Solved Assignment- Mba II

Assignments Master of Business Administration
Semester 2

Submitted by:

ANOOP KUMAR VERMA ROLL NO. 521023181

MB0044

Production & Operations Management
Assignment Set- 1

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Q.1 Explain in brief the origins of Just In Time. Explain the different types of wastes that can be eliminated using JIT. Answer: Just In Time JIT is a manufacturing/delivery process where a minimum of goods are kept in stock. Items are planned to arrive precisely at the time they are required for use or despatch. JIT can be considered to be a philosophy of manufacturing founded on the principles of elimination of all waste and thereby increasing productivity. When the philosophy is applied at workplace, the approach results in providing parts in just right quantities at the right time. This results in economy of material and time thus lowering the costs and increasing productivity. Since no extra parts are available, production of only good parts is forced on the system. JIT has been extended to mean continuous improvement. These principles are being applied to engineering, purchasing, accounting and data processing also. In these days when technology is able to provide us with highly accurate equipments which have high capacities and the business has become global meaning that both suppliers and customers are widely accessible. To remain competitive, cost efficiencies have become compulsory. JIT helps in this process. It is extended to the shop floor and inventory systems of the vendors also. Ori gi n of JIT Just In Time, or JIT, was coined to name and describe a manufacturing processes developed by Toyota in Japan in the 1950s and which spread to the US and UK in the 1970s. Within Toyota Taiichi Ohno is most commonly credited as the father/originator of this way of working. The beginnings of this production system are rooted in the historical situation that Toyota faced. After the Second World War the president of Toyota said "Catch up with America in three years, otherwise the automobile industry of Japan will not survive". At that time one American car worker produced approximately nine times as much as a Japanese car worker. Taiichi Ohno examined the American industry and found that American manufacturers made great use of economic order quantities - the traditional idea that it is best to make a "lot" or "batch" of
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an item (such as a particular model of car or a particular component) before switching to a new item. They also made use of economic order quantities in terms of ordering and stocking the many parts needed to assemble a car. Nevertheless, the credit for the initiative should go to Henry Ford. He described essentially the same process, although it wasn't then named, in his autobiography My Life and Work, 1922: Kanban System Kanban for material flow Kanban means a ‗Visible Card‘ and also ‗Signal‘ in Japanese language. These cards are used for communicating the quantities required at the ‗customers‘ point for his use. This means that by the card the operator next in line, who is the customer, decides how many units he needs and asks for them. The operator who receives the card should make only that many and supply. Similarly he makes a demand on his predecessor by a ‘kanban‘ and receives only the required quantity. This is called the pull system. The containers are designed to hold specific components in certain numbers. Kanban system is a physical control system which uses cards and containers materials must not be removed without posting a card at the receiving post. Wastes that can be eliminated using JIT Taichi Ohno, a production engineer with Toyota Corporation identified seven wastes to be addressed by the Toyota system, and they have become known as the 7Ws which are detailed below: 1. Defects The simplest form of waste is components or products that do not meet the specification. We all know about the Japanese scaring us with their target of single-figure reject rates when we realised that they measured in parts per million and that 1% defects gave a figure of 10,000. 2. Over-Production A key element of JIT was making only the quantity required of any component or product. This challenged the Western premise of the Economic Order Quantity (EOQ) which was built on acceptance of fixed ordering costs, built around set-up times, and thus the need to spread these fixed costs over large batches.

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3. Waiting Time not being used effectively is a waste - we are incurring the cost of wages and all the fixed costs of rent, rates, lighting and heating so we should use every minute of every day productively. Ohno looked at the reasons for machines or operators being under-utilised and set about addressing them all. 4. Transporting Items being moved incur a cost, if it is only the energy needed to initiate the movement - such as the electricity absorbed by a fork lift truck. Of course, movement brings another cost, which is less visible but more significant. 5. Movement On a related note, people spending time moving around the plant is equally wasteful. The time a machine operator or fitter wastes walking to the tool room or the stores for a fixture or a component could be far better utilised if our plant layout and housekeeping were geared around having everything that is required close to hand. 6. Inappropriate Processing The most obvious example of inappropriate processing from my own experience relates to surface finishes that required components to be moved to grinders for completion, when in fact such finishes served no purpose. 7. Inventory The element that Western industry immediately focused upon when confronted with JIT was the cost reduction available from holding less inventory. In fact, other forms of waste have been identified in Lean definitions since the term was first adopted, though strict devotees of the TPS have been known to dispute matters. Womack and Jones, the leaders of the MIT Study, added that of designing and making products which do not meet the customer's requirements, though this could perhaps be classified within Ohno's Inappropriate Processing. As ever, we can debate the semantics and draw clever diagrams to show how matters overlap, or we can get on with bringing about change for the better within our organisation. I hope that people who know me would recognise the camp to which I belong.

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Q.2 What is Value Engineering or Value Analysis? Elucidate five companies which have incorporated VE with brief explanation. Answer: Value engineering (VE) is a systematic method to improve the "value" of goods or products and services by using an examination of function. Value, as defined, is the ratio of function to cost. Value can therefore be increased by either improving the function or reducing the cost. It is a primary tenet of value engineering that basic functions be preserved and not be reduced as a consequence of pursuing value improvements. In the United States, value engineering is specifically spelled out in Public Law 104-106, which states ―Each executive agency shall establish and maintain cost-effective value engineering procedures and processes." Value engineering is sometimes taught within the project

management or industrial engineering body of knowledge as a technique in which the value of a system‘s outputs is optimized by crafting a mix of performance (function) and costs. In most cases this practice identifies and removes unnecessary expenditures, thereby increasing the value for the manufacturer and/or their customers. VE follows a structured thought process that is based exclusively on "function", i.e. what something "does" not what it is. For example a screw driver that is being used to stir a can of paint has a "function" of mixing the contents of paint can and not the original connotation of securing a screw into a screw-hole. In value engineering "functions" are always described in a two word abridgment consisting of an active verb and measurable noun (what is being done - the verb - and what it is being done to - the noun) and to do so in the most non-prescriptive way possible. In the screw driver and can of paint example, the most basic function would be "blend liquid" which is less prescriptive than "stir paint" which can be seen to limit the action (by stirring) and to limit the application (only considers paint.) This is the basis of what value engineering refers to as "function analysis". Value engineering uses rational logic (a unique "how" - "why" questioning technique) and the analysis of function to identify relationships that increase value. It is considered a quantitative method similar to the scientific method,
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which focuses on hypothesis-conclusion approaches to test relationships, and operations research, which uses model building to identify predictive relationships. Value engineering is also referred to as "value management" or "value methodology" (VM), and "value analysis" (VA). VE is above all a structured problem solving process based on function analysis—understanding something with such clarity that it can be described in two words, the active verb and measurable noun abridgement. For example, the function of a pencil is to "make marks". This then facilitates considering what else can make marks. From a spray can, lipstick, a diamond on glass to a stick in the sand, one can then clearly decide upon which alternative solution is most appropriate. How it works VE follows a structured thought process to evaluate options as follows: Gather information 1. What is being done now? Who is doing it? What could it do? What must it not do? Measure 2. How will the alternatives be measured? What are the alternate ways of meeting requirements? What else can perform the desired function? Analyze 3. What must be done? What does it cost? Generate 4. What else will do the job? Evaluate 5. Which Ideas are the best? 6. Develop and expand ideas. What are the impacts? What is the cost? What is the performance? 7.Present ideas Sell alternatives Here are the five companies which incorporated VE: 1. GENERAL ELECTICALS CORPORATION (GEC) The concepts of value engineering originated in 1947 in General Electricals Corporation (GEC) when a substitute for asbestos for flooring had to be found. Specialized dealers could provide an equally good material at a lesser price.

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Initially, the practioners were the people in charge of purchasing who tried to locate substitute material which would be equally good, if not better, at a lower price. This is the first and basic approach to value engineering. A concept percolated to the manufacturing departments, engineers applied the same principles and found that, they could use alternate materials, which were cheaper giving the same performance. It was also fund that dimensions and tolerance could be altered without affecting the performance of the part or the product. The investigations took them on the path of eliminating some operations. The focus was on the value of each bit materials, each operation. This approach led to the design stage. 2. ASHOK LEYLAND. In implementation of VA, Ashok Leyland changed gear material from phosphor bronze to a less expensive cast iron and eliminated frequent field complaint of gear seizure in trucks. 3. TVS Motors During the mid 1940 to 1960s, TVS based in Madurai was ranked as the best bus transportation system in India. It could manage to run the fleets for about 96% of the time.TVS used the VE approach to restore the mobility of buses that had broken down. They stocked their garage with some critical assemblies of a bus. Whenever, a part or an assembly failed of a bus, they replaced it immediately with a new one, thus restoring mobility within a couple of hours. When compared to the traditional method, this approach has gained much more benefits to the company, it helped to save time, reduce cost, efficient, quicker, and competitive. 4. MODI XEROX. Modi Xerox designed the VE-d low cost copier 1025 ST, which uses a single tray. The advantage of new design is that it is easy to operate and the cost is also very low. 5. TITAN Industries Limited Titan watches introduced new designs adopting a strategy of innovation which helps it to be ahead of its competitors.

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Q.3 Explain different types of Quantitative models. Differentiate between work study and motion study. Answer: Types of quantitative models There are different quantitative models as detailed below:

1. Linear Programming: Linear programming technique is often used for optimising a given objective like: profit or revenue maximisation, or cost outgo minimisation. Distribution of the resources is the critical issue, when there are limited resources and they have to meet competing demands. 2. Transportation Model: Transportation model is concerned with goods from manufacturing centres or warehouses which have to be supplied to depots or retail outlets. The demand and supply position of the places where they are required or produced and the cost of transportation are considered in the model. We use this model to economise. 3. Assignment Model: Allocating jobs or persons to machines, awarding different projects to contractors is done so that maximum returns occur or less expense are incurred. Hence, calls for the use of this model. 4. Inventory Control Model: Inventory control model considers the: - Frequency of placing orders - Quantities per order considering the cost of placing an order -Number of pieces that are to be kept in reserve - Rate of consumption - Lead time required for the supplier - Costs involved in storage

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We have different models which give solutions to optimisation depending upon the probabilities of patterns of consumption and supply. 5. Waiting Line Models: Queues are formed when the rate of service is at a variance with the rate of arrival. They are formed when the rate of production is less at particular points compared to the previous ones. Sometimes we see multiple service points and a single queue are formed for feeding them. Number of items which includes the following is studied with some special techniques. - People to be serviced - Rate of service - Type of queue discipline that is intended to be followed - Policy of priority - Tolerable amounts of waiting - Others 6. Simulation Models: Simulation models are used when we will not be able to formulate mathematical models. So, we develop a model which resembles a real life situation. Based on this pattern, we predict and plan our procurement, production, delivery and other actions. 7. PERT (Project Evaluation and Review Technique) and CPM (Critical Path Method) Models: When projects are undertaken with a number of activities, some happens in sequence, with gaps of weeks or months and some happens simultaneously. It is important to estimate the time required for completion of the project. A lot of coordination is needed while supplying the resources. It is also equally important to identify the bottlenecks and smoothen resources so that time schedules are maintained. Delayed completion may entail penalties. In this model, we adopt special methods to make the system efficient. Work Study is the systematic examination of the methods of carrying out activities such as to improve the effective use of resources and to set up standards of performance for the activities carried out. Another definition of Work Study could be:

A generic term for those techniques, particularly method study and work measurement, which are used in the examination of human work in all its

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contexts, and which lead systematically to to the investigation of all the factors which affect the efficiency and economy of the situation being reviewed, in order to effect improvement'.This has to do with Productivity Improvement, but also improvement of Quality and Safety.

Components of Work Study Like time study, motion study is also useful tool to increase the efficiency. Here, we are defining it. You know that workers can do any work with many ways or method. But to choose the best way out of alternatives is called motion study. For this, cost accountant has to maintain the data of all the activities of workers. With this study, productivity can be enlarged and inefficiency and wastage can be diminished. In motion study, we first of all, note the activities of laborers in work place. With the help of stop watch equipment, spending time on per activity is noted. After this, we have to take decision of activities which we have to stop. This study or analysis determines prime method of doing any activity in factory. Sometime software engineer can make the work design relating to workplace arrangement and adjustable chair for workplace.

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Difference between work and motion study

Work study We can say that work study is being conducted when analysis of work methods is conducted during the period when a job is done on a machine or equipment.

Motions study. Method study is on studying the method currently being used and developing a new method of performing the task in a better way.

The study helps in designing the Operation flow charts, motion charts, optimum work method and flow process charts, which are the standardization of the work elements of the task are studied to find method. the purpose of each activity, the sequences in which they are done, and the effect of these on the work.

The study enables the methods The study may help in changing some of engineer to search for better them and even eliminate some of them methods for higher utilization of to effect improvements. man and machine and accomplishment of higher productivity. The study gives an opportunity to The new method should result in saving the workmen to learn the process of of time, reduced motions and simpler study thus making them able to activities. offer suggestions for improved methods.

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Q.4 What is Rapid Prototyping? Explain the difference between automated flow line and automated assembly line with examples. Answer: Prototyping is a process by which a new product is developed in small numbers. Prototyping is helpful to:     Determine the suitability of the materials Study the various methods of manufacture Determine type of machinery required Develop techniques to overcome problems that may be encountered when full scale manufacturing is undertaken.

Rapid prototyping is the automatic construction of physical objects using additive manufacturing technology. The first techniques for rapid prototyping
became available in the late 1980s and were used to produce models and prototype parts. Today, they are used for a much wider range of applications and are even used to manufacture production-quality parts in relatively small numbers. Some sculptors use the technology to produce complex shapes for fine arts exhibitions.

The use of additive manufacturing for rapid prototyping takes virtual designs from CAD or animation modelling software, transform them into thin, vertical and horizontal cross sections and then creates successive layers until the model is complete. After exhaustive CAD and CAE, physical prototypes are required in Product Development. Physical prototypes are required in a short period of time to meet various needs of Product Development. Rapid Prototyping (RP) technology enables fabrication of physical prototypes out of various materials. Rapid Prototyping (RP) can be defined as a group of techniques used to quickly fabricate a scale model of a part or assembly using three-dimensional computer aided design (CAD) data. What is commonly considered to be the first RP technique, Stereo lithography, was developed by 3D Systems of Valencia, CA, USA. The company was founded in 1986, and since then, a number of different RP techniques have become available. Rapid Prototyping has also been referred to as solid free-form manufacturing; computer automated manufacturing, and layered manufacturing. RP has obvious use as a vehicle for visualization. In addition, RP models can be used

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for testing, such as when an airfoil shape is put into a wind tunnel. RP models can be used to create male models for tooling, such as silicone rubber moulds and investment casts. In some cases, the RP part can be the final part, but typically the RP material is not strong or accurate enough. When the RP material is suitable, highly convoluted shapes (including parts nested within parts) can be produced because of the nature of RP. The most widely used RP techniques are:   

SLA (Stereo Lithography Appratus) SLS (Selective Laser Sintering) FDM (Fused Deposition Modeling) 3D Printing

Difference between Automated Flow lines and Assembly Flow line. AUTOMATED FLOW LINES ASSEMBLY FLOW LINES

Several Automated machines are All equipments are needed to in linked by a transfer system. automated Assembly line Handling machine have main role to All equipments make role of making move semi finished product to the sub-assemblies put together and fitted. next stage. Semi-finished products are the main Here Sub-assemblies products are the core activities. core activities. Here raw materials are achieving to Here intermediated products get required shapes and acquire achieving to get finished product. special properties. The materials are needed to be moved, held, rotated, fitted and positioned for completing different operations. are

Here All parts or sub-assemblies are fitted to enables the product to be in readiness to perform the function it was designed to. This process is called assembly.

Human intervention may be needed No human intervention is needed, to verify that the operations are methodologies are framed to achieve taking place according to standards. the final result, basic principle is to fit parts together and ensure linkages so that the functions are integrated and give out the desired output.

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Q.5

Explain Break Even Analysis and Centre of Gravity methods. Explain Product layout and process layout with examples

Answer: Break-even analysis is a technique widely used by production management and management accountants. It is based on categorising production costs between those which are "variable" (costs that change when the production output changes) and those that are "fixed" (costs not directly related to the volume of production). Total variable and fixed costs are compared with sales revenue in order to determine the level of sales volume, sales value or production at which the business makes neither a profit nor a loss (the "break-even point"). The Break-Even Chart In its simplest form, the break-even chart is a graphical representation of costs at various levels of activity shown on the same chart as the variation of income (or sales, revenue) with the same variation in activity. The point at which neither profit nor loss is made is known as the "break-even point" and is represented on the chart below by the intersection of the two lines:

In the diagram above, the line OA represents the variation of income at varying levels of production activity ("output"). OB represents the total fixed costs in the business. As output increases, variable costs are incurred, meaning that total costs (fixed + variable) also increase. At low levels of output, Costs

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are greater than Income. At the point of intersection, P, costs are exactly equal to income, and hence neither profit nor loss is made. The center of gravity method is used to determine the location of a single distribution center that will minimize distribution costs. It treats distribution cost as a linear function of the distance and the quantity shipped, which is assumed to be fixed, although an acceptable variation is that quantities are allowed to change as long as their relative amounts remain the same. It is helpful in a limited number of situations – primarily service entities – where geography and transportation costs are important; as opposed to the critical factor method, which is more qualitative and general. The method includes the use of a map that shows the locations of destinations. The map must be accurate and drawn to scale. A coordinate system is then overlaid on the map to determine relative locations. Once done, coordinates for each destination can then be placed. If the quantities to be shipped to every location are equal, the solution is straightforward, as you can simply average the x and y coordinates. When they are not (as is usually the case), a weighted average must be applied, with the weights being the quantities to be shipped. The center of mass of a system of particles is defined as the average of their positions weighted by their masses:

As an example, consider six locations that require a central warehouse; each are plotted on a map with the following x and y values, followed by their importance (weights): 3, 4, 8 5, 6, 2 6, 9, 2 9, 1, 10 11, 4, 3 11, 4, 13 6, 9, 2 Using the matplotlib/pylab extension for Python, this would be the result:

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PRODUCT LAYOUT Product layout is also called as production lines or assembly lines. They are designed and laid out in such a way that only few products are capable of being manufactured or assembled. Materials flow through the various facilities. These use special machines to perform specific operations to produce only one product at one time. So, companies should set different set of machines for different products. Workers perform a narrow range of activities to complete the operations on the product as it moves in a flow line. The operation times, the sequence of movements and routing procedures are highly standardized to meet production requirements which are synchronized with many such products to complete finished goods to meets demands. In a product layout, the workstations and equipment are located along the line of flow of the work units. Usually, work units are moved along a flow line which is powered by a conveyor. Work is done in small amounts at each of the workstations on the work unit. This means that to use the product layout the total work must be dividable into small tasks that can be assigned to the workstations. When the workstations are relatively few in number, they can be arranged in one straight line. In more complicated plants such as the automobile final assembly plant, they can be arranged into a series of connected line segments. Because the workstations do small amounts of work,
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the stations are specialized in their tasks with specialized equipment and tooling, which leads to high proficiency and reduced cycle time. And this also leads to a higher production rate. Example: Let us consider an example of a stainless steel manufacturing industry, in which the operations turning, milling and drilling happen in a sequence. Testing is performed in each process to assure the quality. The items are then sent to the assembly block. The items that arrive for assembly are either bought out items or made item components from elsewhere in the plant. The final product inspections are made and send to the packing dispatch. TURNING OPERATION PACKING DISPATCH MILLING MACHINES INSPECTION DRILLING MACHINES ASSSEMBLY

In industrial engineering, process layout is the floor plan of a plant, which is installed by industrial engineers to improve the efficiency by arranging equipment according to their functions. In this layout, the main idea is to arrange or gather machines or equipments of the same function into one group or department. Process layout is also called as functional layout. Similar machines or similar operations are located at one place as per the functions. For example, all milling operations are carried out at one place while all lathes are kept at a separate location. Grinding or finishing operation is kept at a separate location. This functional grouping of facilities is useful for job production and nonrepetitive manufacturing environment. Important facts: 1. It is a flexible layout 2. It is excellent for low to medium production quantity 3. It is excellent for medium to high production variation 4. The workers should be skilled and qualified 5. It has a high work in process 6. Its main disadvantage is the low production rate.

