The document provides information about operations management concepts including scientific management, productivity, ABC analysis, economic order quantity, and materials requirements planning. It defines each concept and provides examples to illustrate how they are applied. Scientific management aims to improve efficiency through systematic analysis of work processes. Productivity is a measure of output per unit of input. ABC analysis categorizes inventory items based on their value and usage to determine appropriate control methods. Economic order quantity and ordering cycle determine optimal replenishment amounts and frequencies to minimize total inventory costs. Materials requirements planning is a technique to plan material needs at different production levels based on a product structure tree.

1. Eighth semester BE degree Examination, June/ July-2015
Operations Management
1 a) Explain ‘Scientific Management’ and its origin - 5 Marks
Answer: Scientific management- is a systematic study of the relationships between people and tasks, for the purpose
of redesigning the work process to improve efficiency.
• It is a theory of management that analyses and synthesizes work flows with main objective of improving
economic efficiency.
• It is a term coined in late1800’s to describe the system of industrial management created and promoted by
Fedrick W. Taylor and his followers.
• He is regarded as the “father of Scientific Management”
• Its main objective is to improve industrial efficiency, especially labour productivity. It was one of the earliest
attempts to apply science to the engineering processes to management.
• The various contributions made by Taylor in the field of scientific management are as follows;
➢ Developed a science for each element of an individual work
➢ Introduced a concept of functional management
➢ Suggested importance of time, motion and fatigue study which are essential in order to improve
production rate and efficiency of labour.
➢ Standardised methods, machines, tools and procedures
➢ Proposed scientific selection and training of workers
b) What is Operations Management? - 5 Marks
Answer: Definition: Operation Management is the business function responsible for managing the process of creation
of goods and services. It involves Planning, Organizing, Coordinating and Controlling all the resources needed in the
production of goods and services
(Resources) (Goods/Products & Services)
Fig Schematic Operations Management
Ex: Automobile assembly factory – Operations management uses machines to efficiently assemble products that
satisfy current customer demands.
Management consultant – Operations management uses people to effectively create the services that will address
current and potential client needs
Importance of operations management;
Operation management can reduce the cost of products and services being efficient.
Operations management can increase revenue through increased customer satisfaction in producing quality goods and
services.
c) What is ‘Productivity’? Mention how it can be improved? - 5 Marks
Answer: Productivity is defined as a total output per one unit of a total input. In control management, productivity is a
measure of how efficiently a process runs and how effectively it uses resources.
Production can be increased by increasing input but productivity may not increase. The total productivity of an
enterprise can be defined as
Ptotal= Total Productivity
= Overall output
IL = Labor input
IC = Capital input
IR = Raw materials and finished parts components
IH = Other miscellaneous goods and services input
Technical Methods to Improve Productivity
• Task based techniques: Pertains to Work measurement, Time/motion study, job analysis/evaluation
• Product based techniques: Includes product classification and coding, product standardization, specialization.
• Technology base methods: Implementation of CAD, CAPP, CIM, CAE, JIT and GT
INPUT TRANSFORMATION
ON
OUTPUT

2. • Material based techniques: Related to MRP, Inventory Management & Control, and Material handling
systems.
• Employee based methods: Adopting various incentives schemes for both individual and group of employees,
total quantity management etc.
d) Suppose a company produced 300 standard book cases last week using 8 workers and it produced 240
standard book cases this week using 6 workers. In which week was productivity higher?
The above problem pertains to productivity which defines labour efficiency. - 5 Marks
Answer:
2 a) Explain what ‘Uncertainty’ is and how this can be overcome in operations management? - 8 Marks
Answer: When the decision maker faces multiple states of nature but he has no means to arrive at probability values to
the likelihood of occurrence of these states of nature, this problem is a decision problem under uncertainty. Such
situations arise when a new product is introduced in the market or a new plant is setup. In business, there are many
problems of this ‘nature’. Here the choice of decision largely depends on the personality of decision maker.
The following choices are available before the decision maker in situations of uncertainty.
Maximax criterion: is an abbreviation of the phrase ‘maximum of the maximums’ and an adventurous & aggressive
decision maker may choose to take the action that would result in the maximum payoff possible. Suppose for each
action there are three possible payoffs corresponding to three states of nature as given the following decision matrix.
States of
nature
Decisions
A1 A2 A3
S1 220 180 100
S2 160 190 180
S3 140 170 200
Maximax 220 190 200
Maximum of these three maximums is 220
Minimax criterion: is just opposite of maximax. Application of the minimax criteria requires a table of losses instead
of gains. The losses are the costs to be incurred or the damages to be suffered for each of the alternative actions and
states of nature. The term minimax is an abbreviation of the phrase minimum of the maximum.
States of
nature
Decisions
A1 A2 A3
S1 0 4 10
S2 3 0 6
S3 18 14 0
It shows that the maximum losses incurred b the various decisions.
Minimax 18 14 10
Minimum of these three maximums is 10
Maximin criterion: The maximin criteria of decision making stands for choice between alternative courses of action
assuming pessimistic view of nature. The below table consists of worst possible results in terms of payoff and select
the act which maximizes the minimum payoff.
States of
nature
Decisions
A1 A2 A3
S1 -80 -60 -20
S2 -30 -10 -2

