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Exam 25 January 2017, answers

Operations and Logistics Management (Rijksuniversiteit Groningen)

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University of Groningen, Faculty of Economics and Business

Operations & Logistics Management

Exam
January 25th 2017, 14.00-17.00h
Name: _____________________________

Student Number: _____________________________

Signature: _____________________________

Please read this before you start:

During the course of the exam you are required to show your university registration card (or
an official identity card, e.g. passport etc.) to the invigilators if you are requested to do so.
This is a three hour exam. Between the start of the exam and 14:30, you may not leave the
examination room. Before leaving, you must hand in your exam.
You may only use a faculty- approved type of calculator (see website for approved types).
With the exception of your calculator, all electronic equipment must be switched off and
must remain stowed away during the full length of the exam.
When making calculations, do not round intermediate answers. For example, if you make
calculations for waiting line models, do not round the values of and before you complete
the final calculations.
Always provide sufficient argumentation for your answers.
You must formulate all of your answers in English.
Your answers must be formulated within the textboxes. Your formulations must be
comprehensible. (Parts of) answers formulated outside the text boxes will not be assessed.
An appendix containing some important formulae is supplied separately.
You are not allowed to consult any book or note during the exam and no books or notes are
in any form allowed on your desk. Use of a dictionary is NOT allowed during the exam.
The exam is composed of 4 open questions and 25 multiple choice questions. The maximum
total number of points to be earned (including possible bonus points) is 100.
The MC questions have different weights. The gambling-effect correction will be corrected
for these different weights.

Question Max. Mark Question Max. Mark

1 30 MC * 20
2 10 MC *** 20
3 10
4 10 Total 100

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Please note that Question 1 (30 point) consists of large texts that may contain
a lot of redundant information but also essential information. You must be
able to distinguish information necessary in order to answer the questions
from redundant or superfluous information.

Also note that neither the examiner nor the invigilators will answers questions
with regards to the questions of this exam. If you think that information is
missing you may make assumptions about this information, but only if the
information is indeed missing.

If you have doubts about the (questions of) the exam, you are requested to
formulate these in the text box provided at the end of this exam form.

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Question 1 (Max. 30 points)

The case description is provided as a separate document.
a. Make a sketch depicting the operations and the material flows the times required to
execute the respective operation(s). Also depict the intermediate inventory point but do
not incorporate intermediate inventory points that are in all likelihood not present. Use
standard symbols. (max. 5 points)
So, operations and actual intermediate inventory only. Line processes have no intermediate inventory within the
particular line. Theres only a buffer between the press line and the coating line and an intermediate stock between the
paint line and the assembly line. Indicating more inventory is not required. Non-existent intermediate inventory within
the line results in deduction of points, inventory supplying to the line (assembly line especially) will not result in
deduction of points.

Total mess: zero points

Intermediate inventory that isnt there: minus 2 points Buffers in the assembly line: minus 3 points

Buffer between forming and rinsing not present: minus 1 point

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 Applicator Press Press Press Die-press

Warehou
Perforating every 60 Cutting round Forming shallow
se Applying lubricating film Cutting segments of 70 cm
cm. shapes bowl
Sheet metal rolls Roll of sheet metal 10 sec 10 sec
cycle cycle 10 sec cycle 10 sec cycle 10 sec cycle

Baking Powder coating Rinsing Forming press Forming press Forming press

Removing lubricant, Buffer Forming mowing

Baking powder into film Applying coat of powder Bending edges inward Trimming
drying cavity
10 sec 10 sec
720 sec 10 sec 30 sec 10 sec 10 sec 400 10 sec
cycle cycle
cycle cycle cycle cycle

De-
coupling
1 worker 1 worker 1 worker 1 worker 1 worker 2 worker 2 worker 2 worker 2 worker 2 worker
Stock of Decks
Attaching Attaching
Attaching Attaching Attaching Attaching Attaching Attaching
30 sec Taking motor Taking deck deck to adapter and
safety bare door brackets front mounts rear mounts front wheels
cycle 10 sec 5 sec motor blade
20 sec 15 sec 10 sec 5 sec 5 sec 5 sec
10 sec 10 sec