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An effective Process Layout:         Minimize material handling costs Utilize space efficiently Utilize labour efficiently Eliminate bottlenecks Facilitate communication and interaction between workers, workers and supervisors Eliminate waste or redundant material Promote product and service and quality Provide a visual control of activities

A typical process layout may look like this:

Process-type layout

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Q.6 Explain Juran‘s Quality Trilogy and Crosby‘s absolutes of quality. List out the pillars of Total Productive Maintenance. Answer:
JURAN’S QUALITY TRIOLOGY

Juran uses his famous universal Breakthrough Sequence to implement quality programmes. The universal breakthrough sequences are:   Proof of need: there should be a compelling need to make changes. Project identification: here what is to be changed is identified. Specific projects with time frames and the resource allocation are decided.  Top management commitment: Commitment of the top

management is to assign people and fix responsibilities to complete the project.  Diagnostic journey: Each team will determine whether the problems result from systemic causes or are random or are deliberately caused. Root causes are ascertained with utmost certainty.   Remedial Action: This is the stage when changes are introduced. Inspection, testing, and validation are also included at this point. Holding on to the gains: the above steps results in beneficiary results. Having records or all actions and consequences will help in further improvements. The actions that results in the benefits derived should be the norm for establishing standards. Juran has categorised the cost of quality into four categories as given below: 1. Failure costs –internal: These are cost of rejections, repairs in terms of materials, labour, machine time and loss of morale. 2. Failure costs-External: These are cost of replacement, on-site rework including spare parts and expenses of the personnel, warranty costs and loss of goodwill. 3. Appraisal costs: These are cost inspection, including maintenance of records, certification, segregation costs, and others. 4. Prevention costs: Prevention cost is the sequence of three sets of activities, Quality planning, Quality control, and Quality improvement, forming the triology to achieve TOTAL QUALITY MANAGEMENT.

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Juran‘s argument says that:  Quality is the result of good planning consideration the needs of both internal and external customers and develops processes to meet them. The processes are also planned to meet them.  Quality is built into the system of manufacture, inputs and processes that are on stream like raw material, spare parts, labour, machine maintenance, training, warehousing, inspection procedures, packaging, and other. All these have to follow standards and control exercises to make sure that mistake do not occur often and that if mistakes do occur then they are corrected at the source.  Quality improvement measures are essential to keep the quality culture alive. Newer methods will be found, some operations can be eliminated, improved technology available. In short, as experience is gained things can always be done better. IT is for the management to take the initiative an encourage the employees to be on lookout for opportunities for improvement. Crosby‘s absolutes of quality The late Phillip Crosby, former president of the American Society for Quality (ASQ), established four absolutes for quality performance. 1. Quality is defined as conformance to customers‘ requirements. 2. The system for improving quality is prevention. 3. The performance standard is zero defects—a commitment to conform to requirements each and every time. 4. The measurement of quality is the price of non-conformance. Most, if not all, of us recognize that none of us is perfect, but the concept of quality is continuous improvement to make what we do a little bit better every time we do it. A company that has embraced quality and Crosby's four absolutes of quality is Sunny Fresh Foods. You may say, "I've never heard of them. Who is Sunny Fresh Foods?" If you have ever had an Egg McMuffin from McDonald‘s, you are a customer of Sunny Fresh Foods. Sunny Fresh produces more than 160 products for the food service industry. Their products include omelette, precooked scrambled eggs, peeled hard-cooked eggs, liquid egg products, sandwich patties and breakfast wraps. You won't find them on

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your grocery shelf because Sunny Fresh only sells to food service providers, such as cafeterias, healthcare facilities and McDonald‘s. Sunny Fresh Foods has won the Malcolm Baldrige National Quality Award twice, in 1999 and 2005. When Sunny Fresh started their quality journey, they adopted the approach of Philip Crosby, PhD and his four absolutes of quality. Their key to zero defects is preventing defects from ever occurring, and Sunny Fresh aggressively manages its processes. Working with egg and dairy products provides a great number of opportunities for problems and high regulatory standards from the U.S. Department of Agriculture. Standing operating procedures and work instructions have been developed to ensure high food safety standards are maintained. Not only are business and manufacturing processes continually reviewed by senior leaders and department managers, but also the operators on the line are empowered to control their work processes to insure conformance to the high-quality standard, as determined by their customers. To ensure the customer's requirements are being met, Sunny Fresh takes a systematic approach. All customer complaints are logged into a database immediately and tracked for prompt corrective action and follow up. Their current average response time is 0.8 day. Their resolution satisfaction increased from 92 percent to 100 percent in 2002. They conduct customer satisfaction surveys and distribute the results to sales and marketing managers so they can use these data for continuous improvement. The measurement of quality is the price of non-conformance, and is sometimes referred to as the cost of quality.

Total productive maintenance
Total productive maintenance (TPM) has been around for almost 50 years. It may be misunderstood as a new way of looking at maintenance, however, at least in Japan, it is a well-established process. Like all processes, it has a host of acronyms and buzzwords. Some are obvious, many will require follow-up reading. In TPM, the machine operator is thoroughly trained to perform much of the simple maintenance and fault-finding. Eventually, by working in "Zero Defects" teams that include a technical expert as well as operators, they can

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learn many more tasks - sometimes all those within the scope of an operator. Tradesmen are also trained at doing the more skilled tasks to help ensure process reliability. This should be fully documented, Autonomous Maintenance ensures appropriate and effective efforts are expended after the machine becomes wholly the domain of one person or team. Safety is paramount, so training must be appropriate. Operators are often capable of high standards of technical ability; this is improved through the use of "best practice" procedures and proper training of these procedures. TPM is a critical adjunct to lean manufacturing. If machine uptime is not predictable and if process capability is not sustained, the process must keep extra stocks to buffer against this uncertainty and flow through the process will be interrupted. One way to think of TPM is "deterioration prevention": deterioration is what happens naturally to anything that is not "taken care of". For this reason many people refer to TPM as "total productive manufacturing" or "total process management". TPM is a proactive approach that essentially aims to identify issues as soon as possible and plan to prevent any issues before occurrence. One motto is "zero error, zero work-related accident, and zero loss". TPM focuses primarily on manufacturing (although its benefits are applicable to virtually any "process") and is the first methodology Toyota used to improve its global position (1950s). After TPM, the focus was stretched, and also suppliers and customers were involved (Supply Chain), this next methodology was called lean manufacturing.

Pillars of TPM
Total Productive Maintenance is often presented as a series of pillars supporting Lean Manufacturing and resting on a foundation of education and training. Below this is the attitude of environmental responsibility and safety. This representation is adequate as a starting point.

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Supporting Lean Maintenance enables and supports Lean efforts in at least three major ways: Quality, Setup Reduction (SMED) and predictability. In turn, other Lean elements support TPM through Work cells, Teamwork and Problem-solving. The Foundations Education & Training-- Education, training and investments in people characterize all aspects of Lean. In the maintenance area, they are even more important because of the specialized knowledge required on typical manufacturing equipment. This is one of the foundation stones of TPM. Without it, the pillars of TPM will have limited impact. Safety/Environment-- Underlying even the training and education piece are the more fundamental values of responsibility to the environment and safety for employees. One important reason is simple: it is the right thing to do. Autonomous maintenance Autonomous maintenance is the concept that the people who operate a machine should maintain the machine. The degree of autonomous maintenance depends on the level of training and the abilities of operators. For example, in the foundry where this author worked, machinists repaired and overhauled their own machine tools. A trained and competent machinist is certainly capable of overhauling a gearbox. And, as the users, they tended to know the equipment intimately.
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Planned maintenance Planned maintenance is the deliberate planning and scheduling of maintenance activities as opposed to reacting to breakdowns and emergencies. A maintenance department that uses TPM effectively generally devotes less than 10% of its labor hours to such unplanned activities Equipment Improvement Improving equipment constantly is a major part of TPM. This author witnessed an outstanding example of this some years ago at Toyota's Kamigo Engine plant. Toyota was using the same type of American equipment that I had seen at Ford Motor Company years earlier. However, Toyota's equipment was so reliable that it ran with far fewer people and far better quality. Most production equipment has not had the extensive design, testing and development common in mass-produced products such as automobiles. Accordingly, there are many deficiencies that may not be evident when the equipment first goes into service. In addition, each manufacturing plant and its products tend to be different and can benefit by design changes that adapt the machines better to their individual situations. New equipment management is related somewhat to equipment

improvement. It refers to the careful design, selection and testing of equipment. The purpose is to ensure a smooth commissioning process with minimal design defects and problems. New equipment management includes vendor selection, evaluating options for maintainability, training personnel in advance and other common-sense techniques Process Quality Management In TPM making the equipment run is only part of Maintenance's job. Ensuring that the equipment is capable of producing parts well within the tolerance range (process capability) is also a primary responsibility. Worn bearings and ways, undo vibration, bent shafts and multiple other maintenance problems contribute to the gradual deterioration of process capability. With constant use, machines still run but become "finicky." For example, a particular machine shop lathe that the author recalls could only be run by a particular operator. He was the only one who knew exactly where the ways were worn and how to compensate.

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MB0045

Financial Management
Assignment Set- 2

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Q.1. Discuss the objective of profit maximization vs. wealth maximization. Answer: Profit Maximization Vs Wealth Maximization The financial management come a long way by shifting its focus from traditional approach to modern approach. The modern approach focuses on wealth maximization rather than profit maximization. This gives a longer term horizon for assessment, making way for sustainable performance by businesses. A myopic person or business is mostly concerned about short term benefits. A short term horizon can fulfil objective of earning profit but may not help in creating wealth. It is because wealth creation needs a longer term horizon Therefore, Finance on wealth Management maximization or rather Financial than profit

Management emphasizes maximization.

For a business, it is not necessary that profit should be the only objective; it may concentrate on various other aspects like increasing sales, capturing more market share etc, which will take care of profitability. So, we can say that profit maximization is a subset of wealth and being a subset, it will facilitate wealth creation. Giving priority to value creation, managers have now shifted from traditional approach to modern approach of financial management that focuses on wealth maximization. This leads to better and true evaluation of business. For example, under wealth maximization, more importance is given to cash flows rather than profitability. As it is said that profit is a relative term, it can be a figure in some currency, it can be in percentage etc. e.g. a profit of say ` 10,000 cannot be judged as good or bad for a business, till it is compared with investment, sales etc. Similarly, duration of earning the profit is also important i.e. whether it is earned in short term or long term. In wealth maximization, major emphasizes is on cash flows rather than profit. So, to evaluate various alternatives for decision making, cash flows are taken under consideration. For e.g. to measure the worth of a project, criteria like: ― present value of its cash inflow – present value of cash outflows‖ (net present value) is taken. This approach considers cash flows rather than profits into consideration and also use discounting technique to find out worth of a

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project. Thus, maximization of wealth approach believes that money has time value. An obvious question that arises now is that how can we measure wealth. Well, a basic principle is that ultimately wealth maximization should be discovered in increased net worth or value of business. So, to measure the same, value of business is said to be a function of two factors - earnings per share and capitalization rate and it can be measured by adopting following relation: Value of business = EPS / Capitalization rate At times, wealth maximization may create conflict, known as agency problem. This describes conflict between the owners and managers of firm. As, managers are the agents appointed by owners, a strategic investor or the owner of the firm would be majorly concerned about the longer term performance of the business that can lead to maximization of shareholder‘s wealth. Whereas, a manager might focus on taking such decisions that can bring quick result, so that he/she can get credit for good performance. However, in course of fulfilling the same, a manager might opt for risky decisions which can put on stake the owner‘s objectives. Hence, a manager should align his/her objective to broad objective of organization and achieve a trade off between risk and return while making decision; keeping in mind the ultimate goal of financial management i.e. to maximize the wealth of its current shareholders the objections are: Profit cannot be ascertained well in advance to express the probability of return as future is uncertain. It is not at possible to maximize what cannot be known.  The executive or the decision maker may not have enough confidence in the estimates of future returns so that he does not attempt future to maximize. It is argued that firm's goal cannot be to maximize profits but to attain a certain level or rate of profit holding certain share of the market or certain level of sales. Firms should try to 'satisfy' rather than to 'maximize'.  There must be a balance between expected return and risk. The possibility of higher expected yields are associated with greater risk to recognise such a balance and wealth Maximization is brought in to the

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analysis. In such cases, higher capitalisation rate involves. Such combination of expected returns with risk variations and related capitalisation rate cannot be considered in the concept of profit maximization.  The goal of Maximization of profits is considered to be a narrow outlook. Evidently when profit maximization becomes the basis of financial decisions of the concern, it ignores the interests of the community on the one hand and that of the government, workers and other concerned persons in the enterprise on the other hand. Keeping the above objections in view, most of the thinkers on the subject have come to the conclusion that the aim of an enterprise should be wealth Maximization and not the profit Maximization. Prof. Soloman of Stanford University has handled the issued very logically. He argues that it is useful to make a distinction between profit and 'profitability'. Maximization of profits with a view to maximising the wealth of shareholders is clearly an unreal motive. On the other hand, profitability Maximization with a view to using resources to yield economic values higher than the joint values of inputs required is a useful goal. Thus the proper goal of financial management is wealth maximization.

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Q.2. Explain the Net operating approach to capital structure

Answer: According to the net operating income (NOI) approach the market value of the firm is not affected by the capital structure changes. The market value of the firm is found out by capitalizing the net operating income at the overall or the weighted average cost of capital, which is constant. The overall capitalisation rate depends on the business risk of the firm. It is independent of financial mix. If NOI and average cost of capital are independent of financial mix, market value of firm will be a constant are independent of capital structure changes. The critical assumptions of the NOI approach are:   The market capitalizes the value of the firm as a whole. Thus the split between debt and equity is not important. The market uses an overall capitalisation rate, to capitalize the net operating income. Overall cost of capital depends on the business risk. If the business risk is assumed to remain unchanged, overall cost of capital is a constant.  The use of less costly debt funds increases the risk to shareholder. This causes the equity capitalisation rate to increase. Thus, the advantage of debt is offset exactly by the increase in the equity-capitalisation rate.   The debt capitalisation rate is constant. The corporate income taxes do not exist.

Thus, we find that the weighted cost of capital is constant and the cost equity increase as debt is substituted for equity capital. The net operating income approach examines the effects of changes in capital structure in terms of net operating income. In the net income approach discussed above net income available to shareholders is obtained by deducting interest on debentures form net operating income. Then overall value of the firm is calculated through capitalization rate of equities obtained on the basis of net operating income, it is called net income approach. In the second approach, on the other hand overall value of the firm is assessed on the basis of net operating income not on the basis of net income. Hence this second approach is known as net operating income approach.

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The NOI approach implies that whatever may be the change in capital structure the overall value of the firm is not affected. Thus the overall value of the firm is independent of the degree of leverage in capital structure. Similarly, the overall cost of capital is not affected by any change in the degree of leverage in capital structure. The overall cost of capital is independent of leverage. If the cost of debt is less than that of equity capital the overall cost of capital must decrease with the increase in debts whereas it is assumed under this method that overall cost of capital is unaffected and hence it remains constant irrespective of the change in the ratio of debts to equity capital. How can this assumption be justified? The advocates of this method are of the opinion that the degree of risk of business increases with the increase in the amount of debts. Consequently the rate of equity over investment in equity shares thus on the one hand cost of capital decreases with the increase in the volume of debts; on the other hand cost of equity capital increases to the same extent. Hence the benefit of leverage is wiped out and overall cost of capital remains at the same level as before. Let us illustrate this point. If follows that with the increase in debts rate of equity capitalization also increases and consequently the overall cost of capital remains constant; it does not decline. To put the same in other words there are two parts of the cost of capital. One is the explicit cost which is expressed in terms of interest charges on debentures. The other is implicit cost which refers to the increase in the rate of equity capitalization resulting from the increase in risk of business due to higher level of debts.

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Q.3. What do you understand by operating cycle? Answer: Operating cycle is the average time period between buying inventory and receiving cash proceeds from its eventual sale. It is determined by adding the number of days inventory is held and the Collection Period for accounts receivable. Some industries, such as distillery and lumber, have a long operating cycle. The Operating cycle of the firm begins with the acquisition of raw materials and ends with the collection of receivables. It may be divided into four stages a) raw material and stores storage stage b) work-in-progress stage c) finished goods inventory stage and d) debtors collection stage .

Duration of operating cycle: The duration of operating cycle is equal to the sum of the duration of each of these stages less the credit period allowed by the suppliers to the firms . It can be given as O=R+W+F+D–C Where; O = Duration of operating cycle R = Raw material and stores storage period W = Work-in-progress period F = Finished goods storage period D = debtors collection period C = Creditors payment period The components of operating cycle may be calculated as follows;

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R

=

Average stock of raw materials and stores Average raw material and stores consumption per day Average Work-in-progress inventory Average cost of production per day Average Finished Goods Inventory Average cost of goods sold per day Average books debts Average credit sales pert day Average trade creditors Average credit purchase per day

W

=

F

=

D

=

C

=

The operating cycle is the number of days from cash to inventory to accounts receivable to cash. The operating cycle reveals how long cash is tied up in receivables and inventory. A long operating cycle means that less cash is available to meet short term obligations.

The operating cycle can also be calculated in terms of following: Operating Cycle = age of inventory + collection period Or Operating Cycle = Cash Conversion Cycle + No. of Days of Payables

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Where; Cash Conversion Cycle is the average time taken by a firm in converting merchandise or raw materials back into cash. Cash Conversion Cycle (Days) = DIO + DSO – DPO where; DIO : Number of Days of inventory Age of Inventory (in days) = Inventory/ (Cost of Sales/365) = 365/Inventory Turnover DSO: Number of days for sales Collection Period (in days) = Receivables/ (Sales/365) = 365/Receivables Turnover DPO : Number of days of payables Age of Payables (in days) = Payables/(Sales/365) = 365/Payables Turnover

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Q. 4. What is the implication of operating leverage for a firm? Answer: OPERATING LEVERAGE Operating leverage is the extent to which a firm uses fixed costs in producing its goods or offering its services. Fixed costs include advertising expenses, administrative costs, equipment and technology, depreciation, and taxes, but not interest on debt, which is part of financial leverage. By using fixed production costs, a company can increase its profits. If a company has a large percentage of fixed costs, it has a high degree of operating leverage. Automated and high-tech companies, utility companies, and airlines generally have high degrees of operating leverage.

