Student No. ………………………….

s
BRIGHTON BUSINESS SCHOOL

MSc Logistics and Supply Chain Management

December 2015

Level M

OPM58: Operations Management for Logistics

Time allowed: 1 hour 30 minutes

Guidance Note:

Please write your answers in the space provided on the question paper. You may use additional
sheets or the graph paper provided to draw any graphs or diagrams.

This is intended as a short-answer examination. Bullet points, a few sentences, freehand

diagrams and summary-level calculations are acceptable, where appropriate. You are NOT
expected to write long essay-style answers.

Attachments:

 Operations Management for Logistics formula sheet

 ‘Normal’ distribution table

Graph paper and additional blank sheets are available on request. Please write your student
number at the top of any additional sheets you use.

Guidance Note

You must answer 8 questions. All questions carry equal marks.

Question 1

a) Identify the three main process types generally found within service operations.

- Professional service
- Service shop
- Mass service

b) Give two examples for each type of processes identified in part (a).

Students are expected to give two examples for each three types of processes.

c) When should each be used in relation to the first and second of Slack’s 4Vs?

- Professional service (high variety, low volume)

- Service shop (medium variety, medium volume)
- Mass service (low variety, high volume)

Question 2

a) What are the four different types of layouts used in operations?

- Fixed-position layout
- Process (functional) layout
- Cell layout
- Product (line) layout

b) Give an example of each type of layout.

Students are expected to give one example of each layout.

c) For each type of layout, what kind of manufacturing process should be applied?

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Question 3

a) What is the main difference between push and pull production systems.

Students are expected to identify the main difference between push and pull system. Push system is based on
forecasting, while pull system works based on customer orders.
In a push system, a schedule is prepared in advance for a series of workstations and each workstation “pushes”
the work they have completed to the next station. With the pull system, workers go back to previous stations
and take only those parts or materials they need and can process immediately.

b) What are the three advantages of small-lot sizes?

By producing small amounts at a time, processes can be physically moved closer together and transport
between stations can be simplified. Quality problems are easier to detect, and workers show less tendency to
let poor quality pass (as they might in a system that is producing huge amounts of an item anyway). Lower
inventory levels make processes more dependent on each other, revealing errors and bottlenecks that may
otherwise go undetected.

Question 4

a) What are the four different types of waste?

- Over-production
- Waiting time
- Transport
- Process
- Inventory
- Motion
- Defectives

b) What kinds of lean production elements can be applied to eliminate each of these four
wastes?

Students are expected to discuss about different elements of lean production including: flexible resources,
cellular layouts, pull system, Kanban, small lots, quick setups, quality at source, total productive
maintenance, and supplier network. Also they should explain how these elements eliminate different types
of wastes.

a) What are the four benefits of lean production?

- Reduced inventory
- Improved quality
- Lower costs
- Reduced space required
- Shorter lead time
- Increased productivity
- Better relations with suppliers
- Simplified scheduling and control activities

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 - Increased capacity
- Better use of human resources
- More product variety

Question 5

a) What are the five prevention costs of quality?

- Quality planning costs

- Product-design costs
- Process costs
- Training costs
- Information costs

b) Select a Logistics Service Provider (LSP) and discuss the three dimensions of service
quality on which a customer might evaluate it.

Students should identify dimensions of quality for a Logistics Service Provider (time and timeliness,
completeness, courtesy, consistency, accessibility, accuracy, and responsiveness).

Question 6

The Money Pit Mortgage Company is interested in monitoring the performance of the mortgage
process. Fifteen samples of five completed mortgage transactions each were taken during a period
when the process was believed to be in control. The times to complete the transactions were
measured. The means and ranges of the mortgage process transaction times, measured in days,
are as follows:

Sample 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Mean 17 14 8 17 12 13 15 16 13 14 16 9 11 9 12
Range 6 11 4 8 9 14 12 15 10 10 11 6 9 11 13

Subsequently, samples of size 5 were taken from the process every week for the next 10 weeks.
The times were measured and the following results obtained:

Sample 16 17 18 19 20 21 22 23 24 25
Mean 11 14 9 15 17 19 13 22 20 18
Range 7 11 6 4 12 14 11 10 8 6

a) Calculate the control limits for the Mean chart and the Range chart, using the original 15
samples.