5HP motors
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1 worker 1 worker 1 worker 1 worker 1 worker 1 worker 1 worker 1 worker 1 worker 2 worker 2 worker 2 worker 2 worker
Attaching Attaching
Manuals and Fitting Attaching
Boxing Fitting sticker Fitting sticker Fitting sticker Fitting sticker Testing Fitting cables upper lower Flipping
sealing control assy rear wheels
15 sec 3 sec 3 sec 3 sec 3 sec 4 sec 27 sec handlebar handlebar 4 sec
15 sec 27 sec 5 sec
10 sec 15 sec

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Warehouse

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b. What is the average throughput time of the an engine, from the moment it is taken
from (whatever) inventory? Clearly show your calculation! ( (Max. 5 points)

Sum of the operations on the line:

1 worker 1 worker 1 worker 1 worker 1 worker 2 worker 2 worker 2 worker 2 worker 2 worker
Attaching Attaching
Attaching Attaching Attaching Attaching Attaching Attaching
Taking motor Taking deck deck to adapter and
safety bare door brackets front mounts rear mounts front wheels
10 sec 5 sec motor blade
20 sec 15 sec 10 sec 5 sec 5 sec 5 sec
10 sec 10 sec

1 worker 1 worker 1 worker 1 worker 1 worker 1 worker 1 worker 1 worker 1 worker 2 worker 2 worker 2 worker 2 worker
Attaching Attaching
Manuals and Fitting Attaching
Boxing Fitting sticker Fitting sticker Fitting sticker Fitting sticker Testing Fitting cables upper lower Flipping
sealing control assy rear wheels
15 sec 3 sec 3 sec 3 sec 3 sec 4 sec 27 sec handlebar handlebar 4 sec
15 sec 27 sec 5 sec
10 sec 15 sec

10+5+10=20+10+15+10+5+5+5+5+5+4+15+10+27+4+3+3+3+3+15+15=202 sec.

Principle of the calculation must be there. No subtraction of points for small errors.

Not taking into account that some tasks must be executed by two an some by just one: two points
deduction

c. For what parts or sub-assemblies would you consider the use of a KanBan system.
Make clear what your argumentation for your answer is. (max. 5 points)
Especially the motors that arrive in crates of 12 engines and need to be put on special trolleys
holding 8 engines and the grass collector. But a number of alternative uses for a KanBan system can
be thought of such as the supply of the control assemblies, a set consisting of the manual, oil and
grass collector.

As long as in your answer it becomes clear that some kind of operation can take place apart from the
assembly line and where it would make sense to have these operations not perform in the same
sequence/pace of the assembly line (the 30 seconds pace)

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d. Make a precedence diagram of the activities executed by the workers on the assembly
line as described in the case, and in that precedence diagram group the activities into
activities of individual work stations in such a way that the most efficient arrangement
is realized. (max. 15 points)

Precedence for a large part expressed in the case description.

Deck must be mounted to the engine before adapter and blade can be mounted.

Mounts must be fitted before wheels can be attached

Brackets must be fitted before lower push bar can be attached, lower push bar must be attached
before upper can be attached.

In many cases however the required precedence is not described or remains implicit. (Can the
controls be fitted to the upper push bar before this push bar is fitted the lower push bar?)

Its important that in your answer you acknowledge that some operations must be executed before
other operations can be executed, from your answer it must become clear that the deck must be
fitted to the engine before the the blade can be fitted, that the engine must be hoisted onto the line
before the deck can be fitted to it.

More importantly, whatever you describe as prerequisite operations for following operations (your
precedence diagram), this must be reflected in in the grouping of operations. Furthermore, you
must, in the grouping of operations into workstation activities take into account that some
operations must be executed by two persons and that some can be performed by just one worker.

