1. Examination Paper: Supply Chain Management
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IIBM Institute of Business Management
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
Examination Paper: Supply Chain Management
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IIBM Institute of Business Management
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

2. 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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IIBM Institute of Business Management
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

3. 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
Examination Paper: Supply Chain Management
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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
successfulin 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 successfulin 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. Ateam 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,

4. 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
Examination Paper: Supply Chain Management
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IIBM Institute of Business Management
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 peacefulfooting. 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