JAIPURIA INSTITUTE OF MANAGEMENT, JAIPUR

POST GRADUATE DIPLOMA IN MANAGEMENT

FIFTH TRIMESTER (Batch 2017-19)
END TERM EXAMINATION
Course Name Materials & Inventory Management Course Code OM 502
Max. Time 2 Hours Max. Marks 40

Instructions: All Questions are compulsory.

1. The Institute gets T-Shirts made for its ‘Annual Sports Meet’ every year. It has to decide on the
number of T-Shirts it should place order for. The past data shows that average sales were 500 T-
Shirts with a standard deviation of 70 T-Shirts in the previous years. The purchase price is Rs 150
per T-Shirt. It is sold at Rs 250/- per T-Shirt. The salvage value of unsold T-Shirt is Rs 100/-. How
many T-Shirts should be bought by the Institute to maximize its profit? (5 marks)

2. A hospital procures its supplies of a material once a year. The total number procured is 2400
packages (in a year). This policy of procuring material once a year is being questioned. The
accountants calculate the cost of inventory holding as Rs 36 per package per year. It is also figured
out that the costs of procurement add up to Rs 1200 per order. What inventory policy would you
advise to the hospital in terms of order quantity and number of orders to be placed in a year?
(5 marks)
3. ABC wants to compute Economic Batch Quantity (EBQ) for its production to minimize its total
cost. The following data is given:
Monthly Demand: 500 Units
Daily Production Rate: 25 Units
Days in a month: 25 Days
Cost of set-up: Rs 1,500
Cost of holding inventory: Rs 10 per unit per year (6 marks)

4. A Corporation has been observing reduction in sales of its products. On feedback from its dealers
and its customers, it realized that the competitors are able to supply similar products at lower
prices. The corporation is already under pressure of very low margins, hence it can’t reduce prices
of its products. The Management of the Corporation came to know about Just-in-time Production

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System and Lean Management. Suggest your plan, in brief, of cost reduction through various
elements of Just-in-time System. (6 marks)

4. A car manufacturer has to procure very high variety of components. It is managing inventory
through using the concept of economic order quantity. However, it is finding that its administrative
cost of procurement is very high impacting badly on its profitability. It wants to reduce the ordering
cost through selective inventory management. Suggest and explain what inventory management
policy should it adopt to reduce the cost of inventory without impacting the service level?
(6 marks)
6. Outsourcing has become an important strategic decision impacting greatly the complete value
chain of an organization. Give your recommendations with justification as to whether to outsource
or not, depending on parameters like ‘competency’ and ‘capacity’ for a mobile manufacturing
company. (6 marks)

7. A TV manufacturer is exploring ways to select a vendor objectively for its OLED Screen. Design
a suitable Vendor Rating System for selecting a vendor for buying the screen. (6 marks)

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