As an illustration of operating leverage, assume two firms, A and B, produce and sell widgets. Firm A uses a highly automated production process with robotic machines, whereas firm B assembles the widgets using primarily semiskilled labor. Table 1 shows both firm's operating cost structures. Highly automated firm A has fixed costs of $35,000 per year and variable costs of only $1.00 per unit, whereas labor-intensive firm B has fixed costs of only $15,000 per year, but its variable cost per unit is much higher at $3.00 per unit. Both firms produce and sell 10,000 widgets per year at a price of $5.00 per widget. Firm A has a higher amount of operating leverage because of its higher fixed costs, but firm A also has a higher breakeven point—the point at which total costs equal total sales. Nevertheless, a change of I percent in sales causes more than a I percent change in operating profits for firm A, but not for firm B. The "degree of operating leverage" measures this effect. The following simplified equation demonstrates the type of equation used to compute the degree of operating leverage, although to calculate this figure the equation would require several additional factors such as the quantity produced, variable cost per unit, and the price per unit, which are used to determine changes in profits and sales: Operating leverage is a double-edged sword, however. If firm A's sales decrease by I percent, its profits will decrease by more than I percent, too.

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Hence, the degree of operating leverage shows the responsiveness of profits to a given change in sales. OPERATING LEVERAGE Operating leverage is a measure of the extent to which, fixed operating costs are being used in an organization. It is greatest (largest) in companies that have a high proportion of fixed operating costs in relation (proportion) to variable operating costs. This type of company is using more fixed assets in the operation of the company. Conversely, operating leverage is lowest in companies that have a low proportion of fixed operating costs in relation to variable operating costs. Firms with large amounts of fixed operating costs have high break-even points and high operating leverage. Variable cost in these firms tends to be low and both the contribution (CM) and unit contribution (UC) margin is high. Formula(s) for calculating Operating leverage :

Degree of Operating Leverage = or Degree of Operating Leverage = or Degree of Operating Leverage =

Percent Change in Operating Income Percent Change in Sales

Contribution Margin Earnings Before Interest and Taxes

Total Sales  TotalVariableCost Total Sales Total Variable Cost  Total Operating Fixed Cost
Example : Company A and Company B are competitors in the market for a special machine part. The cost structure and price details are given below: Company A AED 30 AED 10 AED 60,000 Company B AED 30 AED 20 AED 20,000

Selling price Variable cost per unit Fixed costs

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Implications: 1. A firm with a high break-even point is more risky than one with a low Break-even point. In periods of increasing sales, operating income (OI or EBIT) of the leveraged firm tends to increase rapidly. This increase in OI (EBIT) is the ‗pay-off‘ for being more risky. But in periods of decreasing sales, operating income of the firm tends to decrease rapidly, that is the risk. 2. Firms with small amounts of fixed operating costs have low breakeven points and are therefore less risky and have low operating leverage. Variable costs in these firms tend to be high and both the CM and UC is low. In periods of increasing sales, operating income (EBIT) for these firms tends to increase slowly. But in periods of decreasing sales, Operating income will tend to decrease slowly making the firm less risky. 3. In conclusion, if a company has high operating leverage, then the operating income (OI or EBIT) will become very sensitive to changes in sales volume. Just a small percentage chance in sales can yield (produce) a large percentage change in Operating Income. A Company with low operating leverage the reverse is true.

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Answer 5 Total outflow Rs. 150 Million + Rs. 50 Million = Rs. 200 Million Incremental approach Revenue – Cost => Rs. 250 Million – Rs. 100 Million = 150 Million Pr factor @10% for 5 years = 3.790
 150 X 3.790 = Rs. 568.62

Calculation of depreciation: 150 25% Year 1 2 3 4 5 Dep. 37.5 28.125 21.09 15.82 11.87 Tax saving 11.25 8.4375 6.327 4.746 3.561 PV@10% 0.909 0.826 0.751 0.683 0.621 Tax saving 10.226 6.969 4.751 3.241 2.211 27.398

Total inflow: 568.62 + 27.398 = 596.018 Add: Inflow in 5th year => 50+48 = 98 X 0.621 60.858 656.876

NPV = 656.876 -200 = 456.876

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Q.6 Given the following information, what will be the price per share using the Walter model? Earnings per share Rs. 40 Rate of return on investments 18% Rate of return required by shareholders 12% Payout ratio being 40%, 50%, or 60%. Answer:

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MB0046

Marketing Management
Assignment Set- 2

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Q.1 What is product mix? What are the strategies involved in product mix and product line? ANSWER:

Product Mix Product mix is a combination of products manufactured or traded by the same business house to reinforce their presence in the market, increase market share and increase the turnover for more profitability. Normally the product mix is within the synergy of other products for a medium size organization. However large groups of Industries may have diversified products within core competency. Larsen & Toubro Ltd, Godrej, Reliance in India are some of the examples. One of the realities of business is that most firms deal with multi-products .This helps a firm diffuse its risk across different product groups/Also it enables the firm to appeal to a much larger group of customers or to different needs of the same customer group .So when Videocon chose to diversify into other consumer durables like music systems, washing machines and refrigerators, it sought to satisfy the needs of the middle and upper middle income group of consumers. Likewise, Bajaj Electricals a household name in India has almost ninety products in i8ts portfolio ranging from low value items like bulbs to high priced consumer durables like mixers and luminaires and lighting projects .The number of products carried by a firm at a given point of time is called its product mix. This product mix contains product lines and product items .In other words it‘s a composite of products offered for sale by a firm. Product Mix Decisions Often firms take decisions to change their product mix. These decisions are dictated by the above factors and also by the changes occurring in the market place. Like the changing life-styles of Indian consumers led BPL-Sanyo to launch an entire range of white goods like refrigerators, washing machines, and microwave ovens .It also motivate the firm to launch other entertainment electronics. Rahejas, a well-known builders firm in Bombay, took a major decision to convert one of its theatre buildings in the western suburbs of Bombay into a large garments and accessories store for men ,women and

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children, perhaps the first of its kind in India to have almost all products required by these customer groups Competition from low priced washing powders (mainly Nirma) forced Hindustan Levers to launch different brands of detergent powder at different price levels positioned at different market segments .Customer preferences for herbs, mainly shikakai motivated Lever to launch black Sunsilk Shampoo ,which has shikakai .Also ,low purchasing power. and cultural bias against shampoo market made Hindustan Lever consider smaller packaging mainly sachets , for single use .So, it is the changes or anticipated changes in the market place that motivates a firm to consider changes in its product mix. Product Mix Pricing Strategies When the product is a part of product-mix, there are five kinds of strategies involved: i. Product Line Pricing In product line pricing, management must decide on the price steps to set between various products in a line. This should take into account the differences in products features, customer evaluations, competitor‘s prices etc. ii. Optional-Product Pricing The pricing of optional or accessory products along with the main product. For example, a car buyer may choose to order a CD changer as an optional product. iii. Captive-Product Pricing Setting a price for products which must be used along with the main product. For example, HP makes printers and cartridges. It makes very low margins on its printer (the main product) but very high margins on cartridges. iv. By-Product Pricing Setting a price for the by-products. Like in processing meats, petroleum products, chemicals etc. Using by-product pricing, the manufacturer will find a market for the by-products and should accept any price that covers more than the cost of storing and delivering them. For example, at Alba, water is obtained as a by-product while manufacturing aluminum. This water can now be sold to the market. v. Product Bundle Pricing Combining several products and offering the bundle at a reduced price. For example, fast food restaurants bundle a burger, French fires and soft drink at a combo price.

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Product line strategies A product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges. For example, Nike produces several lines of athletic shoes and Motorola produces several lines of telecommunications products. In developing product line strategies, marketers face a number of tough decisions. The major product line decision involves product line length—the number of items in the product line. The line is too short if the manager can increase profits by adding items; the line is too long if the manager can increase profits by dropping items. A product line is a group of items manufactured by a company which are similar or related. Companies may develop one product line, or may diversify to appeal to the masses. Product line strategies help the company determine which items to produce and how they should be marketed. Explanation Companies frequently offer similar goods priced at different levels. This strategy allows the company to reach as many consumers as possible. For example, clothing companies may offer similarly styled clothing, however the quality of the material used for some pieces will differ greatly than that used for others, and may be sold at a lower-end store. Application Companies will market their product lines to the consumer they wish to attract. Clothing companies geared towards tweens and teens will focus their products on this age group, keeping their normal price point in mind. Higherend clothing will appeal more to the older consumer who may have more money to spend on higher quality items. Considerations Develop a specific plan for your product line. Consider past and future trends of the product. Set goals for product sales, and work towards meeting those goals.

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Q.2 What is a distribution channel? Explain the factors to be considered while setting up a distribution channel. Answer:

A

distribution

channel

may

be one

defined

as

a path through

which goods and services flow in

direction (from vendor to

the consumer), and the payments generated by them that flow in the opposite direction (from consumer to the vendor). A marketing channel can be as short as being direct from the vendor to the consumer or may include several interconnected intermediaries such

as wholesalers, distributors, agents, retailers. Each intermediary receives the item at one pricing point and moves it to the next higher pricing point until it reaches the final buyer. Distribution is also a very important component of Logistics & Supply chain management. Distribution in supply chain management refers to the distribution of a good from one business to another. It can be factory to supplier, supplier to retailer, or retailer to end customer. It is defined as a chain of intermediaries; each passing the product down the chain to the next organization, before it finally reaches the consumer or end-user. This process is known as the 'distribution chain' or the 'channel.' A number of alternate 'channels' of distribution may be available:


Distributor,who sells to retailers via direct marketing, or brokers can also be used,

 

Retailer (also called dealer or reseller), who sells to end customers Advertisement typically used for the consumption goods

Distribution channels may not be restricted to physical products alice from producer to consumer in certain sectors, since both direct and indirect channels may be used. Hotels, for example, may sell their services (typically rooms) directly or through travel agents, tour operators, airlines, tourist boards, centralized reservation systems, etc. process of transfer the products or services from Producer to Customer or end user. There have also been some innovations in the distribution of services. For example, there has been an increase in franchising and in rental services - the

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latter offering anything from televisions through tools. There has also been some evidence of service integration, with services linking together, particularly in the travel and tourism sectors. For example, links now exist between airlines, hotels and car rental services. In addition, there has been a significant increase in retail outlets for the service sector. Outlets such as estate agencies and building society offices are crowding out traditional grocers from major shopping areas. Selection of channel: The selection of distribution is affected by many of factors, which play significant role while choosing the channel for distribution. It may include the buying pattern of consumer, type of the product is perishable, or auto mobile, weight and bulk and it also depends on the company's resources. Factors affecting selection of channel: 1. Organization objectives - If company objective is to have mass appeal and rapid market penetration. 2. Type of product - Perishable products should have a short distribution channel, FMCG goods should have a wide reaching, intensive distribution channel. 3. Nature and extent of market- Distribution to consumer market or industrial markets would be different channel structures. If the market is concentrated and not scattered, producers may go for direct selling but for scattered market, middlemen are involved. If there are more buyers, there may be a need to include more middlemen. For consumer product market retailers are essential but in case of industrial products a shorter channel is preferred, hence middlemen may be eliminated. 4. Existing channel for comparable product- company may chose it's existing channel of distribution for relative product. 5. Buying habit of customers- Understanding consumer needs and criteria for buying 6.Channel Availability - Channels may not be available 7. Size and Policy of the Company-There are many factors related to company which influence channel decision. A big size company with broader product line can afford to have shorter channel.
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Q.3 Discuss the communication development process with examples Answer: In marketing, integrated marketing communication is very important aspect. American Marketing Association defines this as,‖a planning process designed to assure that all brand contacts received by a customer or prospect for a product, service or organisation are relevant to that person and consistent over time‖ Communication development process The communication development process can be described in following flow chart: Preparing targeted customer profile

Identifying promotion objectives

Designing a Message

Selecting channels of communication

Selecting the message source

Target customer feedback These processes are discussed below: Preparing target customer profile: Effective marketing communication starts with identifying the target customer to whom the communication is developed. In this stage company prepares target customer profile. tExample of arget customer profile:

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Customer characteristics Type of customer Income Media exposure Occupation Need for the product Identifying promotion objectives:

Description Individual Upper middle class and upper class Print Salaried or Business class Original Equipment Manufacturers of a car

Target customer profile provides inputs about his/her readiness to purchase the product. Customer may be in any of the six stages of hierarchy of effects. The six stages are: a. Awareness: Marketer creates the new range of products. Awareness level for these products is very low. Intention of the advertisement is to create awareness about these new products. In the example of Reebok play dry technology garments, it focuses to create awareness among the target audience. b. Knowledge: In this stage target audience don‘t have complete knowledge of the product. Marketer explains the product in detail and its advantages to the target customers. The advertisement of Parry Neutraceuticals explains the advantages of beta carotenes. c. Liking: Promotion is used to convert knowledgeable audience into likeable category. Marketer uses celebrities to create interest in the product. For example, Reid and Taylor highlight their product quality in the advertisement by using Amitabh Bachhan a film actor. d. Preference: Creating differentiation in the market place so that customer identifies it over the rival brands. Big bazaar advertisement with tag line ‗ is se sasta aur achcha kahin nahi‘ or nobody sells cheaper and better is alluring the customer by telling them what differentiation they can bring. e. Conviction: customer may have preference over the product but he/she still not able to decide. In this situation, marketer develops the messages in such a way that it provides platform for him to decide. For example, Tata indigo, requests its customer to go for test drive and experience the truth. Customer may be convinced about indigo but not developed the conviction. f. Purchase: Sometimes customers are having strong desire to buy the product but due to affordability or any other environmental character, they are not able to purchase. In this situation, marketer uses promotional schemes particularly
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reduced price schemes to attract the customer. Company also comes out with communication programs for repeat purchasers and loyal customers. Designing a message After deciding the communication objectives, Marketer turns to develop right message which should create attention, interest, desire or action (AIDA) by the customer. Before deciding what should be there in the message, we will understand AIDA model in detail. I. AIDA model:  Attention: The marketing communication should generate attention towards the product. In this stage customer is having the need; Organization should provide solution from their communication.    Interest: Once the customer provides enough attention towards the communication, organization should stimulate it to create interest. Desire: The interest created should be forced in the customer mind so that he will develop desire towards the product. Action: Strong desires should be turned into action. Hence company should provide the advantages of purchasing of the product in their communication messages. II. Deciding the message content. Message content must have any one of the following appeals Emotional appeal: Positive emotional appeal or negative emotional appeals are strong tools used to intensify the purchasing activity of the customer. Positive emotions like love, pride, joy and humor are used in the message. Following are the advertisement where such attributes of positive emotions used. Moral appeal: These are concerned towards public health or environment or social responsibility. For example, Shell lubricants show its commitment towards environment in their advertisements. III. Message format: How message should look and stimulate the interest. Selecting the channels of communications The communicator may use company sales people, reference groups, blogs, RSS, webinar, online communities and social networking sites to promote their products. These media are called as personal communication channels.

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The word of mouth campaigns buzz marketing and viral marketing are some examples of personal communication channels. Word of mouth communication: the personal communication between customers and their reference groups about the product. Buzz marketing: The marketing technique in which organizations create opinion leaders (people whose opinion are sought by others) and spread the product information to others. For example, Gmail Google did no marketing, they spent no money. They created scarcity by giving out Gmail accounts only to a handful of "power users." Other users who aspired to be like these power users "lusted" for a Gmail account and this manifested itself in their bidding for Gmail invites on eBay. Demand was created by limited supply; the cachet of having a Gmail account caused the word of mouth, rather than any marketing activities by Google. Viral marketing: The marketing technique of using social networks on the internet to create the brand image. Viral marketing is a phenomenon that facilitates and encourages people to send messages to others voluntarily Viral promotions may take the form of video clips, interactive Flash games, images, or even text messages. For example, Cadbury's Dairy Milk 2007 Gorilla advert was heavily popularized on YouTube and Face book. The communicators are using mass media like print (Newspaper, magazine, journals) Broadcast (radio, television) Outdoor (hoardings, Bill board posters) and online (email, communities, groups, websites) to communicate their product attributes. Selecting the message source Messages communicated by the celebrities and proper sources have high credibility among the target consumers. Many companies use well known actors and actresses, cricket players, and even cartoon characters to promote their advertisements. ColgatePalmolive well known FMCG company used Indian Dental Association‘s (IDA) recommendation to promote their toothpaste. As we have seen earlier Rahul Dravid, Amitabh Bachan and Karishma Kapoor are used as sources for Reebok, Reyd and Tayolr, and Dabur Amla respectively. Companies should be very careful about the selection of the sources. If the product character does not match with sources, then product will fail in the market. Recently Pepsi dropped its sources Rahul
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Dravid and Sourav Ganguly and selected Rohit Sharma for the promotion campaigns Target Customer Feedback The communicator collects the feedback on the promotion campaign to assess how many of target customer able to see, hear or read the message. This stage helps communicator to understand how many of target customers actually able to recall the message? And among them how many of them really purchased it. Some companies go further and ask the customer to provide suggestion to improve the promotion campaign.

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Q.4 Select any mobile handset and mobile company and then evaluate its positioning strengths or weakness in terms of attributes, benefits, values, brand name and brand equity. Answer: Here I have selected the mobile company HTC. HTC is one of the leading manufacturers of PDAs and smart phones around the world. It is one of the fastest growing companies in the world and maximizing its market share rapidly. Evaluation of HTC I have evaluated HTC through SWOT analysis. SWOT is the tool to see that where organization stands, which areas required improvement, which areas required serious consideration, which would be the source of growth, which things need avoidance and so on. The SWOT of HTC will help to understand the position of HTC in the market. Strengths It is the leading maker of PDAs smart phones in the world. It is establishing in the world rapidly and attracting more and more customers from all around the world. It has successfully recognized its brand name and has got the good image about the product quality. Its products are considered as reliable products and its gaining more and more success rapidly. The research and development in HTC has been given more importance as it is the way to know what customers want. There is the strong set up of research and development in HTC. The portfolio of HTC is quite wide it has made 42 smart phones product up till now. The customer base of HTC is also very wide as it caters the customer national and international both and the no. of customers also increasing as the time passes. Weaknesses As its weakness, HTC is not a very much recognized brand in the market. Its competitors, which are Nokia, Blackberry, Apple etc. are way much popular and have acquired a big share of market. Another weakness is that, they got a very small range of cell phones models as compared to their competitor, Nokia, which has got a huge variety of smart phones, from cheapest to most expensive one.

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Opportunities HTC is providing Touch Screen Cell Phones, which are very much in demand these days, most of the people, who use expensive cell phones, goes for Touch Screen. On the other side, Since HTC collaborated with Google and launched their cell phones with Google Android OS install in it, their market also got increased. It is also said that, because of the name of Google, HTC got popularity. Google popularity plays a huge role in the success of HTC. 3G technology has been launched all over the world, and is getting launched in other countries as well. Since HTC cell phones have got 3G technology support, so it is an opportunity for HTC company that where ever the 3G technology launches, HTC‘s cell phones demands would raise their. Threats The major threat to HTC, or any other Smartphone company, is a very much popular and highly in-demand brand, Apple iPhone. It is a big hindrance in the demand of HTC cell phones. Apart from that, the financial crunch could also be the threat for the company. That‘s because HTC smart phones are expensive and are not affordable for many of the smart phones users. On the other side Nokia‘s smart phones are way cheaper, and are providing the same characteristics, which a Smartphone should have. So lot of people prefers Nokia on HTC.

