IGNOU MBA MS-91 Free Solved Assignment 2012

Course Code              :           MS - 91

Course Title               :           Advanced Strategic Management

Assignment Code      :           MS-91/SEM -I  /2012

Coverage                    :           All Blocks

1.      Distinguish between Prescriptive and Descriptive Schools of Thought on Corporate Strategy Formulation.

Solution:

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2.      What is the purpose of Kumar Mangalam Birla Committee Report on Corporate Governance? Also discuss its major recommendations.

Solution: The Purpose of Kumar Mangalam Birla Committee Report on Corporate Governance:

The primary objective of the committee was to view corporate governance from the perspective of the investors and shareholders and to prepare a ‘Code' to suit the Indian corporate environment. The committee had identified  the Shareholders, the Board of Directors  and  the Management  as the three key constituents of corporate governance and attempted to identify in respect of each of these constituents, their roles and responsibilities as also their rights in the context of good corporate governance.

The Committee therefore agreed that the fundamental objective of corporate governance is the "enhancement of shareholder value, keeping in view the interests of other stakeholder". This definition harmonises the need for a company to strike a balance at all times between the need to enhance shareholders’ wealth whilst not in any way being detrimental to the interests of the other stakeholders in the company. In the opinion of the Committee, the imperative for corporate governance lies not merely in drafting a code of corporate governance, but in practising it. Even now, some companies are following exemplary practices, without the existence of formal guidelines on this subject. Structures and rules are important because they provide a framework, which will encourage and enforce good governance; but alone, these cannot raise the standards of corporate governance. What counts is the way in which these are put to use. The Committee is thus of the firm view, that the best results would be achieved when the companies begin to treat the code not as a mere structure, but as a way of life.

It follows that the real onus of achieving the desired level of corporate governance, lies in the proactive initiatives taken by the companies themselves and not in the external measures like breadth and depth of a code or stringency of enforcement of norms. The extent of discipline, transparency and fairness, and the willingness shown by the companies themselves in implementing the Code, will be the crucial factor in achieving the desired confidence of shareholders and other stakeholders and fulfilling the goals of the company

The Recommendations of the Committee

Mandatory and non-mandatory recommendations

The committee divided the recommendations into two categories, namely, mandatory and non- mandatory. The recommendations which are absolutely essential for corporate governance can be defined with precision and which can be enforced through the amendment of the listing agreement could be classified as mandatory. Others, which are either desirable or which may require change of laws, may, for the time being, be classified as non-mandatory.

Mandatory Recommendations:

Applies To Listed Companies With Paid Up Capital Of Rs. 3 Crore And Above

Composition Of Board Of Directors – Optimum Combination Of Executive & Non-Executive Directors

Audit Committee – With 3 Independent Directors With One Having Financial And Accounting Knowledge.

Remuneration Committee

Board Procedures – Atleast 4 Meetings Of The Board In A Year With Maximum Gap Of 4 Months Between 2 Meetings. To Review Operational Plans, Capital Budgets, Quarterly Results, Minutes Of Committee's Meeting.Director Shall Not Be A Member Of More Than 10 Committee And Shall Not Act As Chairman Of More Than 5 Committees Across All Companies

Management Discussion And Analysis Report Covering Industry Structure, Opportunities, Threats, Risks, Outlook, Internal Control System

Information Sharing With Shareholders

Non-Mandatory Recommendations:

Role Of Chairman

Remuneration Committee Of Board

Shareholders' Right For Receiving Half Yearly Financial PerformancePostal Ballot Covering Critical Matters Like Alteration In Memorandum Etc

Sale Of Whole Or Substantial Part Of The Undertaking

Corporate Restructuring

Further Issue Of Capital

Venturing Into New Businesses

As per the committee, the recommendations should be made applicable to the listed companies, their directors, management, employees and professionals associated with such companies, in accordance with the time table proposed in the schedule given later in this section. Compliance with the code should be both in letter and spirit and should always be in a manner that gives precedence to substance over form. The ultimate responsibility for putting the recommendations into practice lies directly with the board of directors and the management of the company.

The recommendations will apply to all the listed private and public sector companies, in accordance with the schedule of implementation. As for listed entities, which are not companies, but body corporates (e.g. private and public sector banks, financial institutions, insurance companies etc.) incorporated under other statutes, the recommendations will apply to the extent that they do not violate their respective statutes, and guidelines or directives issued by the relevant regulatory authorities . The Committee recognizes that compliance with the recommendations would involve restructuring the existing boards of companies. It also recognizes that some companies, especially the smaller ones, may have difficulty in immediately complying with these conditions. The recommendations were implemented through Clause 49 of the Listing Agreements, in a phased manner by SEBI.

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3.      Explain any five strategies used by a firm in a stable industry environment. Elucidate it with examples from real world.

Solution: The “five forces model” for industry analysis (Porter, 1980) is now a standard tool used by both academics and practitioners when conducting strategic management studies. In the past decade, this competitive positioning approach has been augmented by the resource-based perspective, which has focused on the accumulation of valuable, knowledge-based assets by individual firms. An integrative synthesis of this work has recently been developed by Teece, Pisano and Shuen (1997) and Teece and Pisano (1998).  They have proposed a “dynamic capabilities” approach as the key to strategy development for the modern business firm.

            Such an approach focuses on the specific ways in which capabilities are renewed as a response to shifts in the environment relevant to the firm. This new perspective raises two important questions. First, does the standard five forces model adequately include the various actors in the firm's environment to which it must respond, given the complexities of modern business, especially the tendency toward globalization? Second, given the relevant external forces to be included in a strategic positioning analysis, do changes in specific external forces require specific types of shifts in the development and use of dynamic capabilities?

