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IIBM – Production and Operations Management Answer sheet

IIBM – Production and Operations Management Answer sheet

  1. The purpose of the transportation approach for locational analysis is to minimize
  2. a) Total costs
  3. b) Total shipping costs
  4. c) Total variable costs
  5. d) Total fixed costs
  1. Which of the following would not generally be a motive for a firm to hold inventories?
  2. e) Take advantage of quantity discounts
  3. f) Minimize holding costs
  4. g) Reduce stock-out risks
  5. h) Decouple production from distribution

III. Which of the following are assignable causes? (1)

  1. Large variations in the hardness of the material
  2. Tool wear
  3. Errors in setting
  4. All of the above
  1. Like the roots of a tree, ________of organization is hidden from direct view.


  1. Goodwill
  2. Core competence
  3. Higher management
  4. Capital investment
  1. Inadequate production capacity ultimately leads to
  2. Poor quality
  3. Poor Customer Service
  4. Poor inventory control
  5. All of the above
  1. Limitations of Traditional cost accounting are (1)
  2. Assumes the factory is an isolated entity
  3. It measures only the cost of producing
  4. Both (A) and (B)
  5. None of the above

VII. Business is rated on which dimensions

  1. Market attractiveness
  2. Business strength
  3. Both (A) and (B)
  4. None of the above

VIII. How does ‘structure’ reduce external uncertainty arising out of human behavior

  1. Research and planning
  2. Forecasting
  3. Both (A) and (B)
  4. None of the above
  1. The objective of the Work Study is to improve
  2. Cycle time
  3. Productivity
  4. Production
  5. All of the above
  1. Which of the following are activities of corrective maintenance?
  2. Overhauling
  3. Emergency repairs
  4. Modifications and improvements
  5. All of the above

Part Two:

  1. What are the dimensions of quality? (5)
  2. What is Quality? (5)
  3. What is Materials Planning? (5)
  4. Need for Inventory Management – Why do Companies hold inventories? (5)

Caselet 1

The pizza business did well and by 1965, Thomas was able to open two more stores in the town -Pizza King and Pizza from the Prop. Within a year, Varti opened a pizza store in a neighborhood town with the same name, DomiNick\’s Pizza. Thomas decided to change the name of his first store, DomiNick\’s Pizza, and one of his employees suggested the name Domino\’s Pizza(Domino\’s). The advantage of this name Thomas felt was that it would be listed after DomiNick in the directory. Domino\’s philosophy rested on two principles – a limited menu and delivering hot and fresh pizzas within half an hour. In 1967, it opened the first franchise store in Ypsilanti, and in 1968, a franchise store in Burlington, Vermont. However, the company ran into problems when its headquarters (the first store) and commissary were destroyed by fire. In the early 1970s, the company faced problems again when it was sued by Amstar, the parent company of Domino Sugar for trademark infringement. Thomas started looking for a new name and came up with Red Domino\’s and Pizza\’s Dispatch. However, there wasn\’t any need for it because Domino\’s won the lawsuit in 1980. In 1982, Domino\’s Pizza established Domino\’s Pizza International (DPI) and was made responsible for opening Domino\’s stores internationally. The first store was opened in Winnipeg, Canada. Within a year, DPI spread to more than 50 countries and in 1983, it inaugurated its 1000th store. Around the same time, new pizza chains like Pizza Hut and Little Caesar established themselves in the USA. Domino\’s Pizza faced intense competition because it had not changed its menu of traditional hand-tossed pizza. The other pizza chains offered low-priced breadsticks, salads, and other fast food apart from pizzas. Domino\’s faced tough competition from Pizza Hut in the home delivery segment also. Little Caesar was eating into Domino\’s market share with its innovative marketing strategies. By 1989, Domino\’s sales had reduced significantly and cash flows were affected due to the acquisition of assets. In 1993, Thomas took measures to expand Domino\’s product line, in an attempt to revive the company and tackle competition. The company introduced pan pizza and bread sticks in the USA. In late 1993, Domino\’s introduced the Ultimate Deep Dish Pizza and Crunchy Thin Crust Pizza. In 1994, it rolled out another non-pizza dish – Buffalo wings. Though Domino\’s did not experiment with its menu for many years, the company adopted innovative ways in managing a pizza store. Thomas gave about 90% of the franchisee agreements in the USA to people who had worked as drivers with Domino\’s. The company gave ownership to qualified people after they had successfully managed a pizza store for a year and had completed a training course. Domino\’s also gave franchises to candidates recommended by existing franchisees. Outside the USA, most of Domino\’s stores were franchise-owned. Domino\’s was also credited for many innovations in the pizza industry and setting standards for other pizza companies. It has developed dough trays, corrugated pizza boxes, insulated bags for delivering pizzas, and conveyor ovens.