The control chart values based on the initial 15 observations are:

R-Chart: R = (6 + 11 + …. 13)/15 = 9.933 days
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 Central line  R  9.933
D3 R  LCLR  0
D4 R  UCLR   2.115 9.933  21.0days
X -Chart:
Central line X = (17 + 14 + …. + 12)/15 = 13.066 days
LCLx  X  A2  R   13.066  0.577  9.933  7.33days

UCLx  X  A2  R   13.066  0.577  9.933  18.8days

The value of D3 , D4 , and A2 are obtained from Table 5.1 for n = 5. The resulting control charts are
shown with the initial 15 points. From the control charts, it is evident that the process is in control.

b) Using data in table 2 (samples 16 to 25), interpret whether the process is in control or out
of the control.

Plot of the 25 samples including the 10 additional samples, starting at sample 16. The process is out
of the control (based on X bar chart)

Question 7

AV City stocks and sells a particular brand of laptop. It costs the firm $625 each time it places an
order with the manufacturer for the laptops. The cost of holding one laptop in inventory for a year is
$130.The store manager estimates that total annual demand for the laptops will be 1500 units.
Orders are received within minutes after placement from a local warehouse maintained by the
manufacturer. The store policy is never to have stockouts of the laptops. The store is open 364 days.
Determine the following:

D  1500

Co  $625

Cc  $130

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 2Co D 2  625 1500 
a. Q    120.1
Cc 130

Co D CcQ
b. TC  
Q 2


 6251500   130 120.1  $15, 612.49
120.1 2

D 1500
c.   12.49 orders
Q 120.1

364
d.  29.14 days
12.49

Question 8

Your firm uses a continuous review system and operates 52 weeks per year. One of the Stock-
Keeping Units (SKUs) has the following characteristics:
Demand = 20000 units/year
Ordering cost = £40/order
Holding cost = £2/unit/year
Service level = 95 percent
Lead time = 2 weeks
Demand is normally distributed, with a standard deviation of weekly demand of 100 units.

a) Calculate the item’s EOQ. What is the average time, in weeks, between orders?

2 DS 2  2, 000  40 
EOQ    894.4 or 894 units
H 2

Time between orders (TBO) = Q/D = 894/20,000 = 0.0447 years = 2.32 weeks

b) Find the safety stock and reorder point that provide a 95 percent service level.

Weekly demand = 20,000/52 = 385 units

For a 95% cycle-service level, z = 1.65
Safety stock: z d L = (1.65)(100) 2 = 233.34, or 233 units
Now solve for R, as
R = d L + Safety stock = 385(2) + 233 = 1,003 units

c) For these policies, what are the annual costs of (i) holding the cycle inventory and (ii) placing
orders?
i. Annual holding cost of cycle inventory
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 Q 894
2 £894.00
H 
2 2
ii. Annual ordering cost
D 20,000
S (40)  £894.85
Q 894

Question 9

a) What are the four of the main improvement techniques (except cause-and-effect)?
- Scatter diagram
- Flow chart
- Pareto diagram
- Why-why analysis

b) What are the four benefits of excelling in process operation?

- Minimum price
- Quick delivery/fast throughput
- Dependable delivery/reliable operation
- Error-free products and services/ error-free processes
- Frequent new products, maximum choice/ability to change

c) Draw the cause-and-effect diagram for pizza delivery delay (specify the main causes and
sub-causes within the diagram).

Students are expected to draw the cause-and-effect diagram and show the main causes and
sub-causes of the effect (pizza delivery delay).

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Question 10

Complete the following Material Requirement Planning (MRP) matrix for item A:

Item: A Period
Lot Size: 50 LT : 2 1 2 3 4 5 6 7 8
Gross Requirements 10 15 25 75 60 85 45 60
Scheduled Receipts
Projected on Hand 50 40 25 0 25 15 30 35 25
Net Requirements 75 35 70 15 25
Planned Order Receipts 100 50 100 50 50
Planned Order Releases 100 50 100 50 50

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OPERATIONS MANAGEMENT FORMULA SHEET

Re-order level in a continuous review inventory management system

ROL = SS + (LT x D)

Safety stock (for a given service level policy) in a continuous review system
SS = Z LT