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Q.5

What is retailing? Explain the functions and different types of retailing

with its key features

Answer: Retail consists of the sale of goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may be individuals or businesses. In commerce, a "retailer" buys goods or products in large quantities from manufacturers or importers, either directly or through a wholesaler, and then sells smaller quantities to the end-user. Retail establishments are often called shops or stores. Retailers are at the end of the supply chain. Manufacturing marketers see the process of retailing as a necessary part of their overall distribution strategy. The term "retailer" is also applied where a service provider services the needs of a large number Functions of retailing: Retailers play a significant role as a conduit between manufacturers, wholesalers, suppliers and consumers. In this context, they perform various functions like sorting, breaking bulk, holding stock, as a channel of communication, storage, advertising and certain additional services. Sorting Manufacturers usually make one or a variety of products and would like to sell their entire inventory to a few buyers to redu7ce costs. Final consumers, in contrast, prefer a large variety of goods and services to choose from and usually buy them in small quantities. Retailers are able to balance the demands of both sides, by collection an assortment of goods from different sources, buying them in sufficiently large quantities and selling them to consumers in small units. The above process is referred to as the sorting process. Through this process, retailers undertake activities and perform functions that add to the value of the products and services sold to the consumer. Supermarkets in the US offer, on and average, 15,000 different items from 500 companies. Customers are able to choose from a wide range of designs, sizes and brands from just one location. If each manufacturer had a separate store for its own products, customers would have to visit several stores to complete their shopping. While
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all retailers offer an assortment, they specialize in types of assortment offered and the market to which the offering is made. Westside provides clothing and accessories, while a chain like Nilgiris specializes in food and bakery items. Shoppers‘ Stop targets the elite urban class, while Pantaloons is targeted at the middle class. Breaking Bulk Breaking bulk is another function performed by retailing. The word retailing is derived from the French word retailer, meaning ‗to cut a piece off‘. To reduce transportation costs, manufacturers and wholesalers typically ship large cartons of the product, which are then tailored by the retailers into smaller quantities to meet individual consumption needs. Holding Stock Retailers also offer the service of holding stock for the manufacturers. Retailers maintain an inventory that allows for instant availability of the product to the consumers. It helps to keep prices stable and enables the manufacturer to regulate production. Consumers can keep a small stock of products at home as they know that this can be replenished by the retailer and can save on inventory carrying costs. Additional Services Retailers ease the change in ownership of merchandise by providing services that make it convenient to buy and use products. Providing product guarantees, after-sales service and dealing with consumer complaints are some of the services that add value to the actual product at the retailers‘ end. Retailers also offer credit and hire-purchase facilities to the customers to enable them to buy a product now and pay for it later. Retailers fill orders, promptly process, deliver and install products. Salespeople are also employed by retailers to answer queries and provide additional information about the displayed products. The display itself allows the consumer to see and test products before actual purchase. Retail essentially completes transactions with customers. Channel of Communication Retailers also act as the channel of communication and information between the wholesalers or suppliers and the consumers. From advertisements, salespeople and display, shoppers learn about the characteristics and features of a product or services offered. Manufacturers, in their turn, learn of sales
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forecasts, delivery delays, and customer complaints. The manufacturer can then modify defective or unsatisfactory merchandise and services. Transport and Advertising Functions Small manufacturers can use retailers to provide assistance with transport, storage, advertising and pre-payment of merchandise. This also works the other way round in case the number of retailers is small. The number of functions performed by a particular retailer has a direct relation to the percentage and volume of sales needed to cover both their costs and profits. There are the following types of retailers: 1. Department stores - very large stores offering a huge assortment of "soft" and "hard goods; often bear a resemblance to a collection of specialty stores. A retailer of such store carries variety of categories and has broad assortment at average price. They offer considerable customer service. 2. Discount stores - tend to offer a wide array of products and services, but they compete mainly on price offers extensive assortment of merchandise at affordable and cut-rate prices. Normally retailers sell less fashion-oriented brands. 3. Warehouse stores - warehouses that offer low-cost, often high-quantity goods piled on pallets or steel shelves; warehouse clubscharge a membership fee; 4. Variety stores or "dollar stores" - these offer extremely low-cost goods, with limited selection; 5. Demographic - retailers that aim at one particular segment (e.g., high-end retailers focusing on wealthy individuals). 6. Mom-And-Pop (or Kirana Stores as they call them in India): is a retail outlet that is owned and operated by individuals. The range of products are very selective and few in numbers. These stores are seen in local community often are family-run businesses. The square feet area of the store depends on the store holder. 7. Specialty stores: A typical speciality store gives attention to a particular category and provides high level of service to the customers. A pet store that specializes in selling dog food would be regarded as a specialty store. However, branded stores also come under this format. For example if a

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customer visits a Reebok or Gap store then they find just Reebok and Gap products in the respective stores. 8. General store - a rural store that supplies the main needs for the local community; 9. Convenience stores: is essentially found in residential areas. They provide limited amount of merchandise at more than average prices with a speedy checkout. This store is ideal for emergency and immediate purchases. 10. Hypermarkets: provides variety and huge volumes of exclusive merchandise at low margins. The operating cost is comparatively less than other retail formats. A classic example is the Metro™ in Bangalore. 11. Supermarkets: is a self service store consisting mainly of grocery and limited products on non food items. They may adopt a Hi-Lo or an EDLP strategy for pricing. The supermarkets can be anywhere between 20,00040,000 square feet. Example: SPAR™ supermarket. 12. Malls: has a range of retail shops at a single outlet. They endow with products, food and entertainment under a roof. Example: Sigma mall and Garuda mall in Bangalore, Express Avenue in Chennai and GIP mall in Noida. 13. Category killers or Category Specialist: By supplying wide assortment in a single category for lower prices a retailer can "kill" that category for other retailers. For few categories, such as electronics, the products are displayed at the centre of the store and sales person will be available to address customer queries and give suggestions when required. Other retail format stores are forced to reduce the prices if a category specialist retail store is present in the vicinity. For example: Pai Electronics™ store in Bangalore, Tata Croma. 14. E-retailers: The customer can shop and order through internet and the merchandise are dropped at the customer's doorstep. Here the retailers use drop shipping technique. They accept the payment for the product but the customer receives the product directly from the manufacturer or a wholesaler. This format is ideal for customers who do not want to travel to retail stores and are interested in home shopping. However it is important for the customer to be wary about defective products and non secure credit card transaction. Example: Amazon and Ebay.

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15. Vending Machines: This is an automated piece of equipment wherein customers can drop in the money in machine and acquire the products. For example: Soft drinks vending at Bangalore Airport. Some stores take a no frills approach, while others are "mid-range" or "high end", depending on what income level they target. Other types of retail store include:  Automated Retail stores are self service, robotic kiosks located in airports, malls and grocery stores. The stores accept credit cards and are usually open 24/7. Examples include Zoom Shops and Redbox.     Big-box stores encompass larger department, discount, general merchandise, and warehouse stores. Convenience store - a small store often with extended hours, stocking everyday or roadside items; General store - a store which sells most goods needed, typically in a rural area; of individuals, such as a public utility, like electric power.

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Q6 a. What is CRM? What are its objectives?
Answer:

CRM stands for Customer Relationship Management. It is a process or methodology used to learn more about customers' needs and behaviors in order to develop stronger relationships with them. There are many technological components to CRM, but thinking about CRM in primarily technological terms is a mistake. The more useful way to think about CRM is as a process that will help bring together lots of pieces of information about customers, sales, marketing effectiveness, responsiveness and market trends. CRM helps businesses use technology and human resources to gain insight into the behavior of customers and the value of those customers. Customer relationship management is a widely-implemented strategy for managing a company‘s interactions with customers, clients and sales prospects. It involves using technology to organize, automate, and synchronize business processes—principally sales activities, but also those

for marketing, customer service, and technical support. The overall goals are to find, attract, and win new clients, nurture and retain those the company already has, entice former clients back into the fold, and reduce the costs of marketing and client service. Customer relationship management describes a company-wide business strategy including customer-interface departments as well as other departments. The use of a CRM system will confer several advantages to a company:
    

Quality and efficiency Decrease in overall costs Decision support Enterprise agility Customer Attention

Objectives of CRM CRM, the technology, along with human resources of the company, enables the company to analyze the behavior of customers and their value. The main areas of focus are as the name suggests: customer ,relationship , and the

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management of relationship and the main objectives to implement CRM in the business strategy are:
    

To simplify marketing and sales process To make call centers more efficient To provide better customer service To discover new customers and increase customer revenue To cross sell products more effectively

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Q.6.b Write a short note on Brand development. Answer: Brand Development If your company isn‘t tapping the power within your brand development strategy, you‘re losing money. Plain and simple! A well-conceived brand development strategy has the power to inspire both your employees to do their jobs better and your customers to remain loyal to your brand. Sound like something you need? Brand Identity Guru Inc. is the place to get it. Brand development is Brand Identity Guru‘s Inc. specialty. Our brand reinvention process helps companies of any size truly understand their brand development (where it is and where it needs to be) and leverage it to its fullest advantage. The process is called the Brand Masterpiece. After going through the Brand Masterpiece process, your new brand development strategy will positively affect your company‘s bottom line guaranteed. Why is Successful Branding So Important Today? Though brand development is by no means a new idea, today consumers have more access to information and more choices than ever before. The result is higher expectations, and the brand‘s message must captivate the consumer immediately. Companies seeking to experience long-term success will have to create the most compelling, relevant, and consistent brand experiences for their customers. In order to successfully develop the most effective branding strategy, a firm understanding of what a brand is must first be answered. The Brand Is Everything According to Scott Bedbury, a leading branding consultant,―A brand is the sum of the good, the bad, the ugly, and the off-strategy. It is defined by your best product as well as your worst product. It is defined by award-winning advertising as well as by the god-awful ads that have somehow slipped through the cracks, got approved, and, not surprisingly, sank into oblivion. The Brand‘s Creed The development of a branding strategy must begin with identifying the brand‘s (the business‘) core values. These are qualities which an organization deems most important. For instance, an organization or business may identify

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its core values to include: honesty, integrity, excellent communication, and client satisfaction. Consideration for these values should not be taken lightly for these values represent the ―creed‖ for the business and become the cornerstone for developing the brand‘s proposition. And though the brand‘s proposition may change from time to time, the brand‘s core values should never change. Great Strategy Begins with Great Research Once the brand‘s core values have been identified, the road towards effective brand proposition development begins. To ensure a successful outcome, comprehensive and objective research involving at the minimum, the brand‘s strengths and weaknesses, the target audience, and the competition will be conducted. If the resources are available, research should also involve extensive observation into the brand‘s industry, its history, the current market picture, and potential growth and direction. The Target Audience Holds the Keys to Your Brand‘s Success Truly understanding your target audience, in addition to having a realistic assessment of what your product offers, is invaluable in assisting you in the development of a successful brand proposition. This information will also provide insight into how to convey this message in an engaging, relevant, and consistent manner. Developing a Brand Statement (Brand Proposition) From the research, development of the brand statement, often referred to as a brand proposition, commences. The brand statement is a promise. It states that if you use our services / products, we promise that this or that will occur, whether it is the satisfaction from wearing well designed clothing, to the comfort of choosing the services of particular financial planner. The brand proposition must be clearly understood, engaging, presented in the right context for relevancy, and offer a solution to the target audience‘s current wants and needs. ―Dude Your Getting a …..‖ An example of effective brand propositioning can be found in a well known computer company‘s line of television commercials. The commercials successfully convey the brand's statement that goes something like this; if you buy our PC‘s, we'll customize the computer to fit all your needs, you'll have
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access to our award winning customer service, you‘ll have less hassle to worry about, and best of all, you'll be cool. Deliver the Unexpected When developing a brand proposition, never let your brand‘s promise be one that is already expected; this is a sure way to NOT stand out from your competitors. Advertising efforts that utilize adjectives like ―good‖, or ―nice‖ are sure to fail when seeking to be both engaging and unique. Your brand proposition should convey a message that is:         Aligned with the brand‘s core values Clear, Engaging, Unique, and Relevant to your target audience Able to incorporate an element of positive emotional attachment that is better than just "good‖ Echoed within your business, internally and externally Consistent across multiple marketing and advertising mediums (print, online presence, etc) Continually reinforced within the organization so that your employees consistently deliver what is promised Echoed by strategic partners Able to adapt to a changing marketplace

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MB0047

Management Information Systems
Assignment Set- 1

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1. What is MIS? Define the characteristics of MIS? What are the basic Functions of MIS? Give some Disadvantage of MIS? Answer: Management Information System (MIS): It is a system or process that provides information needed to manage organizations effectively Management information systems are regarded to be a subset of the overall internal controls procedures in a business, which cover the application of people, documents, technologies, and procedures used by management accountants to solve business problems such as costing a product, service or a business-wide strategy. Management information systems are distinct from

regular information systems in that they are used to analyze other information systems applied           in operational activities in the organization.

Characteristics of MIS It supports transaction handling and record keeping. It is also called as integrated database Management System which supports in major functional areas. It provides operational, tactical, and strategic level managers with east access to timely but, for the most, structured information. It supports decision –making function which is a vital role of MIS. It is flexible which is needed to adapt to the changing needs of the organization. It promotes security system by providing only access to authorized users. MIS not only provides statistical and data analysis but also works on the basis on MBO (management by objectives). MIS is successfully used for measuring performance and making necessary change in the organizational plans and procedures. It helps to build relevant and measurable objectives, monitor results, and send alerts. Coordination: MIS provides integrated information so that all the departments are aware of the problem and requirements of the other departments. This helps in equal interaction of the different centres and connects decision centres of the organization.
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  

Duplication of data is reduced since data is stored in the central part and same data can be used by all the related departments. MIS eliminates redundant data. It helps in maintaining consistency of data. It is divided into subsystems. Handlings with small systems are much easier than an entire system. This helps in giving easy access of data, accuracy and better information production.



MIS assembles, process, stores, Retrieves, evaluates and disseminates the information.

Function of MIS The main functions of MIS are: Data Processing: Gathering, storage, transmission, processing and getting output of the data. Making the data into information is a major task. Prediction: Prediction is based on the historical data by applying the prior knowledge methodology by using modern mathematics, statistics or simulation. Prior knowledge varies on the application and with different departments. Planning: Planning reports are produced based on the enterprise restriction on the companies and helps in planning each functional department to work reasonably. Control: MIS helps in monitoring the operations and inspects the plans. It consists of differences between operation and plan with respect to data belonging to different functional department. It controls the timely action of the plans and analyzes the reasons for the differences between the operations and plan. Thereby helps managers to accomplish their decision making task successfully. Assistance: It stores the related problems and frequently used information to apply them for relative economic benefits. Through this it can derive instant answers of the related problem. Database: This is the most important function of MIS. All the information is needs a storage space which can be accessed without causing any anomalies in the data. Integrated Database avoids the duplication of data and thereby reduces redundancy and hence consistency will be increased.

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The major function of MIS lies in application of the above functions to support the managers and the executives in the organization in decisionmaking. Disadvantages of MIS The following are some of the disadvantages of MIS: 1. MIS is highly sensitive: MIS is very helpful in maintaining logging information of an authorized user. This needs to monitor constantly. 2. Quality of outputs is governed by quality of inputs. 3. MIS budgeting: There is difficulty in maintaining indirect cost and overheads. Capturing the actual cost needs to have an accrual system having true costs of outputs which is extremely difficult. It has been difficult to establish definite findings. 4. MIS is not flexible to update itself for the changes. 5. The changes in the decision of top level management decrease its effectiveness. 6. Information accountability is based on the qualitative factors and the factors like morality, confidence or attitude will not have any base.

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2. Explain Knowledge based system? Explain DSS and OLAP with example? Answer: Knowledge based system Knowledge based systems are artificial intelligent tools working in a narrow domain to provide intelligent decisions with justification. Knowledge is acquired and represented using various knowledge representation techniques rules, frames and scripts. The basic advantages offered by such system are documentation of knowledge, intelligent decision support, self learning, reasoning and explanation. Knowledge-based systems are systems based on the methods and techniques of Artificial Intelligence. Their core components are:
 

knowledge base acquisition mechanisms

Knowledge-Based Systems focuses on systems that use knowledge-based techniques to support human decision-making, learning and action. Such systems are capable of cooperating with human users and so the quality of support given and the manner of its presentation are important issues. The emphasis of the journal is on the practical significance of such systems in modern computer development and usage. As well as being concerned with the implementation of knowledge-based systems, the journal covers the design process, the matching of requirements and needs to delivered systems and the organisational implications of introducing such technology into the workplace and public life, expert systems, application of knowledge-based methods, integration with

conventional technologies, software tools for KBS construction, decisionsupport mechanisms, user interactions, organisational issues, knowledge acquisition, knowledge representation, languages and programming

environments, knowledge-based implementation techniques and system architectures. Decision Support Systems (DSS) DSS is an interactive computer based system designed to help the decision makers to use all l the resources available and make use in the decision making. In management many a time problems arise out of situations for
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which simple solution may not be possible. To solve such problems you may have to use complex theories. The models that would be required to solve such problems may have to be identified. DSS requires a lot of managerial abilities and managers judgment. You may gather and present the following information by using decision support application: Accessing all of your current information assets, including legacy and relational data sources, cubes, data warehouses, and data marts  Comparative sales figures between one week and the next  Projected revenue figures based on new product sales assumptions  The consequences of different decision alternatives, given past experience in a context that is described. Examples of DSS Manager may sometimes find it difficult to solve such problems. E.g. – In a sales problem if there is multiple decision variables modeled as a simple linear problem but having multiple optima, it becomes difficult to take a decision. Since any of the multiple optima would give optimum results. But the strategy to select the one most suitable under conditions prevailing in the market, requires skills beyond the model. It would take some trials to select a best strategy. Under such circumstances it would be easy to take decision if a ready system of databases of various market conditions and corresponding appropriate decision is available. A system which consists of database pertaining to decision making based on certain rules is known as decision support system. It is a flexible system which can be customized to suit the organization needs. It can work in the interactive mode in order to enable managers to take quick decisions. You can consider decision support systems as the best when it includes high-level summary reports or charts and allow the user to drill down for more detailed information. A DSS has the capability to update its decision database. Whenever manager feels that a particular decision is unique and not available in the system, the manager can chose to update the database with such decisions. This will strengthen the DSS to take decisions in future. There is no scope for errors in decision making when such systems are used as aid to decision making. DSS is a consistent decision making system. It can be
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

used to generate reports of various lever management activities. It is capable of performing mathematical calculations and logical calculation depending upon the model adopted to solve the problem. You can summarize the benefits of DSS into following:          Improves personal efficiency Expedites problem solving Facilitates interpersonal communication Promotes learning or training Increases organizational control Generates new evidence in support of a decision Creates a competitive advantage over competition Encourages exploration and discovery on the part of the decision maker Reveals new approaches to thinking about the problem space

Online Analytical Processing (OLAP) OLAP refers to a system in which there are predefined multiple instances of various modules used in business applications. Any input to such a system results in verification of the facts with respect to the available instances. A nearest match is found analytically and the results displayed form the database. The output is sent only after thorough verification of the input facts fed to the system. The system goes through a series of multiple checks of the various parameters used in business decision making. OLAP is also referred to as a multi dimensional analytical model. Many big companies use OLAP to get good returns in business.