            In the next sections, a simple conceptual framework is developed that suggests an answer to the above two questions. The relevance of the framework is verified through the analysis of five high profile case studies of corporate strategic responses to environmental regulation, namely the cases of Du Pont, Laidlaw, Allied Signal, Honeywell, McDonald’s and Xerox. Environmental regulation demonstrates the necessity to extend the five forces model into at least a five forces model, in which government regulation is included. The five cases were selected as interesting and relevant examples of the need for a shift in firm-level strategy in response to changes arising from specific forces driving industry competition.  They also all bring an international dimension to the issue of corporate strategy and environmental regulation.

Previous researchers distinguish three main stages of industry growth: (1) growth, (2) maturity, and (3) decline. The business or competitive strategies that help firms to achieve profits are thought to differ under each of these stages.4 The findings of previous research on strategies adopted by large businesses under different growth conditions are summarized in table.

For Examples:

Anderson and Zeithaml, "Stage of the Product Life Cycle'; Hambrick, et al., "Strategic Attributes'; Hofer, "Toward a Contingency Theory'; and Porter, Competitive Strategy.

In growth industries, the overall competitive pressure is limited, and a firm has a comparatively broad range of choices among strategies. Many researchers imply that this is the most hospitable environment in which to operate and earn profits. The "learning curve' is a major tool for the large firm to use to gain competitive advantage; hence high market share is often helpful. One interesting result is that while resource efficiencies, product quality, market share, and high levels of future-oriented investments have commonly been employed as strategies in growth industries, they have had little impact on profit performance.

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4.      Describe the influence of ‘Strategy’ and ‘Support Mechanisms’ in promoting or hindering creativity and innovation.

Solution: coming soon

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5.      “The term philanthropy is generally understood as giving in the interest of the recipient.” Elaborate this statement with special reference to nature of Corporate Philanthropy.

Solution: Corporate philanthropy or corporate giving is the act of corporations donating some of their profits, or their resources, to nonprofit organizations. Corporate giving is often handled by the corporation, directly, or it may be done through a company foundation. Corporations most commonly donate cash, but they also donate the use of their facilities, property, services, or advertising support. They may also set up employee volunteer groups that then donate their time. Corporations give to all kinds of nonprofit groups, from education and the arts to human services and the environment.

Our companies are known for creating products that enrich people's lives. Through Sony Corporation of America and its operating companies - Sony Electronics Inc., Sony Pictures Entertainment Inc. and Sony Music Entertainment - we are also dedicated to improving people's lives. Our commitment extends to helping local communities, fostering better educational systems, funding research to cure devastating diseases, supporting the arts and culture, helping disadvantaged youth, protecting and improving the environment and actively encouraging employee volunteerism.

Our philanthropic efforts reflect the diverse interests of our key businesses and focus on several distinct areas: arts education; arts and culture; health and human services; civic and community outreach; education; the environment; and volunteerism. Each operating company has its own philanthropic priorities and unique resources, from product donations to recordings and screenings that benefit a multitude of causes. Sony Corporation of America is a strong supporter of arts and culture. Education and volunteerism are key components of Sony Electronics Inc.'s philanthropic efforts. Sony Pictures Entertainment is a major supporter of arts education and community involvement, with emphasis in Culver City, California, its world headquarters. Collectively, we have also been quick to provide assistance when large-scale disasters have struck. We've helped victims of major hurricanes, earthquakes, wildfires and the attack on the World Trade Center.  The spirit of philanthropy is deeply imbedded in the culture of Sony in America. We're proud of the dozens of programs and partnerships that have touched thousands of lives in all corners of the country and fill the pages of this brochure. Our 20,000 employees have responded positively to this spirit and have given generously of themselves. They've collected food for the hungry, built homes for the poor, cleaned polluted waterways, mentored the disadvantaged and helped in countless other ways that are detailed in the following pages.  Together with our employees, Sony in America is working to improve our communities and the world around us.

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6.      Write short notes on the following:

a)      Transnational Strategy

Solution: The firm seeks to combine the benefits of global-scale efficiencies with the benefits of local responsiveness. Interchange still occurs between the home base and foreign subsidiary and between foreign subsidiaries - a process known as global learning.

Advantages:	Core competencies exchangeable.  Experience and location economies.  Locally responsive.
Disadvantages:	Difficult to implement.  The term transnational may be used differently from person to person. There is no universally agreed definition.
Examples:	Shell, Unilever, Caterpillar.

No strategy of the four mentioned is likely to provide the perfect response to the many variables which confront an MNE. However, the firm must search for the best compromise. Turn now to your textbook and then take some time to work through the placement of each strategy in Figure 12.6 on page 428. An application of international strategy decisions for the global automotive industry is also included in the readings.

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b)     Personalized  Recognition

Solution: In order to personalize recognition as a leader, you need to know your employees.  The two biggest leadership barriers to this are limits to time and organizational skills.  In a 24/7 business environment with large spans of control, it is increasingly challenging for leaders to develop personal face time with their direct reports.  Organizational skills are therefore required to develop a system to keep track of significant information about each person.  The biggest cultural barrier is when an organization does not hardwire “managing up” as a key recognition principle.

Why is it important to do anyway?

Again, the goal of employee recognition is to show appreciation for an employee’s achievement and motivate employees to continue with good performance. When you personalize this recognition, it is a win-win for both the employee and you as their leader.  For the employee, when the recognition is personalized it is more specific to the actual event or performance occurrence and therefore more apt to be repeated.  For the leader, you earn credibility.  Personalized recognition demonstrates that you have taken the time to know the employee and that you pay attention to their work. 

How can you do it?

Round with your employees. You must have a system in place for you to get to know your employees.  Most leaders participate in “operational” rounding every day and spend a great deal of time troubleshooting problems.  This is not the same as rounding with your employees.  Develop a system by which you “check-in” regularly with your employees.  Learn what’s going on with them personally and professionally.  Ascertain any “nuggets” of information that will assist you in personalizing recognition.

