QUESTION 1

1. PreciseMachining is a small company focusing on high precision machining of oil

and gas valves. The company operates in an oil and gas town located in
Terengganu. The fully automated machining centres allow them to serve various
oil and gas companies in the town. The company accepts various valves of
different design and usage to be repaired or to be produced at the request of the
customers. However, recently PreciseMachining has signed an agreement to
supply a standard valve in large quantities to an oil and gas company from a
middle east country. Although this is good news to the company, it also creates a
conflict in the valve production. The company finds it is difficult to serve the
various small orders from companies in the town and at the same it time has to
produce in mass production of the standard valve for the middle east client. As a
result, it receives a lot of complaints from the local customers. They are not happy
with the delay in completing their orders. Time is crucial for the oil and gas
companies.

a. Discuss the conflict that faced by Precise Machining from the perspective of
trade off theory. In your answer, include your analysis on the shift in
positioning strategy and the competitive priorities.

ANSWER:
Precise Machining need to go global, to gain higher position among the mass market. It also
needs to maintain its customers satisfaction, as to maintain lead time and product quality to
its existing customers. To do this Precise Machining need mass production strategy that can
adds value for products and services offered to the oil and gas company from the Middle
East, but it implies some trade-offs between manufacturing competitive priorities and, hence,
implications for customer satisfaction, whereby in this case their local customers.

Can be argue that the customers’ needs are an important reason for the existence of trade-offs
between mass productions and positioning strategy in the global market, to the costumer
satisfaction in customized products and services. The customer satisfaction in the local
market is a trade off to the positioning strategy in the global market.
High customer satisfaction with goods is compatible with high productivity in which we refer
to the mass production for the global market, while high customer satisfaction with services
within the local market is not compatible with high productivity. This means eventhough we
produce high quality product accordance to customer’s requirement, it does not means
possible high demand in the future. It means that the nature of services leads to possible
manufacturing competitive priorities trade-offs and consequences for customer satisfaction.

b. From the perspective of product- process matrix, analyse the reasons of

inefficiency of the current production process.

ANSWER:
The product–process matrix, gives link and inter-relation between three principle of process
product: (1) volume or demand of the product, (2) product customization, and (3) process
characteristics. It emphasizes on the product to be manufactured with the manufacturing
process itself.
A good strategy for a manufacturing process depends first and foremost on volume. Customer
contact, a primary feature of the customer-contact matrix for services, normally is not a
consideration for manufacturing processes (although it is a factor for the many service
processes throughout manufacturing firms). For many manufacturing processes, high product
customization means lower volumes for many of the steps in the process. The vertical
dimension of the product–process matrix deals with the same two characteristics in the
customer-contact matrix: process divergence and flow. Each manufacturing process should
be analyzed on these two dimensions, just as was done for a service process.

The process characteristics of the various valves of different design and usage to be repaired
or to be produced at the request of the customers for local oil and gas companies in the town
can be described as Disconnected line flow (Batch), as this accommodate the requirement for
Precise Machining to provide various valves of different design and usage to be repaired or to
be supplied at the request of the customers. Production using batch processes is used to make
similar valves on a repeat basis, where the volumes are not high enough to allow the
economic use of a connected line flow. Batch production also permits a wider range of
products than typical continuous flow.
QUESTION 2
Two years after successful business endeavour, Mr Zaki is now focusing on supplying
standard frozen pizzas to supermarkets. Starting with the customized pizzas now he has
moved into mass production.

a. Discuss the implications of this decision on the supply chain design in regards in
the shift from customized into standard pizzas.

ANSWER :
Mr. Zaki need to consider new assets for equipment that can support mass production of the
pizza dough for his supermarket’s supply product. Mr Zaki should also consider hiring more
workers that can cater the updated equipment. Mr. Zaki needs to consider the material
resources, whereby if not manage accurately, it can lead to wastage. Customized pizza can be
considered to have more lead time than standard pizza. Therefore the standard pizza need to
be prioritized in terms of delivery, as it needs to be delivered on time. As it is in mass
production, the quality is the second factor to be considered after lead time required.
Compared to customized pizza, the quality is most important as it needs to fulfilled each
customer’s satisfaction to gain re-current customers.

b. Mr Zaki now wants to obtain both efficiency in term of high volume (to cater the
mass market) and flexibility (from individual customers) in term of adding more
variety of pizzas based on customer orders. Explain to him on how he could
achieve that.