The querying process of the OLAP is very strong. It helps the management take decisions like which month would be appropriate to launch a product in the market, what should be the production quantity to maximize the returns, what should be the stocking policy in order to minimize the wastage etc. A model of OLAP may be well represented in the form of a 3D box. There are six faces of the box. Each adjoining faces with common vertex may be considered to represent the various parameter of the business situation under consideration. E.g.: Region, Sales & demand, Product etc.

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3. What are Value Chain Analysis & describe its significance in MIS? Explain what is meant by BPR? What is its significance? How Data warehousing & Data mining is useful in terms of MIS? Answer: Value Chain Analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business. Influential work by Michael Porter suggested that the activities of a business could be grouped under two headings: (1) Primary Activities - those that are directly concerned with creating and delivering a product (e.g. component assembly); and (2) Support Activities, which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management). It is rare for a business to undertake all primary and support activities. Value Chain Analysis is one way of identifying which activities are best undertaken by a business and which are best provided by others ("out sourced"). Significance of Value Chain Analysis in MIS What activities a business undertakes is directly linked to achieving competitive advantage. For example, a business which wishes to outperform its competitors through differentiating itself through higher quality will have to perform its value chain activities better than the opposition. By contrast, a strategy based on seeking cost leadership will require a reduction in the costs associated with the value chain activities, or a reduction in the total amount of resources used. There is always a mention about what IT contributes to corporate strategy. It was recognized that corporation achieved a significant competitive advantage by adopting suitable IT concepts in building up their strategy. It quickly become incumbent on its competitors to neutralize that advantage, and hence to avoid ‗competitive disadvantage‘ (Vitate 1986, warner 1987, Brouns eau 1990). The notion of ‗competitive advantage‘ and ‗contestable‘ competitive advantage came in light (Clemons 1986, Feeny andlves 1989, clborra 1992). Though many kinds of advantages which can possibly be derived from

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innovative use of IT, it is possible to quickly neutralize by others. A distinction needs to be made between the sustainable of the original advantage, and of any derived advantage. An enhancement to the porter framework of competitive strategy was the notion of ‗alliance‘ (Barrett and Konsyanski 1982, Gummesson 1987, EDP Analyzed 1987, Johnston and vitale 1988, Rockart and short 1989 Wiseman 1989, Konsyanski and Mcfarian 1990 ford 1990, Bowersox 1990). This referred to chains or clusters of organizations which collaborate in order to gain competitive advantage over others, similar organizations, or to neutralize the advantage of one or more competitor organizations. The innovation in IT and its strategies importance to enterprise is compatible with the company‘s existing characteristics and advantages (Beath and Ives 1986, Clemons and Row 1987, Ives a and Vitale 1988, Hopper 1990). One policies and outline of factors that influence organization‘s strategic goals is summarized in the following levels. Business Process Re-engineering The existing system in the organization is totally re examined and radically modified for incorporating the latest technology. This process of change for the betterment of the organization is called as Business process re-engineering. This process is mainly used to modernize and make the organizations efficient. BPR directly affects the performance. It is used to gain an understanding the process of business and to understand the process to make it better and redesigning and thereby improving the system. BPR is mainly used for change in the work process. Latest software is used and accordingly the business procedures are modified, so that documents are worked upon more easily and efficiently. This is known as workflow management. Significance of BPR Business process are a group of activities performed by various departments, various organizations or between individuals that is mainly used for transactions in business. There may be people who do this transaction or tools. We all do them at one point or another either as a supplier or customer. You will really appreciate the need of process improvement or change in the organizations conduct with business if you have ever waited in the queue for a longer time to purchase 1 kilo of rice from a Public Distribution Shop (PDS71 | 5 2 1 0 2 3 1 8 1

ration shop). The process is called the check-out process. It is called process because uniform standard system has been maintained to undertake such a task. The system starts with forming a queue, receiving the needed item form the shop, getting it billed, payment which involves billing, paying amount and receiving the receipt of purchase and the process ends up with the exit from the store. It is the transaction between customer and supplier.

The above activities takes place between the customer and supplier which forms the process steps this example explains the business process. The business process may be getting admission to the college and graduating from the college, building house, and implementing new technology to an organization (Example EDUNXT in SMUDE), etc. Business process reengineering is a major innovation changing the way organizations conduct their business. Such changes are often necessary for profitability or even survival. Data warehousing Data Warehouse is defined as collection of database which is referred as relational database for the purpose of querying and analysis rather than just transaction processing. Data warehouse is usually maintained to store heuristic data for future use. Data warehousing is usually used to generate reports. Integration and separation of data are the two basic features need to be kept in mind while creating a data warehousing. The main output from data warehouse systems are; either tabular listings (queries) with minimal formatting or highly formatted "formal" reports on business activities. This becomes a convenient way to handle the information being generated by various processes. Data warehouse is an archive of information collected from wide multiple sources, stored under a unified scheme, at a single site. This data is stored for a long time permitting the user an access to archived data for years. The data stored and the subsequent report generated out of a querying process enables decision making quickly. This concept is useful for big companies having plenty of data on their business processes. Big companies have bigger problems and complex problems. Decision makers require access to information from all sources. Setting up queries on individual processes may be tedious and inefficient. Data warehouse may be considered under such

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situations. Data Mining Data mining is primarily used as a part of information system today, by companies with a strong consumer focus -retail, financial, communication, and marketing organizations. It enables these companies to determine relationships among "internal" factors such as price, product positioning, or staff skills, and "external" factors such as economic indicators, competition, and customer demographics. And, it enables them to determine the impact on sales, customer satisfaction, and corporate profits. Finally, it enables them to "drill down" into summary information to view detail transactional data. With data mining, a retailer could use point-of-sale records of customer purchases to send targeted promotions based on an individual's purchase history. By mining demographic data from comment or warranty cards, the retailer could develop products and promotions to appeal to specific customer segments. Data Mining is a collaborative tool which comprises of database systems, statistics, machine learning, visualization and information science. Based on the data mining approach used, different techniques form the other discipline can be used such as neural networks, artificial intelligence, fuzzy logic, knowledge representation, high performance Data mining refers to extracting or mining knowledge from large amount of data. There may be other terms which refer data mining such as knowledge mining, knowledge extraction, data/pattern analysis, data archaeology, and data dredging.

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4. Explain DFD & Data Dictionary? Explain in detail how the information requirement is determined for an organization? Answer: Data flow diagrams represent the logical flow of data within the system. DFD do not explain how the processes convert the input data into output. They do not explain how the processing takes place. DFD uses few symbols like circles and rectangles connected by arrows to represent data flows. DFD can easily illustrate relationships among data, flows, external entities an store. DFD can also be drawn in increasing levels of detail, starting with a summary high level view and proceeding o more detailed lower level views. Rounded rectangles represent processes that transform flow of data or work to be done. Rectangle represents external agents- the boundary of the system. It is source or destination of data. The open-ended boxes represent data stores, sometimes called files or databases. These data stores correspond to all instances of a single entity in a data model. Arrow represents data flows, inputs and outputs to end from the processes. A number of guideline should be used in DFD  Choose meaningful names for the symbols on the diagram.  Number the processes consistently. The numbers do not imply the sequence.  Avoid over complex DFD.  Make sure the diagrams are balanced Data flow diagrams represent the logical flow of data within the system. DFD do not explain how the processes convert the input data into output. They do not explain how the processing takes place. DFD uses few symbols like circles and rectangles connected by arrows to represent data flows. DFD can easily illustrate relationships among data, flows, external entities an stores. DFD can also be drawn in increasing levels of detail, starting with a summary high level view views A number of guidelines should be used in constructing DFD.
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and

proceeding

o

more

detailed

lower

level

   

Choose meaningful names for the symbols on the diagram. Number the processes consistently. The numbers do not imply the sequence. Avoid over complex DFD. Make sure the diagrams are balanced.

Data Dictionary The data dictionary is used to create and store definitions of data, location, format for storage and other characteristics. The data dictionary can be used to retrieve the definition of data that has already been used in anapplication. The data dictionary also stores some of the description of data structures, such as entities, attributes and relationships. It can also have software to update itself and to produce reports on its contents and to answer some of the queries. A schedule is made for the development of the system. While preparing theschedule due consideration is given to the importance of the system in the overall information requirement. Due regard is also given to logical system development. For example, it is necessary to develop the accounting system first and then the analysis. Further, unless the systems are fully developed their integration is not possible. This development schedule is to be weighed against the time scale for achieving certain information requirement linked to a business plan. If these are not fully met, it is necessary to revise the time scheduleand also the development schedule, whenever necessary decisions with the financial decisions. The system development schedule is linked with the information requirements which in turn, are linked with the goals and objectives of the business. The selection of the architecture, the approach to the information system development and the choice of hardware and software are the strategic decisions in the design and development of the MIS in the organisation. The organisations which do not care to take proper decisions in these areas suffer from over-investment, under-utilisation and are not able to meet the critical information requirements.

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Determination of information requirement for an organization

The issue of information requirements of an organization and their specifications span two isolated territories. One territory is that of organization and management and the other belongs to technicians. There is a considerable gap between these two territories. Research in requirements engineering (technician's side) has primarily concentrated on designing and developing formal languages to document and analyze user requirements, once they have been determined. This research has ignored the organizational issues involved in information requirements determination. Research in the field of organization and management has addressed the organizational issues which affect information requirements of an organization. Various frameworks reported in the literature provide insights, but they cannot be considered as methods of determining requirements. Little work has been done on the process of determining requirements. This process must start with the understanding of an organization and end with a formal specification of information requirements. Here, it is worth emphasizing the fact that the process of determining and specifying information requirements of an organization is very different from the process of specifying design requirements of an information system. Therefore, program design methodologies, which are helpful in designing a system are not suitable for the process of determining and specifying information requirements of an organization. This paper discusses the state of the art in information requirements determination methodologies. Excluded are those methodologies which emphasize system design and have little to offer for requirements determination of an organization. The two levels of information requirements There are two levels at which information requirements need to be established in order to design and implement computer-based information systems: 1. The organizational information requirements to define an overall information system structure and to specify a portfolio of applications and data bases. 2. The detailed information requirements for an application. The requirements determination process is similar for the two levels, and the same set of requirements determination strategies apply to both. However, the
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scope and detail differences in requirements suggest that some methods of requirements determination are more suitable for the less-detailed, broaderscope, organization-level information requirements, whereas other methods may be more suitable for the more detailed application information requirements. Some methodologies can be applied to requirements determination at both levels. An overall plan or master plan is necessary for the formal information system in an organization (often termed a management information system). The master plan is important to information system development for reasons such as the following: 1. The plan defines an overall information system structure or architecture. 2. The plan establishes a portfolio of applications that will provide complete coverage of needs. 3. Clear, well-defined boundaries are established for individual applications. The interfaces among applications are defined so that applications can interact as part of the larger system. 4. The plan specifies an orderly development of applications based on organizational priorities and the necessary physical development sequence. 5. If the overall system architecture includes shared data bases, sets of data requirements are defined Strategies for information requirements determination A strategy was defined earlier as an approach for achieving an objective. Strategies are general approaches; methods and methodologies are the detailed means for doing it. There are four strategies for determining information requirements: (1) asking, (2) deriving from an existing information system, (3) synthesis from characteristics of the utilizing system, and (4) discovering from experimentation with an evolving information system. In a specific case, one of the strategies may be used as the primary strategy; others may be used as supplementary strategies. The set of four strategies is applicable both to organizational information requirements determination and to application requirements. For each strategy, therea re a number of methods andm ethodologies that are in use (or have been proposed). In the discussion of strategies, some methods or methodologies will be used as illustrations; no attempt will be made to provide a comprehensive list.
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In addition to strategies and methods for eliciting requirements, there are also strategies and methods for obtaining assurance that requirements are complete and correct and that system as implemented meet those requirements. A complete strategy for information system analysis, design, and implementation should include both an eliciting strategy and a quality assurance strategy. The selection of an assurance strategy has been described elsewhere; this paper focuses only on the strategy for eliciting or determining the information requirements. It is not directed at life cycle or other methodologies for assurance.

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5. What is ERP? Explain its existence before and its future after? What are the advantages & Disadvantages of ERP? What is Artificial Intelligence? How is it different from Neural Networks? Answer: Enterprise Resource Planning To be considered an ERP system, a software package must provide the function of at least two systems. For example, a software package that provides both payroll and accounting functions could technically be considered an ERP software package. However, the term is typically reserved for larger, more broadly based applications. The introduction of an ERP system to replace two or more independent applications eliminates the need for external interfaces previously required between systems, and provides additional benefits that range from standardization and lower maintenance to easier and/or greater reporting capabilities.

Examples of modules in an ERP which formerly would have been standalone applications include: Manufacturing, Supply Chain, Financials,

Customer Relationship Management (CRM), Human Resources, Warehouse Management and Decision Support System. Enterprise Resource Planning is a term originally derived from manufacturing resource planning that followed material requirements planning . MRP evolved into ERP when "routings" became a major part of the software architecture and a company's capacity planning activity also became a part of the standard software activity. ERP systems typically handle the manufacturing, logistics, distribution, inventory, shipping, invoicing, and accounting for a company. Enterprise Resource Planning or ERP software can aid in the control of many business activities, like sales, marketing, delivery, billing, production, inventory management, quality management, and human resource management. ERP systems saw a large boost in sales in the 1990s as companies faced the Y2K problem in their legacy systems. Many companies took this opportunity to replace their legacy information systems with ERP systems. This rapid growth in sales was followed by a slump in 1999, at which time most companies had already implemented their Y2K solution.

ERPs are often incorrectly called back office systems indicating that
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customers and the general public are not directly involved. This is contrasted with front office systems like customer relationship management (CRM) systems that deal directly with the customers, or the eBusiness systems such as eCommerce, eGovernment, eTelecom, and eFinance, or supplier relationship management (SRM) systems. ERPs are cross-functional and enterprise wide. All functional departments that are involved in operations or production are integrated in one system. In addition to manufacturing, warehousing, logistics, and information

technology, this would include accounting, human resources, marketing, and strategic management. ERP II means open ERP architecture of components. The older, monolithic ERP systems became component oriented. EAS – Enterprise Application Suite is a new name for formerly developed ERP systems which include (almost) all segments of business, using ordinary Internet browsers as thin clients. ERP Before and After Before Prior to the concept of ERP systems, departments within an organization (for example, the human resources (HR)) department, the payroll department, and the financial department) would have their own computer systems. The HR computer system (often called HRMS or HRIS) would typically contain information on the department, reporting structure, and personal details of employees. The payroll department would typicallycalculate and store paycheck information. The financial department would typically store financial transactions for the organization. Each system would have to rely on a set of common data to communicate with each other. For the HRIS to send salary information to the payroll system, an employee number would need to be assigned and remain static between the two systems to accurately identify an employee. The financial system was not interested in the employee-level data, but only in the payouts made by the payroll systems, such as the tax payments to various authorities, payments for employee benefits to providers, and so on. This provided complications. For instance, a person could not be paid After ERP software, among other things, combined the data of formerly
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in

the

payroll

system

without

an

employee

number.

separateapplications. This made the worry of keeping numbers in synchronization across multiple systems disappears. It standardized and reduced the number of software specialties required within larger organizations. Advantages and Disadvantages Advantages – In the absence of an ERP system, a large manufacturer may find itself with many software applications that do not talk to each other and do not effectively interface. Tasks that need to interface with one another may involve: • A totally integrated system • The ability to streamline different processes and workflows • The ability to easily share data across various departments in an organization • Improved efficiency and productivity levels • Better tracking and forecasting • Lower costs • Improved customer service Disadvantages – Many problems organizations have with ERP systems are due to inadequate investment in ongoing training for involved personnel, including those implementing and testing changes, as well as a lack of corporate policy protecting the integrity of the data in the ERP systems and how it is used. While advantages usually outweigh disadvantages for most organizations implementing an ERP system, here are some of the most common obstacles experienced: Usually many obstacles can be prevented if adequate investment is made and adequate training is involved, however, success does depend on skills and the experience of the workforce to quickly adapt to the new system. • Customization in many situations is limited • The need to reengineer business processes • ERP systems can be cost prohibitive to install and run • Technical support can be shoddy • ERP's may be too rigid for specific organizations that are either new or want

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to move in a new direction in the near future.

Artificial Intelligence
Artificial Intelligence is the science and technology based on various functions to develop a system that can think and work like a human being. It can reason, analyze, learn, conclude and solve problems. The systems which use this type of intelligence are known as artificial intelligent systems and their intelligence is referred to as artificial intelligence. It was said that the computer don‘t have common sense. Here in AI, the main idea is to make the computer think like human beings, so that it can be then said that computers also have common sense. More precisely the aim is to obtain a knowledge based computer system that will help managers to take quick decisions in business.

Artificial Intelligence can be classified into various branches like Natural Language Processing (NLP), Speech Recognition, Automated Programming, Machine Learning, Pattern Recognition and Probabilistic Networks. Most of the software developed for AI have been through Prolog, C++, Java and LISP. These programming languages provide facility of creating various functions of business activity, extension of a function, handling dynamic situations in business, providing uniformity in application etc. A business decision making process depends upon the level of risk and uncertainty involved in the problem. To model the uncertainty and risk of natural language used in developing a AI for business application the concept of fuzzy logic is used. For problems related finance applications apart from fuzzy logic concepts, two other concepts of AI are being researched. These are genetic algorithm and chaotic models. AI is also being applied to the functions of marketing like – Selling, Forecasting, and Communication etc. Artificial Intelligence and Neural Networks Artificial intelligence is a field of science and technology based on disciplines such as computer science, biology, psychology, linguistics, mathematics and engineering. The goal of AI is to develop computers that can simulate the ability to think, see, hear, walk, talk and feel. In other words, simulation of computer functions normally associated with human intelligence, such as reasoning, learning and problem solving.

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AI can be grouped under three major areas: cognitive science, robotics and natural interfaces. Cognitive science focuses on researching on how the human brain works and how humans think and learn. Applications in the cognitive science area of AI include the development of expert systems and other knowledge-based systems that add a knowledge base and some reasoning capability to information systems. Also included are adaptive learning systems that can modify their behavior based on information they acquire as they operate. Chess-playing systems are some examples of such systems.

Fussy logic systems can process data that are incomplete or ambiguous. Thus, they can solve semi-structured problems with incomplete knowledge by developing approximate inferences and answers, as humans do.

Neural network software can learn by processing sample problems and their solutions. As neural nets start to recognize patterns, they can begin to program themselves to solve such problems on their own. Neural networks are computing systems modelled after the human brain‘s mesh like network of interconnected processing elements, called neurons. The human brain is estimated to have over 100 billion neuron brain cells. The neural networks are lot simpler in architecture. Like the brain, the interconnected processors in a neural network operate in parallel and interact dynamically with each other. This enables the network to operate and learn from the data it processes, similar to the human brain. That is, it learns to recognize patterns and relationships in the data. The more data examples it receives as input, the better it can learn to duplicate the results of the examples it processes. Thus, the neural networks will change the strengths of the interconnections between the processing elements in response to changing patterns in the data it receives and results that occur.

