MB0044_MBA_Sem2_Fall/August 2012

Master of Business Administration - MBA Semester 2

MB0044 Productions & Operations Management- 4 Credits
Assignment Set- 1 (60 Marks)
Note: Each question carries 10 Marks. Answer all the questions.
Q.1 What do you understand by Vendor-Managed Inventory (VMI)?
Answer : Vendor-managed inventory (VMI) is a family of business models in
which the buyer of a product provides certain information to a supplier of that
product and the supplier takes full responsibility for maintaining an agreed
inventory of the material, usually at the buyer's consumption location (usually a
store). A third-party logistics provider can also be involved to make sure that the
buyer has the required level of inventory by adjusting the demand and supply
gaps.
As a symbiotic relationship, VMI makes it less likely that a business will
unintentionally become out of stock of a good and reduces inventory in the
supply chain. Furthermore, vendor (supplier) representatives in a store benefit
the vendor by ensuring the product is properly displayed and store staff are
familiar with the features of the product line, all the while helping to clean and
organize their product lines for the store.
One of the keys to making VMI work is shared risk. In some cases, if the
inventory does not sell, the vendor (supplier) will repurchase the product from
the buyer (retailer). In other cases, the product may be in the possession of the
retailer but is not owned by the retailer until the sale takes place, meaning that
the retailer simply houses (and assists with the sale of) the product in exchange
for a predetermined commission or profit (sometimes referred to as consignment
stock). A special form of this commission business is scan-based trading whereas
VMI is usually applied but not mandatory to be used.
This is one of the successful business models used by Wal-Mart and many other
big box retailers. Oil companies often use technology to manage the gasoline
inventories at the service stations that they supply (see Petrolsoft Corporation).
Home Depot uses the technique with larger suppliers of manufactured goods (i.e.
Moen, Delta, RIDGID, Paulin). VMI helps foster a closer understanding between
the supplier and manufacturer by using Electronic Data Interchange formats, EDI
software and statistical methodologies to forecast and maintain correct inventory
in the supply chain.
Vendors benefit from more control of displays and more customer contact for
their employees; retailers benefit from reduced risk, better store staff knowledge
(which builds brand loyalty for both the vendor and the retailer), and reduced
display maintenance outlays.

Consumers benefit from knowledgeable store staff who are in frequent and
familiar contact with manufacturer (vendor) representatives when parts or
service are required. Store staff have good knowledge of most product lines
offered by the entire range of vendors. They can help the consumer choose from
competing products for items most suited to them and offer service support
being offered by the store.

Q.2 Explain briefly the four classification of scheduling strategies & its
approaches.
Q.3 Define production management. What are the various functions
involved in production management?
Q.4 Explain the various phases in project management life cycle.
Q.5 Explain the ingredients of a business process. Explain Physical
Modelling.
Q.6 Define the term quality. Explain the concept of quality at source.

MB0044_MBA_Sem2_Fall/August 2012
Master of Business Administration - MBA Semester 2
MB0044 Productions & Operations Management - 4 Credits
Assignment Set- 2 (60 Marks)
Note: Each question carries 10 Marks. Answer all the questions.
Q.1 What is value engineering? Explain the steps involved in Value
analysis.
Answer : Value engineering (VE) is a systematic method to improve the "value"
of goods or products and services by using an examination of function. Value, as
defined, is the ratio of function to cost. Value can therefore be increased by
either improving the function or reducing the cost. It is a primary tenet of value
engineering that basic functions be preserved and not be reduced as a
consequence of pursuing value improvements.[1]
In the United States, value engineering is specifically spelled out in Public Law
104-106, which states Each executive agency shall establish and maintain costeffective value engineering procedures and processes." [2]

Value engineering is sometimes taught within the project management or

industrial engineering body of knowledge as a technique in which the value of a
systems outputs is optimized by crafting a mix of performance (function) and
costs. In most cases this practice identifies and removes unnecessary
expenditures, thereby increasing the value for the manufacturer and/or their
customers.
VE follows a structured thought process that is based exclusively on "function",
i.e. what something "does" not what it is. For example a screw driver that is
being used to stir a can of paint has a "function" of mixing the contents of a paint
can and not the original connotation of securing a screw into a screw-hole. In
value engineering "functions" are always described in a two word abridgment
consisting of an active verb and measurable noun (what is being done - the verb
- and what it is being done to - the noun) and to do so in the most nonprescriptive way possible. In the screw driver and can of paint example, the most
basic function would be "blend liquid" which is less prescriptive than "stir paint"
which can be seen to limit the action (by stirring) and to limit the application
(only considers paint.) This is the basis of what value engineering refers to as
"function analysis".[3]
Value engineering uses rational logic (a unique "how" - "why" questioning
technique) and the analysis of function to identify relationships that increase
value. It is considered a quantitative method similar to the scientific method,
which focuses on hypothesis-conclusion approaches to test relationships, and
operations research, which uses model building to identify predictive
relationships.
Value engineering is also referred to as "value management" or "value
methodology" (VM), and "value analysis" (VA).[4] VE is above all a structured
problem solving process based on function analysisunderstanding something
with such clarity that it can be described in two words, the active verb and
measurable noun abridgement. For example, the function of a pencil is to "make
marks". This then facilitates considering what else can make marks. From a spray
can, lipstick, a diamond on glass to a stick in the sand, one can then clearly
decide upon which alternative solution is most appropriate.