Forgetting the major dependencies: minus 1 point per dependency.

Grouping inconsistent with indicated interdependencies: minus 5 points

Not taking into account two worker requirement: minus 3 points

Lousy arrangement of activities leading to substantial inefficiencies: minus 4 points

Total mess: 0 points

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Question 2 (Max. 10 points)

The Concept of Domain Consensus has been discussed a number of times in the lectures.
Explain
what -in the context of Supply Chain Management- the domain is,
what the parties are that can arrive at such a domain consensus,
why arriving at such a domain consensus is such an important matter, and
how intensifying competition affects existing domain consensus.

Domain: Claim that the organization stakes out for itself in terms of population served, services
rendered, products offered. It is an implicit statement by which the organization claims that it will
serve a part of the environment, hoping that that claim will be accepted and that this acceptance
will endure.

Parties: all parts of the environment relevant for the organization, given the claim of the
organization. Task-environment. Suppliers, customers, workers, legislators, communities etc.
Stakeholders.

Domain consensus: the acceptance of the claim. Relationship of exchange in which the organization
gets what it wants at conditions acceptable for the task-environment and the (parties in the) task
environment get(s) what it (they) want(s) at conditions acceptable for the organization.

Intensified competition will put any domain consensus under pressure, because the organization will
be confronted with competing claims and the task-environment faced with alternative offers. The
task-environment will be offered more alternatives for the domain of the organization, and the
organization will have to come up with a better, more attractive offer or claim.

In your own words, but covering the above (less abstract); no deduction of points.

Humbug: major deduction of points (up to 15)

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Question 3 (Max. 10 points)

Suppose that you are the owner of the small shop that sells something not especially healthy. You employ
a number of students to staff your shop, but in the current (Original) Situation there is at any time just
one employee who takes the orders and prepares whatever you sell. As a O&LM student, you felt inspired
to investigate the behavior of your customers and you discovered that their arrival follows a Poisson
distribution. You also found out that the average time between the arrival of your customers is 5 minutes
and 12 seconds (Poisson distributed arrivals). Once inside your shop, your customers can choose from a
great variety of products which are all assembled to the preferences of the customer. Serving the
customers in this way takes on average 3 minutes 42 seconds of taking an order, prepare the whatever you
sell, handing it over to the customer and receiving the payment. Your research makes you assume that the
service time is according to a negative exponential distribution. As the shop is popular and the customers
relaxed, all customers are patient and wait until served. After being served, all customers stay half an
hour in the shop on average.

a. In this ORIGINAL SITUATION, How long will customers on average stay in the shop
(from they enter the shop until they leave the shop again)? Show your calculations! (Max.
2 points)

M/M/1 system Ws plus time after purchase

Ws= 1/(-)

= 3600/312 = 11,538

= 3600/222 = 16,216

Ws= 1/(16,216-11,538)= 0,214 hr = 12,826 min.

Plus the half hour they stay in addition: 42,826 minutes

Minor deviations: no subtraction of points.

Wrong formula: 0 points

Not taking into account the 30 minutes stay: 1 point deduction.

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b. How many customers should your shop be able to accommodate? Provide an estimation and
make clear how you arrive at that number, but more importantly mention what the limitations
of your estimation are. (Max. 4 points)

Calculate Ls: for this MM1 situation using = 3600/312 = 11,538 and = 3600/222 = 16,216

a) Ls= /(-) = 3.4 persons. However, they stay for half an hour extra, so this formula will not
give you an adequate estimate. (zero points)

b) Better would be to use Littles law and to calculate WIP: average stay in the shop: 42,826
minutes, flow is so the WIP would be 42,826/60 (average stay in the shop in hours) x 11,538
customers per hour = 8,235 customers. (2 points)

c) However, the maximum number of customers cannot be calculated since these formulas
calculate averages. A maximum number can best be estimated by using simulation. (the limitation of
the estimation) (3 points)