3. S3 30 15 7
S4 75 80 25
Maximin -80 -60 -20
Maximum of these three minimums is A3
Laplace criterion: As decision maker has no information about the probability of occurrence of various events, the
decision maker makes a simple assumption that each probability is equally likely. The expected payoff is worked that
each probability is equally likely. The act having maximum expected payoff is selected
States of
nature
Decisions
A1 A2 A3
E1 20 12 25
E2 25 15 30
E3 30 20 22
We associate equal probability for each event say 1/3: Expected payoff are
b) Explain Baye’s theorem with notations. A study of old buses shows the probability of an accident by over
speeding is 0.8, and the probability of over speeding alone is 0.3. The probability of an accident occurring due
to non over speeding reduces to 0.1. Recently an accident occurred. What is the probability of that the bus was
over speeding? - 6 Marks
Answer: Baye’s theorem:
It states that.
P (A/O) = Probability of occurrence of accident because of over speeding = 0.8
P (O) = Probability of over speeding of bus = 0.3,
To find probability that the bus was over speeding given that accident has occurred, is given by Baye’s rule
c) Maximize by graphical method.
- 6 Marks
Solution: Objective function
Subjected constraints

4. Graphical representation:
The coordinates at which two lines intersect away from the origin at last corner of the solution space gives the solution
x1=1000 x2=500
If we substitute these values in Z equation, we get
x1=1000 x2=500
3. a) Explain the “Moving Average” and “Simple Exponential Smoothing” methods of forecasting.
- 8 Marks
Answer: Simple moving average: In this model, the arithmetic average of the actual sales for specific
number of recent past time periods is taken as the forecast for the next time period. Extending the moving
average to include more periods may increase the smootheningeffect but decreases the sensitivityof the
forecast.Long periods provide too many opportunities for significant changes to occur in demand pattern.
To reduce this risk, the organizations can base its forecast on average demand during short periods say three
months.
n= number of periods, Di=demand in the ith
period
Simple Exponential Smoothing
In these methods, the forecast sales for the last period are modified by information about the forecast error of the last
periods. This modification of the last year’s forecasts is the forecasts for the next time periods.
Note: The plotted graph
may not be according to
the scale. Keep mention
appropriate scale when
you plot such graphs

5. In this methods, the weight assigned to a previous period’s demand decreases exponentially as that data gets older.
Thus, recent demand data receive a higher weight than does the older demand data.
A simple exponential smoothing technique considers only trend values and does not take into account seasonal indexes
or seasonal adjustments.
b) Explain linear regression method for trend analysis by least squares. Explain any simplification possible.
- 6 Marks
Answer: Regression Analysis
Regression analysis is a forecasting technique that establishes a relationship between variables – one
dependent and other(s) independent. In simple regression, there is only one independent variable. In multiple
regressions there is more than one independent variable.
Least squares concept is used for regression and correlative analysis between any set of dependent and independent
variables. Least square is a widely used mathematical method of obtaining line of best fit between the dependent
variable (usually demand) and an independent variable. It is so called as least squares method since the sum of the
squares method since the sum of the square of the deviations of the various points from the line of best fit is minimum
or least. It gives the equations of the line for which the sum of the squares of vertical distance between the actual
values and line values are at minimum.
In least squares or regression analysis, the relationship between the dependent variables Y and some
independent variable X can be represented by a straight line.
The method of least squares is to find the parameters m and c such that sum of squares of the errors is minimum.
Let,

6. c) The data given below refers to past sales for eleven years. Using least squares estimate sales forecast for next
two years. Also use moving average for 3 years and compare the forecasts.
Years 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991
35 50 48 47 50 55 65 77 92 86 100
- 6 Marks
To find constants m &
c
Year Code X Y Sales XY X2
1981 1 -175 25
1982 2 -200 16
1983 3 -144 9
1984 4 -94 4
1985 5 -50 1
1986 6 0 0
1987 7 65 1
1988 8 154 4
1989 9 276 9
1990 10 344 16
1991 11 500 25
n=11
Median