In 1993, Domino\’s withdrew the guarantee of delivering pizzas within 30 minutes of order and started emphasizing on Total Satisfaction Guarantee (TSG) which read: \”If for any reason, you are dissatisfied with your Domino\’s Pizza dining experience, we will re-make your pizza or refund your money.\” Domino\’s entered India in 1996 through a franchise agreement with VamBhartia Corp in Delhi. With the overwhelming success of the first outlet, the company opened another outlet in Delhi. By 2000, Domino\’s had outlets in all major cities in India. When Domino\’s entered India, the concept of home delivery was still in its nascent stages. It existed only in some major cities and was restricted to delivery by the friendly neighborhood fast food outlets. Eating out at \’branded\’ restaurants was more common. To penetrate the Indian market, Domino\’s introduced an integrated home delivery system from a network of company outlets within 30 minutes of the order. Goutham Advani (Advani), Chief of Marketing, at Domino\’s Pizza India, said, \”What worked its way into the Indian mindset was the promised 30-minute delivery.\” Domino\’s also offered compensation: Rs.30/- off the price tag if there was a delay in delivery. For the first 4 years in India, Domino\’s concentrated on its \’Delivery\’ strategy.

Domino\’s Logistics Model

Analysts felt that Domino\’s took a cue from McDonald\’s supply chain model. However, they opined that the level of complexity in McDonald\’s system in India was not as high as that of Domino\’s. Commented Bhatia, \”McDonald\’s operations are not as spread out as ours. They are in four cities while we are in 16. Centralizing wouldn\’t work on such a geographical scale”. The logistics model adopted by Domino\’s offered some obvious benefits including lower transportation costs, cheaper procurement, and economies of scale. Domino\’s had already cut out the duplication in the procurement and processing of raw materials across each of the three commissaries. The old model of self-contained commissaries had another disadvantage: adding new outlets did not translate into greater economies of scale. Bhatia planned to extend the model to other parts of the country as well. The commissary was to be located near the largest market in that region. Bhatia said, \”Our roll-out began only after we mapped out our procurement strategy.\” Based on the agricultural map of India, Domino\’s looked McDonald\’s had one of the best logistics models in India. To maintain consistency and quality of its products, McDonald\’s shipped all the raw materials lettuce, patties et al to a cold storage close to the main market. Based on a daily demand schedule that was prepared a day in advance, the required amount of raw material was transported to individual outlets to get the best product at the lowest cost.

Thus, tomatoes would come from Bhubaneswar, spices from the south, baby corn from Nepal (where it\’s 40% cheaper than in India), and vegetables from Sri Lanka. Similarly, Domino\’s India planned to extend its operations to Nepal, Sri Lanka, and Dhaka. The company planned to establish a commissary in Sri Lanka. Domino\’s also identified specialty crops in each region. The commissary in that region was entrusted with the task of processing that specialty crop. For instance, the commissary for the eastern region in Kolkata was responsible for buying tomatoes, processing them, and then sending them to all the other commissaries. Similarly, the northern commissary had to deliver pizza bases. This way, Domino\’s minimized duplication as well as the dangers of perishability. Once the new model was formalized, Bhatia planned to use Domino\’s 25 refrigerated trucks to transport products for other companies on the same route. For instance, if an operator in Kochi(Kerala) needed to transport specialty cheese, he could use Domino\’s fleet to transport his products. Said Bhatia, \”Not too many people have refrigerated trucks in the country. And we can offer them quality service because we will be giving them standards we use for ourselves.\” Company sources said that inquiries from clients for such transport facilities had started coming in. Bhatia said he was in the process of selecting a person to head the logistics operation, which would be spun off as a separate profit center. Bhatia seemed confident that the profit center had the potential to bring in Rs 10 by 2006. However, he said the profit center would not be allowed to impede the growth of the pizza business, Domino\’s core operation. Only those deliveries that did not delay or reroute the truck would be considered


  1. Describe the Article for Logistics and Operations Management Domino’s Pizza’s Process Technology


  1. Explain the problems experienced by ABC Ltd. What is the main cause of these problems? (20)

Section C: Applied Theory (30 marks)

  1. The Advantages & Disadvantages of Economic Order Quantity (EOQ)? (15)
  2. Distinguish between just-in-time and just-in-case as stock management systems.(15)

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