Encourage “managed up” information about performance.  You cannot be in all places at once, so you need to rely on others to share with you when employees demonstrate excellent performance.  Ask employees about excellence demonstrated by their coworkers; ask your assistant managers or supervisors to send you specific information about employees performing excellence.  When you recognize your employee, reference the co-worker and/or manager you received the information from.  Another win-win.

Write personal thank you notes to the employees’ homes. Probably the most important “to-do” of personalized recognition is to translate the above information into a handwritten, personalized thank you note.  In today’s world of tweets, texts, and email a handwritten thank you note is a treasure.  Be as specific about the excellent behavior observed as possible, and thank them for making a difference in your organization.  Send the note to their home.  This “manages up” the employee to their family.  You will be amazed at how powerful and memorable your kind words of recognition will be.

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c)      Corporate Citizenship

Solution: Corporate citizenship is a term used to describe a company's role in, or responsibilities towards society. For this reason it is sometimes used interchangeably with corporate social responsibility, and in fact many companies including Microsoft, IBM and Novartis have used it in this way to describe their social initiatives. However, many also take it to mean that corporations should be regarded as citizens within a territory - i.e. that corporations have citizenship of some sort. This is usually based on the principle of corporate personhood, in that in certain legal jurisdictions, such as the United States, companies are afforded some of the same legal rights as individuals. Therefore, if corporations are 'artificial persons' under the law (e.g. they own their own assets, they can sue and be sued etc), then they can also claim some of the entitlements, privileges and protections of citizenship such as rights to free speech and political participation. Although this debate remains very active (see legal controversies below), a more recent approach to corporate citizenship has also stressed the political role of corporations in protecting or inhibiting the citizenship rights of individuals (such as by taking over previously governmental roles and functions)b or direct political activity such as lobbying and party financing

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IGNOU MBA MS – 53 Solved Assignment 2012

Course Code              :           MS - 53

Course Title               :           Production/Operations Management 

Assignment Code      :           MS-53/SEM - 1/2012

Coverage                    :           All Blocks

Note : Answer all the questions and submit this assignment on or before April 30, 2012, to the coordinator of your study center.

Q1.Discuss GT, FMS and OPT and their importance for improving the performance of production system.

Solution: GT importance for improving the performance of production system.FMS

 Group Technology (GT) based production system should form an important strategy for developing countries like India presently characterised by poor performance and declining profitability of a number of public sector enterprises. If workers as well as managers have no sense of belonging to a social unit and adopt an attitude of confrontation with each other and the capacity utilisation of these enterprises is unsatisfactory, these are to be seen in the light of their working in systems which are most inappropriate and inefficient. Group Technology represents a major breakthrough in the economic management through a more efficient utilisation of the country's available capacity, resources, capital, services and production facilities. The hope to achieve a higher growth rate lies in this vital system of production particularly for the developing nations which cannot afford the capital intensive machining centres. The paper gives a brief account of Group Technology applications in India and highlights the potential beenfits of its introduction in a multiproduct engineering industry.

FMS importance for improving the performance of production system.

The flexible automation is applicable to a variety of manufacturing operations. According to Yang, et al (2002), FMS technology is most widely applied in machining operations. FMS technology combines the capabilities of the transfer lines for high volume low variety work on the one hand and stands alone CNC machines for mid to low volume high variety production on the other. 

Following are the derived benefits of FMS

 Reduction of inventories

 Reduction of lead times

 Improved machine utilization

 Reduction of labor times

 Quick and uncompleted reaction to engineering and design changes

 Increased management control over the entire manufacturing process.

 Reduced equipment cost

 Reduced floor space

 High product quality

 Financial benefits

OPT importance for improving the performance of production system.

 OPT's  is to simultaneously raise throughput while reducing inventory and operating costs, and achieve a smooth, continuous flow of work in process. OPT build a production system capable of producing 27 million backlight units per month by the end of the present fiscal year. Going forward, the aim is to increase the monthly capacity to 55 million units by the end of fiscal 2012. Once accomplished, this system will enable OPT to establish a leading position in its industry. Based on this well-established position, OPT will continue to respond to robust market demand, promoting growth and further expanding its business.

The  benefits claimed for OPT are that it will  schedule finite resources in order to  achieve maximum factory effectiveness. 

The scheduling system:

1.Addresses the key problem of bottlenecks. 

2.Improves profitability by simultaneously increasing throughput. 

3.Reduces inventory and operating expenses.

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Q2.How does a quantitative forecasting differ from a qualitative forecasting? How do we measure the forecasting error?

Solution: Quantitative forecasting methods are used when historical data on variables of interest are available—these methods are based on an analysis of historical data concerning the time series of the specific variable of interest and possibly other related time series. There are two major categories of quantitative forecasting methods. The first type uses the past trend of a particular variable to base the future forecast of the variable. As this category of forecasting methods simply uses time series on past data of the variable that is being forecasted, these techniques are called time series methods.The second category of quantitative forecasting techniques also uses historical data. But in forecasting future values of a variable, the forecaster examines the cause-and-effect relationships of the variable with other relevant variables such as the level of consumer confidence, changes in consumers' disposable incomes, the interest rate at which consumers can finance their spending through borrowing, and the state of the economy represented by such variables as the unemployment rate. Thus, this category of forecasting techniques uses past time series on many relevant variables to produce the forecast for the variable of interest. Forecasting techniques falling under this category are called causal methods, as the basis of such forecasting is the cause-and-effect relationship between the variable forecasted and other time series selected to help in generating the forecasts.

