MG202: Operations Management

Faculty of Business & Economics

School of Management & Public Administration

MID-SEMESTER TEST
SEMESTER 2, 2019

PRINT MODE

DURATION: 2 HOURS

Reading Time: 10 minutes

Writing Time: 120 minutes

Student ID: ________________________________

First Name(s): ______________________________

Surname: __________________________________

Marks

/ 50
Section A: SHORT ANSWERS (15 Marks)

Answer any 3 of the following short answer questions.

1) Discuss the concept of competitive advantage and describe three ways businesses can achieve
this. Provide examples to support your answers. (5 marks)

2) Identify the three forecasting time horizons. State an approximate duration of each. (5 marks)

3) Discuss with examples three specific ways in which computer aided design (CAD) benefits the
design engineer. (5 marks)

4) Discuss five determinants of service quality. (5 marks)

5) List and briefly discuss 3 types of qualitative forecasting. (5 marks)

Section B: QUESTION 1 - PRODUCTIVITY (5 Marks)

The following table shows data on the average number of customers processed by several
bank service units each day. The hourly wage rate is $23, the overhead rate is 1.0 times labor
cost, and material cost is $5 per customer.

Unit Employee Customers Processed/Day

A 4 36

B 5 40

C 8 60

D 3 20

a) Compute multifactor productivity for each unit. Use an 8-hour day for multifactor
productivity. (5 marks)

QUESTION 2 - FORECASTING (15 marks)

National Marketing Co. sells bundles of dalo. Monthly sales for a 7-month period are as
follows:

Month Feb Mar Apr May Jun Jul Aug

Sales (100 units) 19 17 15 20 18 22 20

Forecast sales for September using each of the following approaches:

1) Naive Forecasting (1 mark)

2) Weighted Moving Averages using 0.6, 0.3 and 0.1 as weights (2 marks)

3) Exponential Smoothing with a smoothing constant of 0.2, assuming a March forecast of

1900 units (5 marks)

4) Linear Regression (6 marks)

5) Which method do you consider the least appropriate? Why? (1 mark)

CASE STUDY: OUTSOURCING OFFSHORE AT DARDEN (15 Marks)

Darden Restaurants, owner of popular brands such as Olive Garden and Red Lobster, serves
more than 300 million meals annually in over 1700 restaurants across the U.S. and Canada.
To achieve competitive advantage via its supply chain, Darden must achieve excellence at
each step. With purchases from 35 countries, and seafood products with a shelf life as short
as 4 days, this is a complex and challenging task.

Those 300 million meals annually mean 40 million pounds of shrimp and huge quantities of
tilapia, swordfish, and other fresh purchases. Fresh seafood is typically flown to the U.S. and
monitored each step of the way to ensure that 34°F is maintained. Darden's purchasing agents
travel the world to find competitive advantage in the supply chain.

Darden personnel from supply chain and development, quality assurance, and environmental
relations contribute to developing, evaluating, and checking suppliers. Darden also has seven
native-speaking representatives living on other continents to provide continuing support and
evaluation of suppliers. All suppliers must abide by Darden's food standards, which typically
exceed FDA and other industry standards. Darden expects continuous improvement in
durable relationships that increase quality and reduce cost.

Darden's aggressiveness and development of a sophisticated supply chain provides an

opportunity for outsourcing. Much food preparation is labor intensive and is often more
efficient when handled in bulk. This is particularly true where large volumes may justify
capital investment. For instance, Tyson and Iowa Beef prepare meats to Darden's
specifications much more economically than can individual restaurants. Similarly, Darden
has found that it can outsource both the cutting of salmon to the proper portion size and the
cracking/peeling of shrimp more cost-effectively offshore than in U.S. distribution centers or
individual restaurants.

Questions:

1) What should this restaurant look for in outsourcing? (3 marks)

2) What supply-chain issues are unique to a firm sourcing from 35 countries? (3 marks)

3) Examine how other firms or industries develop international supply chains as compared
to Darden. (3 marks)

4) Why does Darden outsource harvesting and preparation of much of its seafood? (3
marks)

5) What are some of the possible consequences of poor outsourcing? (3 marks)