For example, neural network can be trained to learn which credit characteristics result in good or bad loans. The neural network would continue to be trained until it demonstrated a high degree of accuracy in correctly duplicating the results of recent cases. At that point it would be trained enough to begin making credit evaluations of its own.

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6. Distinguish between closed decision making system & open decision making system? What is ‗What – if‗ analysis? Why is more time spend in problem analysis & problem definition as compared to the time spends on decision analysis? Answer: Closed decision-making system: The decision-making systems can be classified in a number of ways. There are two types of systems based on the manager's knowledge about the environment. If the manager operates in a known environment then it is a closed decision-making system. The conditions of the closed decision-making system are:    The manager has a known set of decision alternatives and knows their outcomes fully in terms of value, if implemented. The manager has a model, a method or a rule whereby the decision alternatives can be generated, tested, and ranked for selection. The manager can choose one of them, based on some goal or objective criterion. Few examples are a product mix problem, an examination system

to declare pass or fail, or an acceptance of the fixed deposits. Open decision-making system If the manager operates in an environment not known to him, then the decision-making system is termed as an open decision-making system. The conditions of this system in contrast closed decision-making system are: a) The manager does not know all the decision alternatives. b) The outcome of the decision is also not known fully. The knowledge of the outcome may be a probabilistic one. c) No method, rule or model is available to study and finalise one decision among the set of decision alternatives. d) It is difficult to decide an objective or a goal and, therefore, the manager resorts to that decision, where his aspirations or desires are met best. Deciding on the possible product diversification lines, the pricing of a new product, and the plant location, are some decision-making situations which fall in the category of the open decision-making systems.

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The MIS tries to convert every open system to a closed decision-making system by providing information support for the best decision. The MIS gives the information support, whereby the manager knows more and more about environment and the outcomes, he is able to generate the decision alternatives, test them and select one of them. A good MIS achieves this. What if analysis Decisions are made using a model of the problem for developing various solution alternatives and testing them for best choice. The model is built with some variables and relationship between variables. In reality, the considered values of variables or relationship in the model may not hold good and therefore solution needs to be tested for an outcome, if the considered values of variables or relationship change. This method of analysis is called 'what if analysis.' For example, in decision-making problem about determining inventory control parameters (EOQ, Safety Stock, Maximum Stock, Minimum Stock, Reorder level) lead time is assumed fairly constant and stable for a planning period. Based on this, the inventory parameters are calculated. Inventory manager wants to know how the cost of holding inventory will be affected if lead time is reduced by one week or increased by one week. The model with changed lead time would compute the cost of holding inventory under new conditions. Such type of analysis can be done for purchase price change, demand forecast variations and so on. Such analysis helps a manager to take more learned decisions. ‗What if analysis‘ creates confidence in decision-making model by painting a picture of outcomes under different conditions? Decision Analysis A decision is made but such decision needs to be analysed for conditions and assumptions considered in the decision model. The process is executed through analytical modelling of problem and solution.

Problem Definition The starting point of a problem definition is the information gathered in the problem analysis stage. The different aspects surrounding the design problem have been analysed and should be taken into account in the problem definition. For defining a problem this implies that it is not sufficient to describe the
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existing state. Therefore, we speak consciously of the situation someone is or is not content with. A description of the situation is therefore a description of a state plus the relevant causal model(s), including the assumed patterns of behaviour of the people and organizations involved. A situation is only a problem if the problem-owner wishes to, and want to do something about it. This implies that a situation must be conceivable that is more desirable than the present one: the goal situation. The existing situation, however, can also be formulated in such a manner that a problem does arise. A problem definition is usually set up at the end of the problem analysis phase. Problem Analysis You can use problem analysis to gather information that helps you determine the nature of a problem encountered on your system. The problem analysis information is used to: • Determine if you can resolve the problem yourself. • Gather sufficient information to communicate with a service provider and quickly determine the service action that needs to be taken. The method of finding and collecting error information depends on the state of the hardware at the time of the failure. This procedure directs you to one of the following places to find error information: • Hardware Management Console (HMC) error logs • The operating system's error log • The control panel • Advanced System Management Interface (ASMI) error logs Hence more time is spent Problem Analysis and Problem Definition.

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MB0048

Operation Research
Assignment Set- 2

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1. What are the essential characteristics of Operation Research? Mention different phases in an Operation Research study. Point out some limitations of O.R? Answer: Characteristics of Operations Research Operations research, an interdisciplinary division of mathematics and science, uses statistics, algorithms and mathematical modelling techniques to solve complex problems for the best possible solutions. This science is basically concerned with optimizing maxima and minima of the objective functions involved. Examples of maxima could be profit, performance and yield. Minima could be loss and risk. The management of various companies has benefited immensely from operations research. Operations research is also known as OR. It has basic characteristics such as systems orientation, using interdisciplinary groups, applying scientific methodology, providing quantitative answers, revelation of newer problems and the consideration of human factors in relation to the state under which research is being conducted. Systems Orientation This approach recognizes the fact that the behavior of any part of the system has an effect on the system as a whole. This stresses the idea that the interaction between parts of the system is what determines the functioning of the system. No single part of the system can have a bearing effect on the whole. OR attempts appraise the effect the changes of any single part would have on the performance of the system as a whole. It then searches for the causes of the problem that has arisen either in one part of the system or in the interrelation parts. Interdisciplinary groups The team performing the operational research is drawn from different disciplines. The disciplines could include mathematics, psychology, statistics, physics, economics and engineering. The knowledge of all the people involved aids the research and preparation of the scientific model. Application of Scientific Methodology OR extensively uses scientific means and methods to solve problems. Most OR studies cannot be conducted in laboratories, and the findings cannot be
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applied to natural environments. Therefore, scientific and mathematical models are used for studies. Simulation of these models is carried out, and the findings are then studied with respect to the real environment. New Problems Revealed Finding a solution to a problem in OR uncovers additional problems. To obtain maximum benefits from the study, ongoing and continuous research is necessary. New problems must be pursued immediately to be resolved. A company looking to reduce costs in manufacturing might discover in the process that it needs to buy one more component to manufacture the end product. Such a scenario would result in unexpected costs and budget overruns. Ensuring flexibility for such contingencies is a key characteristic of OR. Provides Quantitative Answers The solutions found by using operations research are always quantitative. OR considers two or more options and emphasizes the best one. The company must decide which option is the best alternative for it. Human Factors In other forms of quantitative research, human factors are not considered, but in OR, human factors are a prime consideration. People involved in the process may become sick, which would affect the company‘s output. Phases of operation research Formulate the problem: This is the most important process, it is generally lengthy and time consuming. The activities that constitute this step are visits, observations, research, etc. With the help of such activities, the O.R. scientist gets sufficient information and support to proceed and is better prepared to formulate the problem. This process starts with understanding of the organizational climate, its objectives and expectations. Further, the alternative courses of action are discovered in this step. Develop a model: Once a problem is formulated, the next step is to express the problem into a mathematical model that represents systems, processes or environment in the form of equations, relationships or formulas. We have to identify both the static and dynamic structural elements, and device mathematical formulas to represent the interrelationships among elements. The proposed model may be field tested and modified in order to work under
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stated environmental constraints. A model may also be modified if the management is not satisfied with the answer that it gives. Select appropriate data input: Garbage in and garbage out is a famous saying. No model will work appropriately if data input is not appropriate. The purpose of this step is to have sufficient input to operate and test the model. Solution of the model: After selecting the appropriate data input, the next step is to find a solution. If the model is not behaving properly, then updating and modification is considered at this stage. Validation of the model: A model is said to be valid if it can provide a reliable prediction of the system‘s performance. A model must be applicable for a longer time and can be updated from time to time taking into consideration the past, present and future aspects of the problem. Implement the solution: The implementation of the solution involves so many behavioural issues and the implementing authority is responsible for resolving these issues. The gap between one who provides a solution and one who wishes to use it should be eliminated. To achieve this, O.R. scientist as well as management should play a positive role. A properly implemented solution obtained through O.R. techniques results in improved working and wins the management support. Limitations of OR


Dependence on an Electronic Computer: O.R. techniques try to find out an optimal solution taking into account all the factors. In the modern society, these factors are enormous and expressing them in quantity and establishing relationships among these require

voluminous calculations that can only be handled by computers.


Non-Quantifiable Factors: O.R. techniques provide a solution only when all the elements related to a problem can be quantified. All relevant variables do not lend themselves to quantification. Factors that cannot be quantified find no place in O.R. models.



Distance between Manager and Operations Researcher: O.R. being specialist‘s job requires a mathematician or a statistician, who might not be aware of the business problems. Similarly, a manager fails to understand the complex working of O.R. Thus, there is a gap between the two.

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

Money and Time Costs: When the basic data are subjected to frequent changes, incorporating them into the O.R. models is a costly affair. Moreover, a fairly good solution at present may be more desirable than a perfect O.R. solution available after sometime.



Implementation: Implementation of decisions is a delicate task. It must take into account the complexities of human relations and behaviour.

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2. What are the common methods to obtain an initial basic feasible solution for a transportation problem whose cost and requirement table is given? Give a stepwise procedure for one of them?
Answer:

Transportation Problem & its basic assumption This model studies the minimization of the cost of transporting a commodity from a number of sources to several destinations. The supply at each source and the demand at each destination are known. The transportation problem involves m sources, each of which has available. i (i = 1, 2, …..,m) units of homogeneous product and n destinations, each of which requires bj (j = 1, 2…., n) units of products. Here a i and bj are positive integers. The cost cij of transporting one unit of the product from the ith source to the jth destination is given for each i and j.

The objective is to develop an integral transportation schedule that meets all demands from the inventory at a minimum total transportation cost. It is assumed that the total supply and the total demand are equal. i.e. Condition (1)The condition (1) is guaranteed by creating either a fictitious destination with a demand equal to the surplus if total demand is less than the total supply or a (dummy) source with a supply equal to the shortage if total demand exceeds total supply. The cost of transportation from the fictitious destination to all sources and from all destinations to the fictitious sources are assumed to be zero so that total cost of transportation will remain the same.

Common methods to obtain an initial basic feasible solution for a transportation problem: 1. North West Corner Rule Step 1: The first assignment is made in the cell occupying the upper left hand (north west) corner of the transportation table. The maximum feasible amount is allocated there, that is x11 = mm (a1,b1) So that either the capacity of origin 0, is used up or the requirement at destination D1 is satisfied or both. This value of x11 is entered in the upper
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left hand corner (small square) of cell (1, 1) in the transportation table.

Step 2: If b1 > a1 the capacity of origin 0, is exhausted but the requirement at destination D is still not satisfied , so that at least one more other variable in the first column will have to take on a positive value. Move down vertically to the second row and make the second allocation of magnitude x21 = mm (a2, b1 — x21) in the cell (2,1). This either exhausts the capacity of origin 02 or satisfies the remaining demand at destination D. If a1 > b1 the requirement at destination D1 is satisfied but the capacity of origin O is not completely exhausted. Move to the right horizontally to the second column and make the second allocation of magnitude x2 = mm (a1 — x11, b2) in the cell (1, 2) . This either exhausts the remaining capacity of origin 0 or satisfies the demand at destination D2. If b1 = a1, the origin capacity of 01 is completely exhausted as well as the requirement at destination is completely satisfied. There is a tie for second allocation, An arbitrary tie breaking choice is made. Make the second allocation of magnitude x12 = mm (a1 — a1, b2) = 0 in the cell (1, 2) or x21 = mm (a2, b1 — b2) = 0 in the cell (2, 1).

Step 3: Start from the new north west corner of the transportation table satisfying destination requirements and exhausting the origin capacities one at a time, move down towards the lower right corner of the transportation table until all the rim requirements are satisfied. 2. Minimum Matrix Method (MMM) Matrix minimum method is a method for computing a basic feasible solution of a transportation problem where the basic variables are chosen according to the unit cost of transportation. Steps : 1. Identify the box having minimum unit transportation cost (cij). 2. If there are two or more minimum costs, select the row and the column corresponding to the lower numbered row.
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3. If they appear in the same row, select the lower numbered column. 4. Choose the value of the corresponding xij as much as possible subject to the capacity and requirement constraints. 5. If demand is satisfied, delete the column . 6. If supply is exhausted, delete the row. 7. Repeat steps 1-6 until all restrictions are satisfied. 3.Vogel‘s Approximation Method (VAM) The Vogel approximation method is an iterative procedure for computing a basic feasible solution of the transportation problem. Steps: 1. Identify the boxes having minimum and next to minimum transportation cost in each row and write the difference (penalty) along the side of the table against the corresponding row. 2. Identify the boxes having minimum and next to minimum transportation cost in each column and write the difference (penalty) against the corresponding column 3. Identify the maximum penalty. If it is along the side of the table, make maximum allotment to the box having minimum cost of transportation in that row. If it is below the table, make maximum allotment to the box having minimum cost of transportation in that column. 4. If the penalties corresponding to two or more rows or columns are equal, select the top most rows and the extreme left column.

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3. a. What are the properties of a game? Explain the ―best strategy‖ on the basis of minmax criterion of optimality. Answer: Games describe situations where there is potential for conflict and for cooperation. Many business situations, as well as many other social

interactions have both of these features. The games studied in game theory are well-defined mathematical objects. A game consists of a set of players, a set of moves (or strategies) available to those players, and a specification of payoffs for each combination of strategies. Most cooperative games are presented in the characteristic function form, while the extensive and the normal forms are used to define noncooperative games. A game in extensive form is defined by a set of players, i = 1, ..., n, a game tree, information sets, outcomes, and payoffs. The game tree defines the sequence and availability of moves in every decision node. Each decision node is identified with the player that decides at that point. We assume there are only a finite number of possible moves at every node. Each branch of the tree ends at an event that we call an outcome. The utility associated with the outcome for every player we call his payoff. Information sets contain one or more nodes. They show the extent of knowledge of a player about his position in the tree. A player only knows that he is 3 in an information set, which may contain more than one nodes. Information sets allow a game of simultaneous moves to be described by a game tree, despite the sequential nature of game trees. A game where each information set contains only one point is called a game of perfect information. (Otherwise it is of imperfect information.) Minmax criterion of optimality In the theory of simultaneous games, a minimax strategy is a mixed strategy which is part of the solution to a zero-sum game. In zero-sum games, the minimax solution is the same as the Nash equilibrium. Minimax (sometimes minmax) theory, game is a decision rule used in decision the

theory, statistics and philosophy for minimizing

possible loss while maximizing the potential gain. Alternatively, it can be
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thought of as maximizing the minimum gain (maximin). Originally formulated for two-player zero-sum game theory, covering both the cases where players take alternate moves and those where they make simultaneous moves, it has also been extended to more complex games and to general decision making in the presence of uncertainty. The minimax theorem states: For every two-person, zero-sum game with finitely many strategies, there exists a value V and a mixed strategy for each player, such that (a) Given player 2′s strategy, the best payoff possible for player 1 is V, and (b) Given player 1′s strategy, the best payoff possible for player 2 is −V. Equivalently, Player 1′s strategy guarantees him a payoff of V regardless of Player 2′s strategy, and similarly Player 2 can guarantee himself a payoff of −V. The name minimax arises because each player minimizes the maximum payoff possible for the other—since the game is zero-sum, he also maximizes his own minimum payoff. This theorem was established by John von Neumann, who is quoted as saying ―As far as I can see, there could be no theory of games … without that theorem … I thought there was nothing worth publishing until the Minimax Theorem was proved‖. Example The following example of a zero-sum game, where A and B make simultaneous moves, illustrates minimax solutions. Suppose each player has three choices and consider the payoff matrix for A displayed at right. Assume the payoff matrix for B is the same matrix with the signs reversed (i.e. if the choices are A1 and B1 then B pays 3 to A). Then, the minimax choice for A is A2 since the worst possible result is then having to pay 1, while the simple minimax choice for B is B2 since the worst possible result is then no payment. However, this solution is not stable, since if B believes A will choose A2 then B will choose B1 to gain 1; then if A believes B will choose B1 then A will choose A1 to gain 3; and then B will choose B2; and eventually both players will realize the difficulty of making a choice. So a more stable strategy is needed.
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Some choices are dominated by others and can be eliminated: A will not choose A3 since either A1 or A2 will produce a better result, no matter what B chooses; B will not choose B3 since some mixtures of B1 and B2 will produce a better result, no matter what A chooses. A can avoid having to make an expected payment of more than 1/3 by choosing A1 with probability 1/6 and A2 with probability 5/6, no matter what B chooses. B can ensure an expected gain of at least 1/3 by using a randomized strategy of choosing B1 with probability 1/3 and B2 with probability 2/3, no matter what A chooses. These mixed minimax strategies are now stable and cannot be improved.

B chooses B1 B chooses B2 B chooses B3 A chooses A1 A chooses A2 A chooses A3 +3 −1 −4 −2  0 −3 +2 +4 +1

b. State the assumptions underlying game theory. Discuss its importance to business decisions. Answer: Basic Elements and Assumptions of Game Theory As with any concept in economics, there is the assumption of rationality. There is also an assumption of maximization. It is assumed that players within the game are rational and will strive to maximize their payoffs in the game. (The question of rationality has been applied to investor behavior as well. When examining games that are already set up, it is assumed on your behalf that the payouts listed include the sum of all payoffs that are associated with that outcome. This will exclude any "what if" questions that may arise. The number of players in a game can theoretically be infinite, but most games will be put into the context of two players. One of the simplest games is a sequential game involving two players.

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Game theory sees us all as "players." A game theorist specifies objectives that reflect our motivations and designs rules that reflect the constraints we face— an exercise that is more of an art than a science. Given these objectives and rules, game theoretic arguments generate "equilibrium" outcomes. If these outcomes resemble the ones we observe in the world, the theory may help us to understand the reasons for these outcomes—and may suggest institutional changes that will lead to outcomes in which we are all better off. Importance of game theory in business decisions Economists have long used game theory to analyze a wide array of economic phenomena, including auctions, bargaining, duopolies, fair division, oligopolies, social network formation, and voting systems and to model across such broad classifications as mathematical economics, behavioral economics, political economy, and industrial organization. This research usually focuses on particular sets of strategies known as equilibria in games. These "solution concepts" are usually based on what is required by norms of rationality. In non-cooperative games, the most famous of these is the Nash equilibrium. A set of strategies is a Nash equilibrium if each represents a best response to the other strategies. So, if all the players are playing the strategies in a Nash equilibrium, they have no unilateral incentive to deviate, since their strategy is the best they can do given what others are doing. The payoffs of the game are generally taken to represent the utility of individual players. Often in modeling situations the payoffs represent money, which presumably corresponds to an individual's utility. This assumption, however, can be faulty. A prototypical paper on game theory in economics begins by presenting a game that is an abstraction of some particular economic situation. One or more solution concepts are chosen, and the author demonstrates which strategy sets in the presented game are equilibria of the appropriate type. Economists and business professors suggest two primary uses: descriptive and prescriptive. In the last twenty-five years, game theory has been applied to a growing number of practical problems: from antitrust analysis to monetary policy; from
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the design of auction institutions to the structuring of incentives within firms; from patent races to dispute resolution. The purpose of Game Theory and Business Applications is to expand these applications of game theory into a broad and meaningful view of the way business decisions can be modelled and analyzed. The chapter contents embrace a wide variety of business functions from accounting to finance, to operations, to strategy, and to organizational design. In addition, specific application areas include numerous kinds of market competition, bargaining, auctions and competitive bidding. All of these applications involve competitive decision settings, specifically situations where a number of economic agents in pursuit of their respective self-interests take actions that together affect all of their fortunes. In the language of game theory, players take actions consistent with the given `rules of the game,' and these joint actions determine final outcomes and payoffs. As this volume demonstrates, game theory provides a compelling guide for business strategy. The first section of this volume discusses game-theoretic applications in four functional areas of business: finance, accounting, operations management and information systems, and organization design. The second section considers competitive strategies in `imperfect' markets. Using cooperative and noncooperative game-theoretic approaches, these four chapters consider various topics: spatial competition, signaling of product quality, trust and cooperation in ongoing relationships, strategic behavior in bargaining, and the `balance of power' between the firm and its buyers and suppliers. The last section of the book deals in detail with auctions and competitive bidding institutions. The emphasis is on the contributions of game theory to both auction theory and practice. Topics considered include optimal auctions, bidder collusion, and the design of institutions for selling the radio spectrum and trading electrical power.