Qualitative forecasting techniques generally employ the judgment of experts in the appropriate field to generate forecasts. A key advantage of these procedures is that they can be applied in situations where historical data are simply not available. Moreover, even when historical data are available, significant changes in environmental conditions affecting the relevant time series may make the use of past data irrelevant and questionable in forecasting future values of the time series. Consider, for example, that historical data on gasoline sales are available. If the government then implemented a gasoline rationing program, changing the way gasoline is sold, one would have to question the validity of a gasoline sales forecast based on the past data. Qualitative forecasting methods offer a way to generate forecasts in such cases. Three important qualitative forecasting methods are: the Delphi technique, scenario writing, and the subject approach.

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Q3.Discuss the relationship exists between Layout decisions, capacity decision and scheduling.

Solution: Layout decisions refer to studying various options in term of plant and machinery layout that enables smooth flow materials for smooth production.

Capacity decisions Deals with the issues pertaining to planning the capacity for the plant that enables cost competitive production even with certain degree of fluctuations in the required volumes. Capacity planning Capacity is the measure of ability to produce goods and services or it may be called as rate of output. Its seen that full capacity is never used due to certain constraints e.g. production the different constraints can be input, market demand, government.

Scheduling Organizing Work study Also known as time and motion study that aims at improving the cycle time required for producing a product.Scheduling of activities It simply means sequencing of different activities according to these importance and resources which are available.

HRM It start for recruitment, selection of employees and see that various task are being performed in the best way. Statistics and mathematics The data is collected, analyzed and interpreted as per our requirement. And its later on used to solve the problem in best possible manner. Decision area of production and operation management On the basis of function on the basis of level Technology selection and allocation strategic decisions Capacity management tactical decisions Scheduling operational decisions System maintenance On the basis of function Technology selection and management The very first decision which has to be taken in production and operation management is regarding the type of technology because in this hi-tech world it keeps on changing everyday and decisions regarding how the management has to perform its functions are taken. Capacity management The decisions has to be taken regarding the capacity as full capacity is never being used due to certain constraints and because of it they have to decide maximum capacity which can be used and how it can be managed. Scheduling or time allocation Here, as we know that a proper sequence is followed so time is divided among these activities. Time is allocated so that no activity which could be completed in les time is taking excessively more time. System maintenance Its concerned with controlling aspect. The overall maintenance of complete system is also important because any fault in one subsystem can cause a great problem in the overall result. On the basis of level Strategic decision These decision are taken at top level. Alternative manufacturing approaches and alternative approaches to automation are used. Example product selection and design, facility design, process selection and planning, capacity planning, facilities layout and material handling. Tactical decision Decision which are taken by middle level. To cope with the decisions level and also relating to factors which are out of control how to control and manage them. Example summary reports which compare overall planned or standard performance for such classification as cost per unit and labour used. Operational decisions Reports comparing actual performance to production schedule and highlighting areas where bottlenecks occur. Example production planning, production control, inventory control, method study, cost reduction control and quality control. Such decisions are taken by bottom level.

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Q4.Compare and contrast PUSH type of production system with PULL type of production system and justify which one is better.

Solution: A conservation agricultural approach known as `Push-Pull' technology has been developed for integrated management of stemborers, striga weed and soil fertility. Push-pull was developed by a scientific team led by Prof. Zeyaur Khan at the International Centre of Insect Physiology and Ecology (icipe), Kenya in collaboration with Rothamsted Research, in the United Kingdom and national partners. The technology is appropriate and economical to the resource-poor smallholder farmers in the region as it is based on locally available plants, not expensive external inputs, and fits well with traditional mixed cropping systems in Africa. To date it has been adopted by over 46,000 smallholder farmers in East Africa where maize yields have increased from about 1 t/ha to 3.5 t/ha, achieved with minimal inputs.

The pull

The approach relies on a combination of companion crops to be planted around and among maize or sorghum. Both domestic and wild grasses can help to protect the crops by attracting and trapping the stemborers. The grasses are planted in the border around the maize and sorghum fields where invading adult moths become attracted to chemicals emitted by the grasses themselves. Instead of landing on the maize or sorghum plants, the insects head for what appears to be a tastier meal. These grasses provide the "pull" in the "push–pull" strategy. They also serve as a haven for the borers' natural enemies. Good trap crops include well-known grasses such as Napier grass (Pennisetum purpureum) and Sudan grass (Sorghum vulgare sudanense). Napier grass has a particularly effective way of defending itself against the pests: once attacked by a borer larva, it secrets a sticky substance which physically traps the pest and limits its damage.

The push

The "push" in the intercropping scheme is provided by the plants that emit chemicals (kairomones) which repel stemborer moths and drive them away from the main crop (maize or sorghum). The best candidates discovered so far with the repellent properties are members of leguminous genus Desmodium spp. Desmodium is planted in between the rows of maize or sorghum. Being a low-growing plant it does not interfere with the crops' growth and, furthermore, has the advantage of maintaining soil stability, improving soil fertility through enhanced soil organic matter content and nitrogen-fixation. It also serves as a highly nutritious animal feed and effectively suppresses striga weeds. Another plant showing good repellent properties is molasses grass (Melinis minutiflora), a nutritious animal feed with tick-repelling and stemborer larval parasitoid attractive properties.

PUSH type of production system is better as it has advantage of maintaining soil stability, improving soil fertility through enhanced soil organic matter content and nitrogen-fixation

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Q5.Explain the role of Master Production Schedule (MPS) in the context of overall planning and scheduling of manufacturing.

Solution: The MPS (Master Production Schedule) is the schedule program aimed at defining precisely the required quantity per period for each finished product to sell. It is the main part of the manufacturing production plan to make the supply chain work.