Economic order quantity

EOQ = 2 x Co x D
Ch

Control limits for sample means

UCL = X + A 2R
LCL = X - A 2R

Control Limits for sample ranges

UCL = D4R
LCL = D3R

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Table of Factors for Control Limits
n A2 D3 D4
2 1.880 0.000 3.267
3 1.023 0.000 2.575
4 0.729 0.000 2.282
5 0.577 0.000 2.115
6 0.483 0.000 2.004
7 0.419 0.076 1.924
8 0.373 0.136 1.864
9 0.337 0.184 1.816
10 0.308 0.223 1.777
12 0.266 0.284 1.716
14 0.235 0.329 1.671
16 0.212 0.364 1.636
18 0.194 0.392 1.608
20 0.180 0.414 1.586

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PROBABILITIES FOR THE NORMAL DISTRIBUTION

Probability

zσ

μ X

Normal
Derivative 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09
z
0.0 .5000 .4960 .4920 .4880 .4840 .4801 .4761 .4721 .4681 .4641
0.1 .4602 .4562 .4522 .4483 .4443 .4404 .4364 .4325 .4286 .4247
0.2 .4207 .4168 .4129 .4090 .4052 .4013 .3974 .3936 .3897 .3859
0.3 .3821 .3783 .3745 .3707 .3669 .3632 .3594 .3557 .3520 .3483
0.4 .3446 .3409 .3372 .3336 .3300 .3264 .3228 .3192 .3156 .3121
0.5 .3085 .3050 .3015 .2981 .2946 .2912 .2877 .2843 .2810 .2776
0.6 .2743 .2709 .2676 .2643 .2611 .2578 .2546 .2514 .2483 .2451
0.7 .2420 .2389 .2358 .2327 .2296 .2266 .2236 .2206 .2177 .2148
0.8 .2119 .2090 .2061 .2033 .2005 .1977 .1949 .1922 .1894 .1867
0.9 .1841 .1814 .1788 .1762 .1736 .1711 .1685 .1660 .1635 .1611

1.0 .1587 .1562 .1539 .1515 .1492 .1469 .1446 .1423 .1401 .1379
1.1 .1357 .1335 .1314 .1292 .1271 .1251 .1230 .1210 .1190 .1170
1.2 .1151 .1131 .1112 .1093 .1075 .1056 .1038 .1020 .1003 .0985
1.3 .0968 .0951 .0934 .0918 .0901 .0885 .0869 .0853 .0838 .0823
1.4 .0808 .0793 .0778 .0764 .0749 .0735 .0721 .0708 .0694 .0681
1.5 .0668 .0655 .0643 .0630 .0618 .0606 .0594 .0582 .0571 .0559
1.6 .0548 .0537 .0526 .0516 .0505 .0495 .0485 .0475 .0465 .0455
1.7 .0446 .0436 .0427 .0418 .0409 .0401 .0392 .0384 .0375 .0367
1.8 .0359 .0351 .0344 .0336 .0329 .0322 .0314 .0307 .0301 .0294
1.9 .0287 .0281 .0274 .0268 .0262 .0256 .0250 .0244 .0239 .0233

2.0 .0228 .0222 .0217 .0212 .0207 .0202 .0197 .0192 .0188 .0183
2.1 .0179 .0174 .0170 .0166 .0162 .0158 .0154 .0150 .0146 .0143
2.2 .0139 .0136 .0132 .0129 .0125 .0122 .0119 .0116 .0113 .0110
2.3 .0107 .0104 .0102 .0099 .0096 .0094 .0091 .0089 .0087 .0084
2.4 .0082 .0080 .0078 .0075 .0073 .0071 .0069 .0068 .0066 .0064
2.5 .0062 .0060 .0059 .0057 .0055 .0054 .0052 .0051 .0049 .0048
2.6 .0047 .0045 .0044 .0043 .0041 .0040 .0039 .0038 .0037 .0036
2.7 .0035 .0034 .0033 .0032 .0031 .0030 .0029 .0028 .0027 .0026
2.8 .0026 .0025 .0024 .0023 .0023 .0022 .0021 .0021 .0020 .0019
2.9 .0019 .0018 .0018 .0017 .0016 .0016 .0015 .0015 .0014 .0014
3.0 .0013 .0013 .0013 .0012 .0012 .0011 .0011 .0011 .0010 .0010

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