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4. a. Compare CPM and PERT explaining similarities and mentioning where they mainly differ.
Answer:

The Critical Path Method (CPM) Critical Path Analysis and PERT are powerful tools that help you to schedule and manage complex projects. They were developed in the 1950s to control large defence projects, and have been used routinely since then. As with Gantt Charts, Critical Path Analysis (CPA) or the Critical Path Method (CPM) helps you to plan all tasks that must be completed as part of a project. They act as the basis both for preparation of a schedule, and of resource planning. During management of a project, they allow you to monitor achievement of project goals. They help you to see where remedial action needs to be taken to get a project back on course. Within a project it is likely that you will display your final project plan as a Gantt Chart (using Microsoft Project or other software for projects of medium complexity or an excel spreadsheet for projects of low complexity).The benefit of using CPA within the planning process is to help you develop and test your plan to ensure that it is robust. Critical Path Analysis formally identifies tasks which must be completed on time for the whole project to be completed on time. It also identifies which tasks can be delayed if resource needs to be reallocated to catch up on missed or overrunning tasks. The disadvantage of CPA, if you use it as the technique by which your project plans are communicated and managed against, is that the relation of tasks to time is not as immediately obvious as with Gantt Charts. This can make them more difficult to understand. PERT (Program Evaluation and Review Technique) PERT is a variation on Critical Path Analysis that takes a slightly more skeptical view of time estimates made for each project stage. To use it, estimate the shortest possible time each activity will take, the most likely length of time, and the longest time that might be taken if the activity takes longer than expected.

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Use the formula below to calculate the time to use for each project stage: shortest time + 4 x likely time + longest time ----------------------------------------------------------6 This helps to bias time estimates away from the unrealistically short timescales normally assumed. An effective Critical Path Analysis can make the difference between success and failure on complex projects. It can be very useful for assessing the importance of problems faced during the implementation of the plan. PERT is a variant of Critical Path Analysis that takes a more skeptical view of the time needed to complete each project stage Comparision between CPM and PERT CPM (Critical Path Method) & PERT(Program Evaluation and Review Technique) 1)PERT is a probabilistic tool used with three while CPM is a deterministic tool, with only single Estimating the duration for completion of estimate of duration. 2)This tool is basically a tool for planning but CPM also allows and explicit estimate of and control of time. costs in addition to time, therefore CPM can control both time and cost. 3)PERT is more suitable for R&D related and CPM is best suited for routine and those projects where the project is performed for projects where time and cost estimates can the first time and the estimate of duration be accurately calculated are uncertain. 4) The probability factor i major in PERT but the deterministic factor is more so values or so outcomes may not be exact outcomes are generally accurate and realistic.

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b. What is meant by graphing in Network Analysis? Answer: Network analysis Network analysis can be classified into the following: Social network analysis Social network analysis examines the structure of relationships between social entities. These entities are often persons, but may also be groups, organizations, nation states, web sites, scholarly publications. Since the 1970s, the empirical study of networks has played a central role in social science, and many of the mathematical and statistical tools used for studying networks have been first developed in sociology. Amongst many other applications, social network analysis has been used to understand the diffusion of innovations, news and rumors. Similarly, it has been used to examine the spread of both diseases and health-related behaviors. It has also been applied to the study of markets, where it has been used to examine the role of trust in exchange relationships and of social mechanisms in setting prices. Similarly, it has been used recruitment into political movements and social organizations. It has also been used to conceptualize scientific disagreements as well as academic prestige. More recently, network analysis (and its close cousin traffic analysis) has gained a significant use in intelligence, for uncovering insurgent networks of both hierarchical and leaderless nature. Biological network analysis With the recent explosion of publicly available high throughput biological data, the analysis of molecular networks has gained significant interest. The type of analysis in this content are closely related to social network analysis, but often focusing on local patterns in the network. For example network motifs are small subgraphs that are over-represented in the network. Activity motifs are similar over-represented patterns in the attributes of nodes and edges in the network that are over represented given the network structure.

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Link analysis Link analysis is a subset of network analysis, exploring associations between objects. An example may be examining the addresses of suspects and victims, the telephone numbers they have dialed and financial transactions that they have partaken in during a given timeframe, and the familial relationships between these subjects as a part of police investigation. Link analysis here provides the crucial relationships and associations between very many objects of different types that are not apparent from isolated pieces of information. Computer-assisted or fully automatic computer-based link analysis is increasingly employed by banks and insurance agencies in fraud detection, by telecommunication operators in telecommunication network analysis, by medical sector in epidemiology and pharmacology, in law enforcement investigations, by search engines for relevance rating (and conversely by the spammers for spamdexing and by business owners for search engine optimization), and everywhere else where relationships between many objects have to be analyzed. Network robustness The structural robustness of networks is studied using percolation theory. When a critical fraction of nodes are removed the network becomes fragmented into small clusters. This phenomena is called percolation represent a type of phase transition with critical exponents. Web link analysis Several Web search ranking algorithms use link-based centrality metrics, including (in order of appearance) Marchiori's Hyper Search, Google's PageRank, Kleinberg's HITS algorithm, the CheiRank and TrustRank algorithms. Link analysis is also conducted in information science and communication science in order to understand and extract information from the structure of collections of web pages. For example the analysis might be of the interlinking between politicians' web sites or blogs. Centrality measures Information about the relative importance of nodes and edges in a graph can be obtained through centrality measures, widely used in disciplines like
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[4]

and it

sociology. For example, eigenvector centrality uses the eigenvectors of the adjacency matrix to determine nodes that tend to be frequently visited. Use of graphing in network analysis Graph-tool is an efficient Python module for manipulation and statistical analysis of graphs (a.k.a. networks). Contrary to most other python modules with similar functionality, the core data structures and algorithms of graphtool are implemented in C++, making extensive use of meta programming, based heavily on the Boost Graph Library. This confers a level of performance which is comparable (both in memory usage and computation time) to that of a pure C++ library. Features of graph
 

Creation and manipulation of directed or undirected graphs. Association of arbitrary information to the vertices, edges or even the graph itself, by means of property maps.



Filter vertices and/or edges "on the fly", such that they appear to have been removed.

  

Support for dot and GraphML formats. Convenient and powerful graph drawing based on Graphviz. Support histogram, for typical statistical measurements: histogram, degree/property vertex-vertex

combined

degree/property

correlations, assortativity, average vertex-vertex shortest path, etc.


Support for several graph-theoretical algorithms: such as graph isomorphism, subgraph isomormism, minimum spanning tree, connected components, dominator tree, maximum flow, etc.

 

Support for several centrality measures. Support for clustering coefficients, as well as network motif statistics and community structure detection.



Generation of random graphs, with arbitrary degree distribution and correlations.

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

Support for well-established network models: Price, Barabási-Albert, Geometric Networks, Multidimensional lattice graph, etc.

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5. Consider the following transportation problem: Godowns Factory A B C D Demand It is not 1 7 9 11 9 60 possible 2 3 4 7 11 2 6 20 quantity 5 6 Stock available 60 20 90 50

5 7 11 6 10 6 10 9 20 40 to transport any

5 3 5 2 8 9 12 40 40 from factory B to Godown

Determine: (a) Initial solution by Vogel’s approximation method. (b) Optimum basic feasible solution. Answer: (a) Initial solution by Vogel’s approximation method. Table (1) Godowns Factory A 1 7 2 5 (20) B C D Demand 9 11 9 60 11 10 10 20 (0) (5) 6 6 9 40 11 2 6 20 2 9 40 5 8 12 40 (40) 20 90 50 220 (1) (4) (3) 3 7 4 7 5 5 6 3 Stock available 60 (2)

( 2)

(1)

(4)

(3)

(2)

After allocating (20) in Cell (A2), we will cross the second column as it gets 0 value in second column of Demand. Then we will find a new Table (2): Table (2):Resulting reduced transportation table 7 7 7 5 3 40 (2) 9 6 11 5 20 (1) 11 6 2 2 8 90 (4) (20) (70) 9 9 6 9 12 50 (3) 60 40 20 40 40 (0) (2) (1) (4) (3) (2) After allocating (20) in Cell (3, 3), we will cross the third column as it gets 0 value in third column of Demand. Then we will find a new Table (3):
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7 9 11 9 60 (2)

Table (3): Resulting reduced transportation table 7 5 3 40 6 5 20 6 2 8 70 (40) (30) 9 9 12 50 40 40 (0) 40 (1) (3) (2)

(2) (1) (4) (3)

After allocating (40) in Cell (3, 3), will cross the third column as it gets 0 value in second column of Demand. Then we will find a new Table (4): Table (4): Resulting reduced transportation table 7 7 3 (40) 40 (0) (4) 9 6 5 20 (1) 11 6 8 30 (2) 9 9 12 50 (3) 60 40 40 (0) (2) (1) (2) After allocating (40) in Cell (1, 3), we will cross the third column and the first row as it gets 0 value in column and row. Then we will find a new Table (5): Table (5): Resulting reduced transportation table 9 6 20 (3) 11 6 (30) 30 (0) (5) 9 9 50 60 40 (10) (2) (3) After allocating (30) in Cell (2, 2), we will cross the third column as it gets 0 value in third column. Then we will find a new Table (5): Table (5): Resulting reduced transportation table 9 6 (10) 20 (10) (3) 9 9 50 (0) 60 10 (0) (0) (3) After allocating (10) in Cell (1, 2), we will cross the second column as it gets 0 value in second column. Then we will find a new Table (6): Table (6): Resulting reduced transportation table 9 (10) 10 (0) 9 50 60 (50) Eventually, the basic feasible solution is obtained as shown in Table (7) Table (7): Resulting reduced transportation table 9 (50) 50 (0) 50 (0)
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The transportation cost according to the above route is given by: 9(50)+9(10)+6(10)+6(30)+3(40)+2(40)+2(20)+5(20) = 450+90+60+180+120+80+40+100 = 1120

(b) Optimum basic feasible solution. Obtain an initial basic feasible solution to the following TP using the Matrix Minimum Method: Godowns Factory A B C D Demand 1 7 9 11 9 60 2 5 11 10 10 20 3 7 6 6 9 40 Godowns Factory A B C D Demand 1 7 (60) 9 (0) 11 (0) 9 (0) 60 (0) 2 5 (0) 11 (20) 10 (0) 10 (0) 20 (0) 3 7 (0) 6 (0) 6 (40) 9 (0) 40 (0) 4 7 (0) 11 (0) 2 (20) 6 (0) 20 (0) 5 5 (0) (0) 2 (30) 9 (10) 40 (10) (0) The transportation cost according to the above route is given by: 7(60)+11(20)+6(40)+2(20)+2(30)+9(10)+12(40) = 420+220+240+40+60+90+480 = 1550 6 3 (0) 5 (0) 8 (0) 12 (40) 40 (0) Stock available 60 (0) 20 (0) 90 (50) (30) (0) 50 (40) (0) 220 4 7 11 2 6 20 5 5 2 9 40 6 3 5 8 12 40 Stock available 60 20 90 50

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Q6. A machine operator processes five types of items on his machine each week, and must choose a sequence for them. The set-up cost per change depends on the item presently on the machine and the set-up to be made according to the following table:

A B C D E

A ∞ 4 7 3 4

B 4 ∞ 6 3 4

C 7 6 ∞ 7 5

D 3 3 7 ∞ 7

E 4 4 5 7 ∞

Answer: Solving the following Assignment Problem by Applying Hungarian method: Table 1: Assignment table B C 4 7 ∞ 6 6 ∞ 3 7 4 5 Table 2: Row-reduced matrix B C 1 4 ∞ 3 1 ∞ 0 4 0 1 Table 3: Column-reduced matrix B C 1 3 ∞ 2 1 ∞ 0 3 0 0

A B C D E

A ∞ 4 7 3 4

D 3 3 7 ∞ 7

E 4 4 5 7 ∞

A B C D E

A ∞ 1 2 0 0

D 0 0 2 ∞ 3

E 1 1 0 4 ∞

A B C D E

A ∞ 1 2 0 0

D 0 0 2 ∞ 3

E 1 1 0 4 ∞

If we assign the zeros row and column wise, only four zeros could be assigned. As number of assignments are not equal to rows present,   we have to mark the unassigned rows look for zero in that column

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    

mark the column containing crossed zero look for assigned zero in that column, mark the row containing assigned zero draw straight line through unmarked rows and marked column the number of straight lines will be equal to number of assignments From above process we will found a new table as given below: Table: 4 A ∞ 1 2 0 0 B 1 ∞ 1 0 0 C 3 2 ∞ 3 0 D 0 0 2 ∞ 3 E 1 1 0 4 ∞

A B C D E   

select minimum from uncovered elements subtract it from uncovered elements add it at the point of intersection of lines

From above process we will found a new table as given below: Table: 4 A B C D E A ∞ 0 2 0 0 B 0 ∞ 1 0 0 C 3 1 ∞ 3 0 D 0 0 3 ∞ 3 E 0 0 0 4 ∞

Minimum set up cost = 4+3+5+3+5 = 20 as detailed below: A-> B, C = 4 B-> D = 3 C-> E = 5 D-> A = 3 E-> C = 5

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MB0049

Project Management

Assignment Set- 1

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Q.1 Describe in detail the various phases of Project management life cycle.

Answer: Projects too have to chore through their life-cycles adhering to a system. Every project irrespective of its size, scope has to adapt a system. A system in the project management refers to the existence of interrelationship of activities in a project. The absence of a system makes a project die. No matter what project it is that you‘re preparing for, the project management life cycle can assist you in narrowing your focus, keeping your objectives in order and finishing said project on time, on budget and with a minimum of headaches. Every project management life cycle contains five steps: Initiation, Planning, Execution, Monitoring/Control and Closure. No one step is more important than the other and each step plays a crucial role in getting your project off the ground, through the race, down the stretch and across the finish line. Phases of Project management life cycle 1) Initiation In this first step you provide an over-view of the project in addition to the strategy you plan on using in order to achieve the desired results. During the Initiation phase you‘ll appoint a project manager who in turn will -- based on their experience and skills -- select his team members. And lest you think you need to be a Bill Gates or Donald Trump in order to see your project take on a life of it‘s own, fear not: there are some great technological tools available to get you through the Initiation phase of the project management life cycle. 2) Planning The all-important second step of any successful project management life cycle is planning and should include a detailed breakdown and assignment of each task of your project from beginning to end. The Planning Phase will also include a risk assessment in addition to defining the criteria needed for the successful completion of each task. In short, the working process is defined, stake holders are identified and reporting frequency and channels explained. 3 & 4) Execution and Control Steps Three and Four take you into deeper water. When it comes to the project management cycle, execution and control just may be the most important of
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the five steps in that it ensures project activities are properly executed and controlled. During the Execution and Control phases, the planned solution is implemented to solve the problem specified in the project's requirements. In product and system development, a design resulting in a specific set of product requirements is created. This convergence is measured by prototypes, testing, and reviews. As the Execution and Control phases progress, groups across the organization become more deeply involved in planning for the final testing, production, and support. 5) Closure By the time you reach Step Five -- Closure -- the project manager should be tweaking the little things to ensure that the project is brought to its proper conclusion. The Closure phase is typically highlighted by a written formal project review report which contains the following elements: a formal acceptance of the final product (by the client), Weighted Critical Measurements (a match between the initial requirements laid out by the client against the final delivered product), lessons learned, project resources, and a formal project closure notification to higher management. The Project Management Cycle saves time and keeps everyone on the team focused. Fortunately, modern technology provides a variety of templates that will take you from A-to-Z (or in this case from Start-to-Finish) making the Project Management Cycle user friendly no matter what your level of management experience.

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Q.2 List and explain the various aspects of programme management. Answer: There are two levels of management focus-programme and project. At the programme level, the programme management team are focused on driving change across all relevant parts of the organisation. They manage the portfolio of projects. Below that, each individual initiative will have its own leadership, focused on delivering a specific component of the solution. Programme managers often need to be politically astute promoters, negotiating with the leadership team in different part of the business to achieve the overall strategic corporate goal. Aspects of programme management

A company puts into place program management strategies to improve operating activities and stay ahead of the competition. These strategies also ensure that personnel conform to top management's specifications when completing required duties. Identification Program management incorporates the procedures, policies and methodologies that a company deploys to administer and complete a large-scale corporate initiative, says Michael F. Hanford, program management expert and chief methodologist for the IBM SUMMIT Ascendant methodologies. A program is distinct from a project, which is smaller in scope. Significance Program management plays a cardinal role in corporate decision-making processes, says Hanford. Without adequate policies in place, program personnel may be unable to complete tasks effectively and on time. Features A typical program management plan incorporates initiation and goal review, financial analysis and evaluation, personnel recruitment, progress reporting, completion review and follow-up procedures, according to program and project management expert Patrick Francis. Considerations Administering a program management plan requires analytical skills, computer systems knowledge, time-management ability, effective

communication skills, financial dexterity and attention to detail, according to Florida's Statewide Systems Engineering Management Plan.
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Q.3 Write a short note on the following: a. Project progress control tools and mechanisms b. Process in bringing about a change in project management. Answer: Project Management Control Systems 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. Project monitoring and control also provides information to support status reporting, progress measurement, forecasting and updating current cost and schedule information. During this process, it is also important to ensure that implementation of approved changes are monitored when and as they occur. As for tools and techniques used in facilitating project monitoring and control, automated project management information systems and Earned Value are

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among the most commonly used. Both are also used to update information. Earned Value also provides a means for forecasting future performance based upon past performance. Status reports are used for communicating project progress and status. Variance Analysis reports are typically used to identify variances and the information often used as a basis for determining corrective actions. The ideal suite of project management tools would provide fully integrated functionality such that:


tools share the same communication medium to the team (eg Web, Intranet, Exchange server, EMail, Client/Server)



information can be automatically transferred to other tools, or, better still, be held only once (eg team names, task lists, EMail addresses, distribution lists)



efficiency and effectiveness is supported by automatic messaging and workflow control - the applications will always prompt those responsible for action.

The tools that are used in project planning are 1. Project organization Skills and activities


Process

Prepare an outline project justification, plan and project budget

Initiation



Selection and briefing of the project team, assigning roles and organization

 

Feasibility study- risk and key success factors Project definition and project plan Communicate to the team Allocating and monitoring the work and cost Ensuring work and team cohesion Reporting progress Monitoring progress and managing changes Helping the team to solve project problems Satisfactory delivery Compiling lessons from project experience

Planning

 

Execution

  

Control

 

Close



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2.