The bucket is usually the week and the time horizon up to 3-6 months or a least twice the longest product leadtime.The aggregate master production schedule (MPS) at product level should match with the S&OP defined at product family level and the deviation should be under 3-5% maximum to be consistent accross the supply chain.The master production schedule (MPS) is the reference for the customer service that needs to satisfy its customers, and also for the manufacturing that should plan accordingly taking into account the constraints from the entire supply chain.The Master production schedule (MPS) is established from firm customer orders, Sales forecasts and finished good stock levels and is aimed at:

Anticipate the customer demand per product (forecast)

Explode S&OP families into part numbers for each period

Input quantity to produce and deadlines for each product

Follow current Sales versus forecasts

Insure the required customer service level while maintaining a low stock level

Inform the customer service on the available-to-promise (ATP) quantity for a given product

MPS levels

According to the bill of material, the master production schedule (MPS) could be at different level. The idea is to define the MPS level where there are fewer components:

Low finished products variety but lots of components: MPS at finished product level

High finished products variety but few components: MPS at component level

But there can be a finished goods variety due to intensive customer personalization or customization, but a fewer components to assemble and high raw material variety.

In this case we have multiple MPS levels:

Finished goods MPS

Planned BOM with probability by components (or component types) in order to forecast the sub-assembly items to launch per period

Planned BOM

Percentage or ratios are used to plan for components on a make-to-stock mode. Here we see that the finished good sales forecasts will be at 80% with option B1 and at 60% with module M2 but in all cases the component A is always required.

Available-To-Promise (ATP)

The ATP represents the products manufactured on stock and available for customer orders. This encompasses all what can be sold without modifying the MPS and allow quick responses by the supply chain organisation.

The available to promise (ATP) is a tool for the customer service to accept or not an order and to give a firm promise to the customer.

MPS time horizon

As stated before the minimum time horizon in the master production schedule (MPS) is twice the manufacturing leadtime in order to be able to plan. In most cases, planning is done for a full quarter.

But this horizon is split into 2 areas: firm and planned zone.

Firm zone

The firm zone corresponds to firm customer orders, usually not negotiable or modifiable. Only the manufacturing manager is allowed to accept or not any change.

We also called it the frozen horizon where all orders are frozen, in term of start date or quantity.The goal of this firm horizon is to prevent any bullwhip effect or chaotic variability that will disorganize the production lines and lower its efficiency.

The MRP-2 states that the firm horizon should be equal to twice the longest manufacturing leadtime, as when we’re getting close to the manufacturing leadtime, any change is critical since it screwed up all shop floor scheduling.

Forecast zone

Over the frozen horizon, the orders can still be modified, or at least are negotiable. Change of customer orders is also still possible (options or customization), but subject also to manufacturing manager.

MPS Example

Let’s build an MPS for 8 weeks, fed with forecasts and firm orders.

Batch size = 50 units

Manufacturing Leadtime = 1 period

Safety Stock = 20 units

The first 2 weeks is the frozen horizon.

Let’s do it:

In Firm horizon:

-    Inventory and ATP are calculated from sales orders only

-    Inventory[P] = Inventory[P-1] + MPS_due_date[P] – sales_orders[P]

-    The ATP is calculated between 2 consecutive MPS_due_date  not null, intial value is equal to the initial inventory one

In Forecast horizon:

-    Inventory is calculated from max(sales_orders,forecasts) in order to take into account the forecasts

-    Inventory[P] = Inventory[P-1] + MPS_due_date[P] – Max(sales_orders[P];forecast[P])

-    The ATP is calculated from sales orders only! (otherwise no ATP concept)

-    The ATP is calculated between 2 consecutive MPS_due_date not null

ATP[next MPS>0] = ATP[last_value] + Sum(MPS_due_date)- Sum(sales_orders)

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Q6.Explain the six big losses in maintenance. Suggest the methods to reduce/eliminate these losses.

Solution: Now that we know what the Six Big Losses are and some of the events that contribute to these losses, we can focus on ways to monitor and correct them. Categorizing data makes loss analysis much easier, and a key goal should be fast and efficient data collection, with data put to use throughout the day and in real-time.

Breakdowns

Eliminating unplanned Down Time is critical to improving OEE. Other OEE Factors cannot be addressed if the process is down. It is not only important to know how much Down Time your process is experiencing (and when) but also to be able to attribute the lost time to the specific source or reason for the loss (tabulated through Reason Codes). With Down Time and Reason Code data tabulated, Root Cause Analysis is applied starting with the most severe loss categories.

Setup and Adjustments

Setup and Adjustment time is generally measured as the time between the last good part produced before Setup to the first consistent good parts produced after Setup. This often includes substantial adjustment and/or warm-up time in order to consistently produce parts that meet quality standards.Tracking Setup Time is critical to reducing this loss, together with an active program to reduce this time (such as an SMED - Single Minute Exchange of Dies program).Many companies use creative methods of reducing Setup Time including assembling changeover carts with all tools and supplies necessary for the changeover in one place, pinned or marked settings so that coarse adjustments are no longer necessary, and use of prefabricated setup gauges.

Small Stops and Reduced Speed

Small Stops and Reduced Speed are the most difficult of the Six Big Losses to monitor and record. Cycle Time Analysis should be utilized to pinpoint these loss types. In most processes recording data for Cycle Time Analysis needs to be automated since cycles are quick and repetitive events that do not leave adequate time for manual data-logging.By comparing all completed cycles to the Ideal Cycle Time and filtering the data through a Small Stop Threshold and Reduced Speed Threshold the errant cycles can be automatically categorized for analysis. The reason for analyzing Small Stops separately from Reduced Speed is that the root causes are typically very different, as can be seen from the Event Examples in the previous table.

Startup Rejects and Production Rejects

Startup Rejects and Production Rejects are differentiated, since often the root causes are different between startup and steady-state production. Parts that require rework of any kind should be considered rejects. Tracking when rejects occur during a shift and/or job run can help pinpoint potential causes, and in many cases patterns will be discovered.

