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1.) What are assumptions behind the basic EOQ model?
Ans. Economic order quantity (EOQ) model is the method that provides the company with an
order quantity. This order quantity figure is where the record holding costs and ordering costs areminimized. By using this model, the companies can minimize the costs associated with the
ordering and inventory holding. In 1913, Ford W. Harris developed this formula whereas R. H.
Wilson is given credit for the application and in-depth analysis on this model.
Definition
The economic order quantity (EOQ) is a model that is used to calculate the optimal quantity that
can be purchased or produced to minimize the cost of both the carrying inventory and the
processing of purchase orders or production set-ups.
Formula Following is the formula for the economic order quantity (EOQ) model:
Where Q = optimal order quantity, D = units of annual demand
S = cost incurred to place a single order or setup, H = carrying cost per unit
This formula is derived from the following cost function:
Total cost = purchase cost + ordering cost + holding cost
Limitations of the economic order quantity model:
It is necessary for the application of EOQ order that the demands remain constant throughout the
year. It is also necessary that the inventory be delivered in full when the inventory levels reachzero.
Underlying assumption of the EOQ model
Following are the underlying assumptions for the EOQ model. Without these assumptions, the
EOQ model cannot work to its optimal potential.
The cost of the ordering remains constant.
The demand rate for the year is known and evenly spread throughout the year.
The lead time is not fluctuating (lead time is the latency time it takes a process to initiate
and complete).
No cash or settlement discounts are available, and the purchase price is constant for every
item.
The optimal plan is calculated for only one product.
There is no delay in the replenishment of the stock, and the order is delivered in the quantity
that was demanded, i.e. in whole batch.
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2.) Just-in-Time:
Introduction
Just-in-time manufacturing was a concept introduced to the United States by the Ford motor
company. It works on a demand-pull basis, contrary to hitherto used techniques which worked ona production-push basis.
To elaborate further, under just-in-time manufacturing (colloquially referred to as JIT production
systems), actual orders dictate what should be manufactured, so that the exact quantity is
produced at the exact time it is required.
Just-in-time manufacturing goes hand in hand with concepts such as Kanban, continuous
improvement and total quality management (TQM).
Just-in-time production requires intricate planning, in terms of procurement policies and themanufacturing process, if its implementation is to be a success.
Advantages Just-In-Time Systems
Just-in-time manufacturing eliminates waste, as out-of-date or expired products; do not enter into
this equation at all.
Due to the afore-mentioned low level of stocks held, the organizations return on investment
(referred to as ROI, in management parlance) would generally be high.
Just-in-time manufacturing encourages the .right first time. concept, so that inspection costs and
cost of rework is minimized.
High quality products and greater efficiency can be derived from following a just-in-time
production system.
Constant communication with the customer results in high customer satisfaction.
Over production is eliminated, when just-in-time manufacturing is adopted.
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Disadvantages:
Just-in-time manufacturing provides zero tolerance for mistakes, as it makes re-working very
difficult in practice, as inventory is kept to a bare minimum.
There is a high reliance on suppliers, whose performance is generally outside the purview of the
manufacturer.
The organization would not be able to meet an unexpected increase in orders, due to the fact that
there are no excess finish goods.
Transaction costs would be relatively high, as frequent transactions would be made.
Conclusion
Just-in-time manufacturing is a philosophy that has been successfully implemented in many
manufacturing organizations.
It is an optimal system that reduces inventory whilst being increasingly responsive to customer
needs; this is not to say that it is not without its pitfalls.
However, these disadvantages can be overcome, with a little forethought and a lot of commitment at all levels of the organization.
3.) Management Styles:
Introduction:
In an organization, managers perform many functions and play many roles. They are responsible
of handling many situations and these situations are usually different from one another.
When it comes to handling such situations, managers use their own management styles.
In short, a management style is a leadership method used by a manager. Let's have a look at four
main management styles practiced by managers all over the world.
Autocratic
In this management styles, the manager becomes the sole decision maker.
The manager does not care about the subordinates and their involvement in decision-making.Therefore, the decisions reflect the personality and the opinion of the manager.