Project structure Development plan, project tracking and oversight. Project Key personnel – Identify those business areas that are within the

3.

scope or directly interface with the scope boundary and list them in the ―Business area‖ column of the project assignment worksheet Identify the key personnel for each area and list them in the ―Person‖ column of the project assignment worksheet. 4.


Project management team

It is a senior management team, which will be accountable for the project. Identify project sponsor, client representative and technical

representative.


Stage managers- who will plan and manage the project on a day-to-day basis for this stage

 

Project coordinators- client coordinator and technical coordinator Clearly define these coordination, control activities and identify the brief suitable personnel to carry them out

5.

Key stakeholders

Identify management level personnel who are critical to the success of the project. Document the responsibilities of stakeholders 6. Stage teams Identify appropriate personnel required for the stage, define the team structure and appoint team leaders Document the time commitment and responsibilities to be performed by the team members. 7. Key resources Individuals assigned to a key resource role may work towards gathering ―Business key resources‖ and ―Technical key resources‖. They are project coordinators and team invitees. 8. Work Breakdown Structure (WBS) The entire process of a project may be considered to be made up on number of sub process placed in different stage called the Work Breakdown Structure (WBS).

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This is the technique to analyze the content of work and cost by breaking it down into its component parts. Project key stages form the highest level of the WBS, which is then used to show the details at the lower levels of the project. Each key stage comprises many tasks identified at the start of planning and later this list will have to be validated. WBS is produced by Identifying the key elements, breaking each element down into component parts and continuing to breakdown until manageable work packages have been identified. These can then be allocated to the appropriate person. The WBS does not show dependencies other than a grouping under the key stages. It is not time based- there is no timescale o the drawing. 9. Task duration

Identifying lead and lag times helps in working out task duration. Lead time: An amount of time, which a successor task can overlap with its predecessor task, i.e. the time before the completion of the predecessor at which the successor can start. Lag time: An amount of time, between a predecessor and a successor task, i.e. the time after the completion of the predecessor that the start of the successor is delayed The rate of organizational change has not slowed in recent years, and may even be increasing. The rapid and continual innovation in technology is driving changes to organizational systems and processes. Witness the startling growth of the internet, which is enabling much faster and easier access to knowledge. Add to this the increased expectations of employees as they move more freely between organizations. And, of course, globalization has seen the tearing down of previous international market barriers. It is no wonder that relentless change has become a fact of organizational life. In spite of the importance and permanence of organizational change, most change initiatives fail to deliver the expected organizational benefits. This failure occurs for a number of reasons. You might recognize one or more of these in your organization.


absence of a change champion or one who is too junior in the organization

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     

poor executive sponsorship or senior management support poor project management skills hope rested on a one-dimensional solution political infighting and turf wars poorly defined organizational objectives change team diverted to other projects

Failed organizational change initiatives leave in their wake cynical and burned out employees, making the next change objective even more difficult to accomplish. It should come as no surprise that the fear of managing change and its impacts is a leading cause of anxiety in managers. Understanding your organization and matching the initiative to your organization‘s real needs (instead of adopting the latest fad) is the first step in making your change program successful. Beyond that, recognize that bringing about organizational change is fundamentally about changing people‘s behavior in certain desired ways. As is apparent from the above list of reasons for failure, lack of technical expertise is not the main impediment to successful change. Leadership and management skills, such as visioning, prioritizing, planning, providing feedback and rewarding success, are key factors in any successful change initiative. Change Management Principles Adopting a principled approach that displays integrity and engenders openness and trust will see your change program through the hard times. Our consultancy promotes five key principles of successful change management. Adopting these principles in both spirit and practice will enhance significantly your chances of success. These principles are: 1. Sponsorship The change program has the visible support of key decision-makers throughout the organization and resources are committed to the program. Planning is conducted methodically before program implementation and committed to writing. Plans are agreed with major stakeholders and objectives, resources, roles and risks are clarified. Program objectives are stated in measurable terms and program progress is monitored and

2. Planning

3. Measurement

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communicated to major stakeholders.

4. Engagement

Stakeholders are engaged in genuine two-way dialogue in an atmosphere of openness, mutual respect and trust. Program implementers and change recipients are given the resources and supporting systems they require during and after change implementation.

5. Support structures

Change Management Process — A Structured Approach Adopting a principled approach is great, but how do you apply these change management principles in practice? Business Performance Pty Ltd has developed an easy to understand and structured approach to implementing change in your organization. We call our unique way of planning and delivering real organizational benefits the change approach. This approach consists of six phases that successful change programs progress through.

Create tension Harness support Articulate goals Nominate roles Grow capability Entrench changes

Articulate why change needs to happen and why it needs to happen within the planned timeframe. Get on board the key decision-makers, resource holders and those impacted by the change. Define in specific and measurable terms the desired organizational outcomes. Assign responsibility to specific individuals for the various tasks and outcomes. Build organizational systems and people competencies necessary for affecting the change. Institutionalize the change to make it ―the way we do things around here‖.

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Q.4 Describe in brief the various phases of the quality control process.

Answer: Quality control is a process employed to ensure a certain level of quality in a product or service. It may include whatever actions a business deems necessary to provide for the control and verification of certain characteristics of a product or service. The basic goal of quality control is to ensure that the products, services, or processes provided meet specific requirements and are dependable, satisfactory, and fiscally sound. Essentially, quality control involves the examination of a product, service, or process for certain minimum levels of quality. The goal of a quality control team is to identify products or services that do not meet a company‘s specified standards of quality. If a problem is identified, the job of a quality control team or professional may involve stopping production temporarily. Depending on the particular service or product, as well as the type of problem identified, production or implementation may not cease entirely. Phases of Quality Control Process 1. Planning for Review In this phase the main focus is on collection of data. Data is the main input requirement of any successful project information system and therefore the project. The steps to follow in this phase include:      Preparing a suitable plan for data analysis after the data has been gathered. Obtaining necessary commitment from management and team members to participate actively and take actions on findings. Ensuring that every project member gives his or her commitment to participate and deliver the service/product in the project. Ensuring that review is planned for every stage of the project. Preparing schedule for each project review.

2. Conducting the Review In this phase, the review is conducted as a planned in the preceding phase. The review leader is the project manager. The steps to conduct the review include:

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    

Preparing an agenda before the review. The agenda should be well structured in terms of time and content. Making necessary arrangements to gather inputs for the review. Incorporating points, which are external to the project. These external points have to be well structured to be reviewed. Documenting key points of the meeting. A reporter should be designated for this job. Formulating an automated checklist for the session. Make use of flipcharts to collect data from participants.

3. Taking actions on findings In this phase, a project team takes actions on the findings of the review meeting. The steps to follow in this phase include:           Determining the points which are critical to the project and its performance. Having brain storming sessions to discuss critical points. Making a list of all such items discussed and items suggested. Grouping the data into categories and then prioritise, either by group discussion or voting. Identifying action items Assigning the task to a project member or a team. Setting expectations of scope, investment, time, for each item and send a copy to the team Following up all the actions. Placing review reports in the project documents file, in the quality/productivity departments and in the library. Making reports available to managers of the life process for similar projects. 4. Do continuous improvement Continual improvement is one of the management mantras. Every organisation wants to improve continuously. It is not possible to achieve improvement unless sufficient measures are adopted to calculate improvement. The steps to ensure continuous improvement include:

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Encouraging the quality managers to look for quality themes that emerge from review meetings. The quality managers should highlight trends and de-escalate chronic problems.

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Acting on recommendations from previous projects as reviews are a continuous check process in the ―Plan-Do-Check-Act‖ cycle of a quality management cycle.

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Capturing project data to check do a retrospective analysis of the progress and improvement. Doing periodic project reviews that will trigger mid-project corrections. Conducting immediate and informal retrospective analysis after solving unexpected obstacles Understanding any impact on the remainder of the project. Recognising people for extra efforts and noteworthy contributions. Being open to attend reviews for other projects. Learning from similar ventures, warranty failures, customer surveys and experiences of other divisions and companies. Being a part of continuous organisational learning program that includes experimentation, evaluation and documentation with easy access and retrieval.

5. Identifying Critical Success Factors It is necessary that a company identifies critical factors in a project. These factors may slacken the project if not focused. Some of these success factors are discussed below. Routine tasks may be assigned to lower level team members as this may relieve the project team from wasting their skill set on routine matters. In terms of project delivery, the project office can relieve project managers of tasks, like filling forms and templates, getting these forms signed off, mailing, receiving and checking items. The project office can also help the project manager in the project scope definition, project kick-off preparation and planning tasks, through mentoring and coaching services.

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Regarding project quality reviews, the project management office adds value providing processes, tools and project management experience but any quality review process can be implemented by the team without sponsorship from the management level. These are the combining strengths that make the project manager move forward and achieve the project success. It is necessary to identify all the critical success factors. One of the critical success factors for the project quality review process implementation is to convince and sell the benefits to the management team of the organisation. The team should exhibit better control of their project portfolio a and then demonstrate better control about business profitability. 6. Results and Benefits of the Project Quality Reviews The main benefits of the project quality review are that project status is formally visible to the whole organisation. It creates awareness and room for improvement. Through reviewing, in a detailed manner, we can have a clear idea about the lack of knowledge mistakes, errors, deviations, and their reasons. The project quality reviews help the project manager to make the necessary adjustments and take the actions needed to finish the project on time, scope and budget. The entire project team including the project manager, the customer and the sponsor benefit from project quality reviews.

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Q.5 Write short note on the following Project Management tools: a. Quality Certification b. Strategic inflection point c. Force field analysis d. Information risk management Answer: Quality Certification Quality certification has become extremely important in competitive markets and especially in gaining foothold in exports. To avail the certification of ISO9000, a unit has to undertake significant costs; the small scale industries have been found wanting mainly on account of resource crunch to implement quality systems to obtain this certification. However, as a paradigm shift, SSI must make 'Quality' a way of life. It has been decided to push the quality up gradation programme in the SSI Sector in a big way. A scheme has been launched to give financial incentive to those SSI units who acquire ISO-9000 certification, by reimbursing 75% of their costs of obtaining certification, subject to a maximum of Rs. 0.75 lacs per unit. SSI units are also encouraged to participate in quality awareness and learning programmes organised specially for their benefit. Strategic inflection point Definition: the time at which an organization takes a decision to change its corporate strategy to pursue a different direction and avoid the risk of decline. The term was coined by Andy Grove of Intel to describe the period of change that affects an organization's competitive position. It also concerns the ability of organizations to recognize and adapt to change factors of major significance. Strategic Inflection Points are subtle changes in the environment. If one is not able to monitor or identify subtle signals such as New Emerging Technology or Shifts in Consumer Behavior, much before competition , one may find one‘s products and services becoming redundant and obsolete in the market place. Strategic Inflection Points generate Early Warning, which if not interpreted correctly in context to implications it can have in your industry or
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organisation, your intelligence is not competitive or it would be appropriate to say that your intelligence will not be actionable. Strategic Inflection Points can occur because of New Emerging Technology which may not be the new emerging technology in your sector or industry but it could be a new emerging technology that may be acquired or lets say adapted by your competition. Strategic Inflection Points occur because of subtle shifts that may occur in the macro environment or in the micro environment. The purpose of Five Force Analysis or SWOT Analysis or Six Force Analysis or Value Chain Analysis or Benchmarking Analysis or Service Triangle Analysis etc., is to be able to analyse information and using competitive intelligence generate Early Warning. The subtle signals have to be monitored and implications need to be drawn. Force field analysis Force field analysis is a management technique developed by Kurt Lewin, a pioneer in the field of social sciences, for diagnosing situations. It will be useful when looking at the variables involved in planning and implementing a change program and will undoubtedly be of use in team building projects, when attempting to overcome resistance to change. Lewin assumes that in any situation there are both driving and restraining forces that influence any change that may occur. Driving Forces Driving forces are those forces affecting a situation that are pushing in a particular direction; they tend to initiate a change and keep it going. In terms of improving productivity in a work group, pressure from a supervisor, incentive earnings, and competition may be examples of driving forces. Restraining Forces Restraining forces are forces acting to restrain or decrease the driving forces. Apathy, hostility, and poor maintenance of equipment may be examples of restraining forces against increased production. Equilibrium is reached when the sum of the driving forces equals the sum of the restraining forces. In our example, equilibrium represents the present level of productivity, as shown below.

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Equilibrium This equilibrium, or present level of productivity, can be raised or lowered by changes in the relationship between the driving and the restraining forces. For illustration, consider the dilemma of the new manager who takes over a work group in which productivity is high but whose predecessor drained the human resources. The former manager had upset the equilibrium by increasing the driving forces (that is, being autocratic and keeping continual pressure on subordinates) and thus achieving increases in output in the short run. By doing this, however, new restraining forces developed, such as increased hostility and antagonism, and at the time of the former manager's departure the restraining forces were beginning to increase and the results manifested themselves in turnover, absenteeism, and other restraining forces, which lowered productivity shortly after the new manager arrived. Now a new equilibrium at a significantly lower productivity is faced by the new manager. Now just assume that our new manager decides not to increase the driving forces but to reduce the restraining forces. The manager may do this by taking

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time away from the usual production operation and engaging in problem solving and training and development. In the short run, output will tend to be lowered still further. However, if commitment to objectives and technical know-how of the group are increased in the long run, they may become new driving forces, and that, along with the elimination of the hostility and the apathy that were restraining forces, will now tend to move the balance to a higher level of output. Managers are often in a position in which they must consider not only output but also intervening variables and not only short-term but also long-term goals. It can be seen that force field analysis provides framework that is useful in diagnosing these interrelationships. Information risk management Risk management is the identification, assessment, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives, whether positive or negative) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. Risks can come from uncertainty in financial markets, project failures, legal liabilities, credit risk, accidents, natural causes and disasters as well as deliberate attacks from an adversary. Several risk management standards have been developed including the Project Management Institute, the National Institute of Science and Technology, actuarial societies, and ISO standards. Methods, definitions and goals vary widely according to whether the risk management method is in the context of project management, security, engineering, industrial processes, financial portfolios, actuarial assessments, or public health and safety. The strategies to manage risk include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk. Certain aspects of many of the risk management standards have come under criticism for having no measurable improvement on risk even though the confidence in estimates and decisions increase Principles of risk management The International Organization for Standardization (ISO) identifies the following principles of risk management:
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Risk management should:
          

create value be an integral part of organizational processes be part of decision making explicitly address uncertainty be systematic and structured be based on the best available information be tailored take into account human factors be transparent and inclusive be dynamic, iterative and responsive to change be capable of continual improvement and enhancement

The management of risk data and information is key to the success of any risk management effort regardless of an organization's size or industry sector. Risk management information systems/services (RMIS) are used to support expert advice and cost-effective information management solutions around key processes such as:
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Risk identification and assessment Risk control Risk financing

Typically, RMIS facilitates the consolidation of insurance related information, such as claims from multiple sources, property values, policy information, and exposure information, into one system. Often, Risk Management Information Services/Systems (RMIS) applies primarily to ―casualty‖ claims/loss data systems. Such casualty coverage include Auto Liability, Auto Physical Damage, Workers' Compensation, General Liability and Products Liability. RMIS products are designed to provide their insured organizations and their brokers with basic policy and claim information via electronic access, and most recently, via the Internet. This information is essential for managing individual claims, identifying trends, marketing an insurance program, loss forecasting, actuarial studies and internal loss data communication within a client organization. They may also provide the tracking and management reporting capabilities to enable one to monitor and control overall cost of risk in an efficient and cost-effective manner.

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In the context of the acronym RMIS, the word ―risk‖ pertains to an insured or self-insured organization. This is important because prior to the advent of RMIS, insurance company loss information reporting typically organized loss data around insurance policy numbers. The historical focus on insurance policies detracted from a clear, coherent and consolidated picture of a single customer's loss experience. The advent of RMIS in the 1980s was a breakthrough step in the insurance industry's evolution toward persistent and focused understanding of their end-customer needs. Typically, the best solution for your organization depends on whether it is enhancing an existing RMIS system, ensuring the highest level of data quality, or designing and implementing a new system while maintaining a focus on state-of-the-art technology.

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Q.6 List and describe in brief the various types of review used for improving performance of a project. Answer: Most organizations believe that solutions to their problems when managing projects can be found by investing in project management software and/or training. Appropriate software and adequately trained personnel are undoubtedly very important, but there are other elements that must be implemented within some sort of process framework like that of the Project Office. That organisation must take care of the process implementation and daily operation to serve the PMO customers better and better. The importance of project reviews A project review is a process through which we collect information from the teams experiences and see the variances and deviations from the project plan. This kind of reviews should help us to increase our productivity consequently improving our organizations success. The purposes of these reviews are:  To find out about the feasibility of the project to help management teams to make a decision (go or not go), based in the review results  To check if all the necessary activities have been done before presenting a customer with a proposal or solution  To check if all the formal agreements and procedures have been formally accepted and reviewed by the customer and the project delivery organization  To find out if there are any deviations and variances allowing room for improvement and action plans When to do project reviews Project reviews should be done when we can learn something that can contribute to project performance improvement. In our initial experience at HewlettPackard

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we decided to run these reviews after each project milestone but, depending on the size and complexity of the project, these reviews can be done monthly. The main objective of these reviews is to benefit from experience and learn from failures and, as a result, be able to prepare action plans when necessary. Time and effort for running this type of activity must be authorized and supported by the project sponsor. Keeping projects on track is one of the main responsibilities of the project manager. These reviews are proactive actions that allow the project manager to analyze the project status in a formal way and take the necessary actions in case of variances or deviations. These reviews must be approved and supported by the upper level management of the organization. The Process The project review process varies from organization to organization because it depends on things like project maturity level, project organization and people experience.    
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Planning for review Conducting the review Take action on findings Do continuous improvement

The following types of review used for improving performance of a project: Initiation Reviews (IR) Planning and proposal reviews (PPR) Procurement reviews (PR) Quality assurance reviews (QAR)

The reviews used for improving performance of the a project may be depicted in following figure:

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The details of these reviews are given below: Initiation Reviews A control gate at which the provider executive management reviews, approves, and commits the company to the provider's project plan and approves the project start. The PIR is the forum for executive management to constructively challenge the readiness of the provider project manager and project team to initiate the project effort and successfully meet the project requirements. Planning and Proposal Reviews Each year the organisations evaluate its performance against the objectives in each of the goal areas in the Strategic Plan. The relevant committees and steering groups monitor performance through annual review and reporting. Review reports are considered annually by Planning and Quality Committee which, in turn, presents a comprehensive annual report of progress against the Strategic Plan to its board of directors. Procurement Review: Here you focus on bench marking the vendors/suppliers against metrics such as on time delivery, cost, quality etc to help yourself-buyer- to consider/eliminate them for future projects based on the expereince you have
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on your recent projects with them. This will serve as input for Select Sellers List process for future projects Quality Assurance Reviews A Quality Assurance Review (QAR) is a strategic assessment of an internal audit function, including its infrastructure, staff experience, and performance relative to business goals, "best practices", and applicable standards. We take a flexible approach to a QAR, which is customized to meet the sponsor's specific concerns. Our approach considers the efficiency, productivity, and impact of the internal audit department on the organization.

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