The Methods to Eliminate These Losses.

First, identify all components that are candidates for proactive maintenance:

Identify and document all components that undergo wear (these should have been established as inspection points in Step Two). Consider replacing wear components with low-wear or no-wear versions.

Identify and document all components that are known to regularly fail.

Consider utilizing thermography and/or vibration analysis to provide additional insights as to equipment stress points.

Next, establish initial proactive maintenance intervals:

For wear components, establish the current wear level and a baseline replacement interval (in some cases replacement may be triggered early by an Autonomous Maintenance inspection as established in Step Two).

For failure-prone components, establish a baseline (predicted) failure interval.

Create a baseline Planned Maintenance Schedule that schedules proactive replacement of all wear and failure-prone components. Consider using “Run Time” rather than “Calendar Time” as the interval time base. Create a standard process for generating Work Orders based on the Planned Maintenance Schedule.

Next, create a feedback system for optimizing the maintenance intervals:

Create a Component Log sheet for each wear and failure-prone component. Record every instance of replacement, along with information about the component condition at the time of replacement (e.g. wear amount, “component failed”, “no observable issues”, etc.).

Perform a monthly Planned Maintenance audit: a) verify that the Planned Maintenance Schedule is being followed, b) verify that the Component Log sheets are being maintained, and c) review all new entries in the Component Log and adjust maintenance intervals where appropriate. Keep audits positive and motivational (treat them as a training exercise).

Anytime there is an unscheduled component replacement, consider adjusting the maintenance interval. If the component is not on the Planned Maintenance Schedule, consider adding it.

Consider plotting data over time from thermography and vibration analysis to expose emerging problems and issues.

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IGNOU MBA MS-43 Solved Assignment 2012

Course Code              :           MS - 43

Course Title               :           Management Control Systems 

Assignment Code      :           MS-43/TMA/SEM - I /2012

Coverage                    :           All Blocks

Note : Answer all the questions and submit this assignment on or before  April 30, 2012, to

     the coordinator of your study center.

1.      What are the characteristics of a project organization? Explain how these characteristics affect the control system design of a project. 

Solution: The choice of project organizational structure depends on the characteristics of the project, and external constraints, such as existing organizational policy. It is, therefore, difficult to be prescriptive about such structures, because what is effective (or even feasible) will depend very much on circumstance. The issues to be addressed are canvassed in Guidelines: Project Plan, which also present a default project structure that may be adapted to a project's particular needs. The default structure also suggests a mapping of (Rational Unified Process) roles to the organization's positions. The shape and size of the project organization will vary across phases, and the Software Development Plan, a living document, will be updated to reflect these changes.

The mission of the project organizations is to generate results in response to specific client demands by structuring projects around temporary assemblies of in-house specialist staff and executing business within a fixed time limit. The entire company can also be thought of as an assembly of project organizations where the routine business that goes on at a consulting firm is almost non-existent. A great deal of research has accumulated around project management and project organizations. A key point is that project-based organizations possess all internal and external resources, as well as individual functions such as development, production and sales, and established organizations are structured to execute business as individual projects. Another point is that in order for large companies to implement the most important themes, such as projects to enhance management efficiency or develop new products, an organizational structure should exist  to build the project after members of temporarily existing organizations have ended their participation, and to

have the project carried out by specialist members (see Midler, 1995; Keegan and Turner, 2002). A third characteristic is that a matrix form exists for members to participate in projects in addition to following their primary business in existing organizations (see Galbraith, 1969). The

fourth characteristic is that there are cases where members of existing organizations form informal project networks within and outside the

company. As you can see, the term “project-based organizations” has several meanings.

A project is a temporary organization to which resources are assigned to undertake a unique, novel and transient endeavor that involves managing the inherent uncertainty and need for integration in order to deliver beneficial objectives of change (Turner and Miller, 2003, p. 7).

Project organizations refer to a variety of organizational forms that involve the creation of temporary systems for the performance of project. Clearly, a project organization incorporates the meaning of an organizational structure specially formed for a temporary period to enable a project organization execute a specific task. The project companies of Japanese companies are not simply playing the role of organizations that execute temporary functions, but are also positioned as specialist, official organizations that execute specific function.

Project organization characteristics affect the control system design of a project in the following ways :

 Project management control systems are the modern tools for managing project scope, cost and schedule. They are based on carefully defined process and document controls, metrics, performance indicators and forecasting with capability to reveal trends toward cost overrun and/or schedule slippage. Identifying those trends early makes them more amenable to successful management.

Traditionally, management systems have utilized data about planned and actual costs. Modern systems further incorporate, in their analysis of projects and tasks, the monetary value earned for actual work accomplished. They analyze the Planned Value of work scheduled (PV), Actual Cost of work performed (AC), and Earned Value of work performed (EV). Forecasting includes cumulative and incremental trends in key indicators such as the Estimate at Completion (AC + Estimate to Complete), Cost Variance (EV – AC), Schedule Variance (EV – PV), Cost Performance Index (EV/AC), and Schedule Performance Index (EV/PV). Earned Value Management (EVM) is a systematic approach to the integration and measurement of cost, schedule and scope accomplishments on a project or task, providing managers the ability to examine cost data in the context of detailed schedule information and critical program and technical milestones. EVM systems are in use at CERN and by leading project delivery contractors in commercial industry and government service.

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2.      Explain the concept of Responsibility Accounting and describe its benefits.

Solution: Responsibility accounting is the system for collecting and reporting revenue and cost information by areas of responsibility. It operates on the premise that managers should be held responsible for their performance, the performance of their subordinates, and all activities within their responsibility center. Responsibility accounting, also called profitability accounting and activity accounting, has the following advantages:

1. It facilitates delegation of decision making.

2. It helps management promote the concept of management by objective. In management by objective, managers agree on a set of goals. The manager`s performance is then evaluated based on his or her attainment of these goals.

