delivery to customers ? Standardise processes ? Understand the impact of task dependencies within complex projects ? Share information across different product lines
The strategy
Many AMS project managers were already using Microsoft Project as a desktop application, developing project plans and Work Breakdown Structures (WBS) on their individual PCs. However, these individual installations were not networked together and did not feed critical project performance information to executives.
Therefore, in October 2002, when AMS began the vendor selection process for a company-wide project management solution, Microsoft Project was the natural choice, both because many internal users were already experienced with the application’s scheduling and planning functionality and because Microsoft offered the best price point. In March 2003, AMS chose Microsoft as its project management software vendor and began a pilot programme. In June 2003, AMS selected the public sector product engineering group as the first department to begin the pilot programme. AMS divided this initial pilot programme into four distinct phases:
? Phase 1: In early July, AMS installed Microsoft Project for and trained 15–20 project managers working on a common product line.
? Phase 2: In late August, AMS expanded the installation to 170 people in another product line within the same group.
? Phase 3: In late September, AMS rolled out Project’s decision support capabilities to ten executives, allowing them to mine data for reporting purposes.
? Phase 4: If the pilot is successful, AMS will expand the Project programme to 4,000 users company wide in a staged rollout.
Key benefit areas
With the pilot programme well under way, AMS is already seeing benefits from Microsoft Project. The system has helped AMS to meet its goal of creating a more collaborative project management system that allows managers to view metrics and create schedules with a view of resources across projects and across the entire organisation. The collaborative nature of Microsoft Project Server allows team members, team leaders, and project managers to complete EVM reporting more quickly, leading to more available time for billable hours. The quantifiable benefits from the Microsoft Project deployment include:
? Productivity gains from automated weekly reporting process. Consultants and developers now spend less time each week creating weekly status and performance reports, leading directly to more time available for billable hours. ? Productivity gains from automated EVM analysis. Team leaders and project managers now spend less time processing and analysing status and performance reports from team members, allowing them to also have more time available for billable hours. ? The Microsoft Project deployment also allows AMS project managers to get a better sense of project status metrics in real time. This leads to fewer project budget and cost overruns, because project managers can quickly make adjustments to keep projects profitable.
Key cost areas
The largest cost area for AMS’s deployment of Microsoft Project was the software license cost, making up 63% of the total cost of the project. Other cost areas over the 3-year period included consulting, training, ongoing maintenance, and personnel costs associated with the everyday use of the system.
Lessons learnt
Overall, AMS’s Microsoft Project implementation went smoothly. AMS’s managers attribute the project’s success to their careful planning and staged pilot programme approach. AMS’s managers recommend that companies considering similar implementations should not underestimate the change management necessary to make Microsoft Project work effectively. Project managers, especially those without PMI certifications, will often need to undergo training on how to build effective WBS’s, how to plan and schedule complex projects, and how to adjust WBS’s to changing project conditions.
A successful Microsoft Project implementation also requires a high level of communication between team members and project managers. This is especially important with regard to communicating the inputs, steps, expected output, and dependencies of complex business processes.
AMS’s managers also recommended that companies carefully look at their internal processes for building WBS’s, especially the ones for complex projects that require more than 500 tasks. Some of AMS’s projects contained upwards of 2500 tasks, which was well above Microsoft Project’s practical limit of 500 tasks for a single project.
Calculating the ROI
Nucleus Research analysed the costs of software, personnel, consulting, and training over a 3-year period to quantify AMS’s investment in Microsoft Project. Direct and indirect benefits were also quantified over a 3-year period. Direct benefits quantified included productivity gains for both team members and team leaders when creating EVM reports. Because AMS was an early adopter and because it agreed to participate in trade shows and in marketing ventures, the company received consulting services from Microsoft at no cost, though AMS did use internal consultants for a portion of the implementation. Companies currently considering Microsoft Project for similar enterprise implementations must take consulting costs into account when evaluating potential ROI. Benefits not quantified because of the early stage of AMS’s Project deployment included reduced project budget and schedule overruns. However, Nucleus recommends that companies considering Microsoft Project evaluate this potential benefit. What difficulties were encountered by AMS while dealing with information transfer problem in the company? What strategy is used by AMS for dealing with this problem?
Q4. Form the above case how did the solution help the managers, project teams and the company.
Q5. What are the key steps involved in purchase cycle?
Q6. Discuss the concept of quality and project quality management.