7. The equation of St.line is given by
6 a) Define ABC analysis, EOQ, Ordering Cycle - 6 Marks
Answer: i) ABC Analysis:
• One of the widely used techniques for control of inventories is the ABC (always better control) analysis.
• The objective of ABC control is to vary the expenses associated with maintaining appropriate control
according to the potential savings associated with a proper level of such control.
• The ABC approach is a means of categorizing inventory items in to three classes “A”, “B”, & “C”, according
to the potential amount to be controlled.
• A Class items: These items hold approximately 70-80% of the total cost of the machinery, whereas its usage
among all items is of in between 10-20% (i.e., items consumes more % of total cost but less % of usage). Ex:
Engine in automobile. Also they,
➢ Requires strict control
➢ No need to maintain safety stocks
➢ Maximum efforts required to reduce lead time
➢ Ordering of these items managed by top management
• B Class items: These items hold approximately 20-30% of the total cost of the machinery, whereas it’s usage
among all items is of in between 40-50% (i.e., items consumes moderate % of the total cost and also medium
amount of usage). Ex: Tyres in automobile. Also they,
➢ Need to maintain low safety stocks
➢ Ordering can be done once in three months
➢ Moderate efforts required to minimize lead time
➢ To be handled by middle level management
• C Class items: These items hold approximately 10-20% of the total cost of the machinery, whereas it’s usage
among all items is of in between 70-80%. (i.e., items consumes less % of the total cost of the machinery but
high rate of usage can be made) Ex: Nuts, bolts, screws etc. Also they,
➢ Need to maintain high safety stocks
➢ Bulk ordering can be made once in 6 months
➢ Rough estimation
➢ Can be fully delegated
ii )EOQ: Economic order quantity (EOQ) is the technique which solves the problem of the materials manager. EOQ
or Opt Q (Optimum Quantity) is the order size at which the total cost, comprising ordering cost plus carrying
cost, is the least. Below Fig illustrates the EOQ graphically
➢ EOQ technique is highly useful in inventory management, as it answers the question how much to order ?
➢ Its use causes the sum of the two (ordering & carrying) costs to be lower.

8. iii) Ordering Cycle: It is the time period between two successive orders is called ordering cycle. Ordering cycle may
be decided on the basis of continuous review or a periodic review of the inventory items.
b) Calculate the economic lot size with uniform rate of demand and instantaneous replacement. Give total costs
and total annual costs. - 6 Marks
Let,

10. c) A stockiest has to supply 800 units per week of a product of his customers. He gets the product at Rs.75 per
unit from the manufacturer. The cost of ordering and transportation from the manufacturer is Rs100 per
order. The cost of carrying is 10% per year of the cost of the product. Calculate the economic lot size, time to
produce the economic lot size and total optimum cost per week. - 8 Marks
Solution:
Given;
Annual Demand D = 800 units per week
=
Rate of interest on carrying cost i= 10% =0.1
7. What is MRP and give the inputs required. - 4 Marks
Answer:

11. MRP Inputs
• MRP is the scientific technique for planning the quantity to be ordered, usage of materials at various
levels of production & for monitoring the stocks during these transactions.
b) What is ERP? - 6 Marks
• ERP is a software package developed for optimum use of resources of an enterprise in a planned
manner.
c) A work centre operates 6 days a week on a two shifts per day basis ( 8 hours per shift). It has four machines
with the same capacity. If the machines are utilized 75% of the time at a system efficiency of 90%, what is the
rated output in standard hours per week? - 6 Marks
Answer:
Standard hours= No of working days per week No. of shifts in each day No. of working hours per shift
=
Actual hours utilized by machines = Standard hours per week percentage of utilization
Rated output = Actual hours utilized by machines System efficiency

12. d) Given the structure tree shown compute the net requirements of A, B, C, D, E, F to produce 10 units
of end item X. No stock is on hand. - 6 Marks
X
A (1) C (3)
B (2)
F (3) C (3)
C(1) D (4) E (1)
10 units
20 units
10 units
80 units
20 units
40 units
240 units
240 units
20 units
NET REQUIREMENTS= GROSS
REQUIREMENTS-STOCK ON HAND
A=10UNITS
B=20 UNITS
C= 20+240=260 UNITS
D= 80 UNITS
E= 40+20 = 60 UNITS
F=240 UNITS
F= 240 UNITS