3. It provides a guide to the evaluation of performance and helps to establish standards of performance which are then used for comparison purposes.

4. It permits effective use of the concept of management by exception, which means that the manager`s attention is concentrated on the important deviations from standards and budgets.

For an effective responsibility accounting system, the following three basic conditions are necessary:

(a) The organization structure must be well defined. Management responsibility and authority must go hand in hand at all levels and must be clearly established and understood.

(b) Standards of performance in revenues, costs, and investments must be properly determined and well defined.

(c) The responsibility accounting reports (or performance reports) should include only items that are controllable by the manager of the responsibility center. Also, they should highlight items calling for managerial attention.

A well-designed responsibility accounting system establishes responsibility centers within the organization. A responsibility center is defined as a unit in the organization which has control over costs, revenues, and/or investment funds. Responsibility centers can be one of the following types:

Cost center. A cost center is the unit within the organization which is responsible only for costs. Examples include production and maintenance departments of a manufacturing company. Variance analysis based on standard costs and flexible budgets would be a typical performance measure of a cost center.

Profit center. A profit center is the unit which is held responsible for the revenues earned and costs incurred in that center. Examples might include a sales office of a publishing company, and appliance department in a retail store, and an auto repair center in a department store. The contribution approach to cost allocation is widely used to measure the performance of a profit center. This topic is covered in Chapter 9 (Control of Profit Centers).

Investment center. An investment center is the unit within the organization which is held responsible for the costs, revenues, and related investments made in that center. The corporate headquarters or division in a large decentralized organization would be an example of an investment center.

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3.      What do you understand by transfer pricing? Explain the criteria used for establishing transfer price.

Solution: Transfer pricing refers to the setting, analysis, documentation, and adjustment of charges made between related parties for goods, services, or use of property (including intangible property). Transfer prices among components of an enterprise may be used to reflect allocation of resources among such components, or for other purposes. OECD Transfer Pricing Guidelines state, “Transfer prices are significant for both taxpayers and tax administrations because they determine in large part the income and expenses, and therefore taxable profits, of associated enterprises in different tax jurisdictions.”

Over 60 governments have adopted transfer pricing rules. Transfer pricing rules in most countries are based on what is referred to as the “arm’s length principle” – that is to establish transfer prices based on analysis of pricing in comparable transactions between two or more unrelated parties dealing at arm’s length. The OECD has published guidelines based on the arm's length principle, which are followed, in whole or in part, by many of its member countries in adopting rules. The United States and Canadian rules are similar in many respects to the OECD guidelines, with certain points of material difference. A few countries, such as Brazil and Kazakhstan, follow rules that are materially different overall.

The rules of nearly all countries permit related parties to set prices in any manner, but permit the tax authorities to adjust those prices where the prices charged are outside an arm's length range. Rules are generally provided for determining what constitutes such arm's length prices, and how any analysis should proceed. Prices actually charged are compared to prices or measures of profitability for unrelated transactions and parties. The rules generally require that market level, functions, risks, and terms of sale of unrelated party transactions or activities be reasonably comparable to such items with respect to the related party transactions or profitability being tested.

Most systems allow use of multiple methods, where appropriate and supported by reliable data, to test related party prices. Among the commonly used methods are comparable uncontrolled prices, cost plus, resale price or markup, and profitability based methods. Many systems differentiate methods of testing goods from those for services or use of property due to inherent differences in business aspects of such broad types of transactions. Some systems provide mechanisms for sharing or allocation of costs of acquiring assets (including intangible assets) among related parties in a manner designed to reduce tax controversy.

Most tax treaties and many tax systems provide mechanisms for resolving disputes among taxpayers and governments in a manner designed to reduce the potential for double taxation. Many systems also permit advance agreement between taxpayers and one or more governments regarding mechanisms for setting related party prices.

Many systems impose penalties where the tax authority has adjusted related party prices. Some tax systems provide that taxpayers may avoid such penalties by preparing documentation in advance regarding prices charged between the taxpayer and related parties. Some systems require that such documentation be prepared in advance in all cases.

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4.      What is performance measurement? List the various types of metrics used for performance measurement and identify the purpose for which they are being used.

Solution: Performance measurement is a process for collecting and reporting information regarding the performance of an individual, group or organizations. It can involve looking at process/strategies in place, as well as whether outcomes are in line with what was intended or should have been achieved.

1. To Evaluate how well a public agency is performing. To evaluate performance, managers need to determine what an agency is supposed to accomplish. (Kravchuk & Schack 1996). To formulate a clear, coherent mission, strategy, and objective. Then based on this information choose how you will measure those activities

2. To Control How can managers ensure their subordinates are doing the right thing.

Today managers do not control their workforce mechanically (measurement of time-and-motion for control as during Taylor) However managers still use measures to control, while allowing some space for freedom in the workforce. (Robert Kaplan & David Norton) Business has control bias. Because traditional measurement system sprung from finance function, the system has a control bias.

Organisations create measurement systems that specify particular actions they want execute- for branch employess to take a particular ways to execute what they want- branch to spend money. Then they want to measure to see whether the employees have in fact taken those actions. Need to measure input by individual into organisation and process. Officials need to measure behavior of individuals then compare this performance with requirements to check who has and has not complied.

Often such requirements are described only as guidelines. Do not be fooled. These guidelines are really requirements and those requirements are designed to control. The measurement of compliance with these requirements is the mechanism of control.

3. To Budget Budgets are crude tools in improving performance. Poor performance not always may change after applying budgets cuts as a disciplinary action. Sometimes budgets increase could be the answer to improving performance. Like purchasing better technology because the current ones are outdated and harm operational processes. So for decisions highly influenced by circumstance, you need measures to better understand the situation.