Both b and c: 4 points

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A lecturer, who is not a great supporter of the products the shop is selling, nevertheless proposes to
increase the profitability of the shop by only selling pre-assembled products. In this Proposed Situation,
customers can then no longer compose their own products and can only choose from those readily
available. After doing some field research, you assume that it will then take exactly half a minute to serve
a customer. You also know that a number of customers only want products prepared to their own special
recipe and you hence assume that you will lose 25% of your customers. Assume that in all situations
every product sells for 8 and the cost of preparing the products is half of that (4). Also assume that an
employee costs 20 per hour. Cost of service is assumed to be covered by the wages of the employees,
but the loss of goodwill due to customers waiting in queue are estimated to be 0.30 per minute and per
customer and the cost of having to accommodate the customers (hiring sufficient space, heating, etc.)
about 0.10 per minute and per customer.

c. Which of the two options, "ORIGINAL", or "PROPOSED" is economically the most

healthy option? Support your answer with exact calculations of expected profits for
both situations. (Max. 4 points)

Change from MM1 to MD1 system. In this case advantageous because the Ws comes at a cost.
Furthermore, the service time is reduced, reducing Ws even more. The question remains
whether the reduced costs are not offset by the reduced revenues due to the 25% loss of
customers.

Original: MM1 = 11,538; = = 16,216; Wq-original= 0,152 hr = 9,126 min

Costs of waiting in queue : 11,538 x 9,126 x 0,30 /hr = 31,59 /hr

Costs of accommodating customers: average number in shop (Littles law)= 8,235 => 8,235 x
0,10 /min x 60 = 49,41 /hr

Cost of employee: 20 /hr

Total costs: 101,00 /hr; Gross profit: orig x (8-4) /hr = 65,25 => loss of 35,75 /hr

Proposed: 25% loss of customers: proposed = 0,75 x 11,538 = 8,6538/hr ; proposed =120/hr

MD1; Wq-proposed= very small (1,5 sec)

Cost of waiting in queue: nill

Costs of accommodating customers: average number in shop (Littles law: Ws (MD1) = 31 sec =>
average stay in shop: 30,5 minutes => WIP = 8,6538 x 0,5 = 4,3 customers => 0,10 /min x 4,3 x
60 = 25,8 /hr

Cost of Employee: 20 /hr

Total costs 45,8 /hr Gross profit: prop x (8-4) /hr = 8,6538 x 4 = 34,62 /hr => loss of 11,18 /hr

Proposed is the most healthy of the two although still not sustainable.

Small differences: no subtraction of points.

Number of persons present incorrect: minus two points 10

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Question 4 (Max. 10 points)

a. Make clear why 6 is widely being employed in the aircraft and automotive industry,
but not it why is not embraced -in general- in health care or education. Use both the
concepts of Control and Specification in your answer (Max. 5 points)

Awkward formulation of the question (in hindsight), therefore, the arguments why 6 is especially
used in the aircraft and automotive industry will be considered sufficient.

1. The importance of quality/safety (2 points) (specifications)

2. The possibility to deploy statistical process control
a. Large numbers of identical products or services (operations) allow for statistics and
allow to be established. This of course is a prerequisite for 6
2. To bring the control limits well within the specification limits one needs to now the process
variability. This can only be determined if sufficiently large numbers of identical
products/services are produced.
3. (Healthcare/education: products/services are insufficiently identical to determine process

In your own words, as long as the bearing of your arguments is the same: 5 points.

Specifications (point 1) only: two points, possibility to determine only: 3 points

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b. Consider the picture below. (Max. 5 points)

In what context is this picture usually used?

Explain in your own words what this picture attempts to make clear (Max. 5 points)

Quite simple:

1. Lean philosophy (1 point)

2. sufficient inventory will mask many problems/many problems can be
solved keeping excessive inventory . (2 points)
3. One should be lean (remove excessive inventory) to expose problem so
that one is forced to do something about those problems. (2 points)

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Observations about the exam. Please use this box in case you believe one or
more questions are flawed.

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