ANSWER :

This can be done by combining both Make To Stock and Make to Order process strategy,
with parallel hybrid production and controlling point. Combination of both MTS and MTO
can help Mr. Zaki to achieve both efficiency in getting volume and flexibility production.

Mr. Zaki can create a facility which are completely MTO for some stages of the pizza
production before the personalization of standard order for the mass market or individual
customers, this known as products in high demand, such as the dough after which they are
stored on a warming tray. The final part of the process for mass market is still MTO, as
whenever an order comes in items are taken from the warming tray and assembled into a final
order. But for the individual customers order, in this situation we have MTS and MTO
production steps in sequence. At the same time some products are still MTS, the dough base
pizza and compete with upcoming MTO products for the same capacity (e.g. stove, fryer,
cook). In this situation we have a system that produces pure MTO products, which are
produced on a shared resource. Thereafter is where the order decoupling point are applied.
For the mass market, the process continues for standard pizza while for the individual
customers, the process are continues to produce customized pizza. This is where the concepts
of parallel hybrid products are then applied. The advantage are the stock of dough base pizza
are reliable for both MTS and MTO products.

QUESTION 3
A toy company positions itself in the market by competing in cost efficiency by producing a
standard toy in mass quantity. However, with the mass production, the company faces
problem in forecasting the demand. The demands are difficult to predict or forecast and cause
over stock of the products and sometimes cause the products to be obsolete. The company’s
production manager has detected amplification of orders during certain occasions. He is
puzzled with this phenomenon. He seeks your help to explain to him on the cause of this
phenomenon. He has shared the information (TABLE Q3) of the variants of demands and
orders for the toys as the orders move up to the manufacturer (the toy company).
a) Discuss THREE (3) causes of the above phenomenon.

ANSWER :

Customer companies, often retailers, waiting until orders build up before placing orders with
their suppliers, a practice called order batching.

b) From TABLE Q2 above determine the Bullwhip effects of each of the firm in the
supply chain.
ANSWER :

c) Based on the answer in Q2b), decide which firm contributes most to the bullwhip effect

ANSWER :

QUESTION 4
Two years ago, Kareem involved in an accident that has led him not to be able to work for a
year. Kareem believes that the accident is due to the faulty brake of the car. He is suing the
car manufacturer for RM3.5 million for the defect. The car manufacturer offers a settlement
of RM700,000, of which Kareem would receive $600,000 after attorneys’ fees. He has been
advised that he has a 50% chance of winning his case. If he loses, he will incur attorneys’
fees and court costs of RM75,000. Even if he wins, he is not guaranteed his full requested
settlement. His attorney believes that there is a 50% chance he could receive the full
settlement, in which case Kareem would get RM2 million after his attorney takes her part.
However, there is a 50% chance that the jury will award him a lesser amount of RM1 million,
of which Kareem would get RM500,000. Using decision tree analysis, decide whether
Kareem should proceed with the lawsuit against the manufacturer.

ANSWER :

received lesser than

settlement amount that is
RM500,000

WIN the court case

received full settlement

amount after reduction of
proceed at court to sue lawyer fee ; RM 2 million.
the manufacturer

- incur attorneys’ fees and

LOSE the court case court costs of RM75,000
- no settlement received.

accept the settlemt

no lost or risk
RM600,000

By looking at the Decision Tree, accepting the settlement would be the most non-risk
involved decision that can be taken. This is 2/3 of probability of going to proceed with the
court case give disadvantages to Kareem, as he may either get RM500,000 which is less than
the amount of settlement offered by car manufacturer, or worst case scenario, lost further
more that is RM75,000 for the attorney’s and court’s fee. By not pursuing with the sued case,
Kareem still can get RM600,000.