4. To Motivate Giving people significant goals to achieve and then use performance measures- including interim targets- to focus people’s thinking and work, and to provide periodic sense of accomplishment.

Performance targets may also encourage creativity in developing better ways to achieve the goal (Behn) Thus measure to motivate improvements may also motivate learning.

5. To Celebrate Organisations need to commemorate their accomplishments- such ritual tie their people together, give them a sense of their individual and collective relevance. More over, by achieving specific goals, people gain sense of personal accomplishment and selfworth (Locke & Latham 1984).

6. To Promote How can public managers convince political superiors, legislators, stakeholders, journalists, and citizens that their agency is doing a good job.

(National Academy of Public Administration’s center for improving government performance- NAPA 1999) performance measures can be used to: validate success; justifing additional resources; earn customers, stakeholder, and staff loyalty by showing results; and win recognition inside and outside the organisation.

Indirectly promote, competence and value of goverement in general.

7. To Learn Learning is involved with some process, of analysis information provided from evaluating corporate performance (identifying what works and what does not). By analysing that information, corporation able to learn resons behind its poor or good performance.

However if there is too many performance measures, managers might not be able to learn anything.

8. To Improve What exactly should who- do differently to improve performance? In order for corporation to measure what it wants to improve it first need to identify what it will improve and develop processes to accomplish that.

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5.      Explain in detail the risks faced by the banks and how management control system can contain these risks.

Solution: Bank Deposits generally have a much shorter contractual maturity than loans and liquidity management needs to provide a cushion to cover anticipated deposit withdrawals. Liquidity is the ability to efficiently accommodate deposit as also reduction in liabilities and to fund the loan growth and possible funding of the off-balance sheet claims. The cash flows are placed in different time buckets based on future likely behaviour of assets, liabilities and off-balance sheet items. Liquidity risk consists of Funding Risk, Time Risk & Call Risk.

Funding Risk: It is the need to replace net out flows due to unanticipated withdrawal/nonrenewal of deposit

Time risk : It is the need to compensate for nonreceipt of expected inflows of funds, i.e. performing assets turning into nonperforming assets.

Call risk : It happens on account of crystalisation of contingent liabilities and inability to undertake profitable business opportunities when desired.

The Asset Liability Management (ALM) is a part of the overall risk management system in the banks. It implies examination of all the assets and liabilities simultaneously on a continuous basis with a view to ensuring a proper balance between funds mobilization and their deployment with respect to their a) maturity profiles, b) cost, c) yield, d) risk exposure, etc. It includes product pricing for deposits as well as advances, and the desired maturity profile of assets and liabilities.

b) Interest Rate Risk

Interest Rate Risk is the potential negative impact on

the Net Interest Income and it refers to the vulnerability of an institution’s financial condition to the movement in interest rates. Changes in interest rate affect earnings, value of assets, liability off-balance sheet items and cash flow. Hence, the objective of interest rate risk management is to maintain earnings, improve the capability, ability to absorb potential loss and to ensue the adequacy of the compensation received for the risk taken and effect risk return trade-off. Management of interest rate risk aims at capturing the risks arising from the maturity and re-pricing mismatches and is measured both from

the earnings and economic value perspective. Earnings perspective involves analyzing the impact of changes in interest rates on accrual or reported earnings in the near term. Economic Value perspective involves analyzing the expected cash in flows on assets minus expected cash out

flows on liabilities plus the net cash flows on off-balance sheet items. The economic value perspective identifies risk arising from long-term interest rate gaps.

c) Forex Risk

Foreign exchange risk is the risk that a bank may suffer loss as a result of adverse exchange rate movement during a period in which it has an open position, either spot or forward or both in same foreign currency. Even in case where spot or forward positions in individual currencies are balanced the maturity pattern of forward transactions may produce mismatches. There is also a

settlement risk arising out of default of the counter party and out of time lag in settlement of one currency in one center and the settlement of another currency in anothertime zone. Banks are also exposed to interest rate risk, which arises from the maturity mismatch of foreign currency position. The Value at Risk (VaR) indicates the riskthat the bank is exposed due to uncovered position of mismatch and these gap positions are to be valued on daily basis at the prevalent forward market rates announced by FEDAI for the remaining maturities. Currency Risk is the possibility that exchange ratechanges will alter the expected amount of principal and return of the lending or investment. At times, banks may try to cope with this specific risk on the lending side byshifting the risk associated with exchange rate fluctuations to the borrowers. However the risk does not get extinguished, but only gets converted in to credit risk.By setting appropriates limits-open position and gaps, stop-loss limits, Day Light as well as overnight limits for each currency, Individual Gap Limits and Aggregate GapLimits, clear cut and well defined division of responsibilities between front, middle and back office the risk element in foreign exchange risk can be managed/monitored.

d) Country Risk

This is the risk that arises due to cross border transactions that are growing dramatically in the recent years owing to economic liberalization and globalization. It is the

possibility that a country will be unable to service or repay debts to foreign lenders in time. It comprises of Transfer

Risk arising on account of possibility of losses due torestrictions on external remittances; Sovereign Risk associated with lending to government of a sovereign nation or taking government guarantees; Political Risk when political environment or legislative process of country leads togovernment taking over the assets of the financial entity(like nationalization, etc) and preventing discharge of liabilities in a manner that had been agreed to earlier; Cross border risk arising on account of the borrower being a resident of a country other than the country where the crossborder asset is booked; Currency Risk, a possibility thatexchange rate change, will alter the expected amount ofprincipal and return on the lending or investment.In the process there can be a situation in which seller(exporter) may deliver the goods, but may not be paid orthe buyer (importer) might have paid the money inadvance but was not delivered the goods for one or the

other reasons.

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