The Value Analysis process

Value Analysis is based on the application of a systematic work plan that may be
divided in six steps, as shown in figure 3.
Figure 3
Steps involved in the application of Value Analysis

1: orientation/preparation

Identify what is to be analysed. This will typically be one of:

A manufactured item. This can be anything from a screw to an engine,

although a more complex item is likely to result in a more complex and
time-consuming analysis.
A process or service. Again, all levels can be analysed, from a hand
assembly process to a complete customer service organisation.

2: information

Identify and prioritise the customers of the item from step 1. This may include
external customers, such as 'auto suppliers' and internal customers, such as
'finance manager'.

Note that external customers are usually more important than internal
customers, and that seniority does not necessarily equate with priority. A
customer's preference for a product feature should be more important than the
opinion of a senior designer.

3: analysis

In this phase the functions of the product are analysed by Functional Analysis,
which is aimed at identifying functions given by a product or part of it. Functions
have an importance (weight) and a cost. These costs are quantified and this
leads to a list of functions ordered by their importance and value. This means
that there is an analysis of how each function satisfies customer needs, and
then, an analysis of what the cost of those functions is.

This phase of Value Analysis may be considered as the key one of the whole
methodology as it represents the translation of needs to functions (see the
specific technique).

4: innovation/creativity

For this phase it is necessary to use creative techniques that generate

alternatives. Starting from the analysis of functions and costs, there is a search
for means that allow elimination, change or improvement of components and
functions.

It is important to look for different ways of satisfying the basic functions, even if
it means rejecting the current approach and starting again with a clean drawing
board. This requires the product or process to be 'mentally destroyed' and then
rebuild a new one.

5: evaluation

It represents a confrontation of ideas, a collection of information about the

feasibility and cost of those ideas, and measures the value of the best
alternatives.

This analysis or evaluation uses the same techniques of value measurement that
have been used in previous steps. At this point an examination is done about the
grade of functional accomplishment and the economical analysis of those
alternatives that offer the higher value. Some of the techniques are well-known
such as Cash-flow analysis and break-even point.

The team involved in Value Analysis needs an objective analysis of the ideas
generated through the innovation phase. The evaluation phase is carried out in
two main steps:

A qualitative analysis of value regarding objectives in design, cost,

implementation facilities, etc.
A quantitative analysis using numerical techniques of value measurement
that leads to a few alternatives of high value that will be analysed in
depth.

This process usually involves determining the cost and select those ideas that
can be practically implemented. This may include work to develop and refine
promising ideas into practical and optimum solutions.

6: implementation and monitoring

In this phase it is necessary to prepare a report that summarizes the work that
has been done, including conclusions and specific proposals. It will be also
necessary to describe actions plans for implementation, in which project
management techniques would be useful.

Finally a plan should be included for monitoring of the actions. This should be
based in the accomplishment of objectives.

The application of Value Analysis only needs to make use of Basic Techniques
such as matrixes, pare to chart, pert and Gantt diagrams, etc., in most of the
Value Analysis steps.

Table 2
Specific techniques to be applied in Value Analysis

Value analysis step

1 orientation/preparation
2 information
3 analysis

Specific technique
basic techniques
functional analysis, basic techniques

4 innovation/creativity
5 evaluation

basic techniques

6 implementation and monitoring

Nevertheless, there is one very specific technique worth to be mentioned, such
as Functional Analysis, described in a specific section.

Q.2 Describe dimensions of quality. Which are the quality control tools?
Q.3 What are the objectives of layout? Explain the classification of
layouts.
Q.4 List the benefits of forecasting. Discuss the role of forecasting in
modern business context.
Q.5 Mention the significance of plant location decision. Explain the
location decision sequence.
Q.6 What is meant by business process? Explain logical process
modelling?