Directive autocrat . This type of managers make their decisions alone and supervise the
subordinates closely.
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Permissive autocrat . This type of managers make their decisions alone, but allows subordinates
to freely execute the decisions.
Democratic
In this style, the manager is open to other.s opinions and welcome their contribution into thedecision making process. Therefore, every decision is made with the majority's agreement.
The decisions made reflect the team's opinion. For this management style to work successfully,
robust communication between the managers and the subordinates is a must.
This type of management is most successful when it comes to decision making on a complex
matter where a range of expert advice and opinion is required.
Paternalistic
This is one of the dictatorial types of management. The decisions made are usually for the bestinterest of the company as well as the employees.
When the management makes a decision, it is explained to the employees and obtains their
support as well.
Laissez-faire
In this type of management, the manager is a facilitator for the staff. The employees take the
responsibility of different areas of their work.
When compared with other styles, a minimum communication takes place in this management
style between the employees and the managers.
This style of management is the best suited for companies such as technology companies where
there are highly professional and creative employees.
4.) Balance Score Card:
Introduction
The balance scorecard is used as a strategic planning and a management technique. This is
widely used in many organizations, regardless of their scale, to align the organization's
performance to its vision and objectives.
The scorecard is also used as a tool which improves the communication and feedback process
between the employees and management, and to monitor performance of the organizational
objectives.
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The Basics of Balanced Scorecard
our main areas of consideration are bound by the business organization's vision and strategy.
The balanced scorecard is divided into four main areas and a successful organization is one that
finds the right balance between these areas.
Each area (perspective) represents a different aspect of the business organization in order to
operate at optimal capacity.
Financial Perspective: This consists of costs or measurement involved, in terms of rate of returnon capital (ROI) employed and operating income of the organization.
Customer Perspective: Measures the level of customer satisfaction, customer retention andmarket share held by the organization.
Business Process Perspective: This consists of measures such as cost and quality related to the
business processes.
Learning and Growth Perspective: Consists of measures such as employee satisfaction,
employee retention, and knowledge management.
Features of Balanced Scorecard
When it comes to defining and assessing the four perspectives, following factors are used:
Objectives: This reflects the organization's objectives such as profitability or market share.
Measures: Based on the objectives, measures will be put in place to gauge the progress of
achieving objectives.
Targets: This could be department based or overall as a company. There will be specific targetsthat have been set to achieve the measures.
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Initiatives: These could be classifies as actions that are taken to meet the objectives.
The Need for a Balanced Scorecard
Increases the focus on the business strategy and its outcomes.
Leads to improvised organizational performance through measurements.
Align the workforce to meet the organization's strategy on a day-to-day basis.
Targeting the key determinants or drivers of future performance.
5.) Material Requirement Planning:
Material requirement planning (MRP) is a computer-based information system
designed to handle ordering and scheduling of dependent-demand inventories (e.g.,
raw materials, component parts, and subassemblies).
A production plan for a specified number of finished products is translated into
requirements for component parts and raw materials working backward from the due
date, using lead times and other information to determine when and how much to
order. Hence, requirements for end items generate requirements for low-level
components.
Material requirement planning is as much a philosophy as it is a technique, and as
much an approach to scheduling as it is to inventory control.
A great deal of the credit for publicizing MRP and creating potential users about MRP
goes to Joseph Orlicky, George Plossl, Oliver Wight, and APICS. APICS offers
certification information and exams.
MRP begins with a schedule for finished goods that is converted into a schedule of
requirements for the subassemblies, component parts, and raw materials needed to
produce the finished items in the specified time frame. Thus, MRP is designed to
answer three questions: what is needed? how much is needed? and when is needed?
The primary inputs of MRP are a bill of materials, which tells the composition of a
finished product; a master schedule, which tells how much finished product is desired
and when; and an inventory record file, which tells how much inventory is on hand or
on order. The planner processes this information to determine the net requirements for
each period of the planning horizon.
Outputs from the process include planned-order schedules, order releases, changes,
performance-control reports, planning reports, and exception reports.
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6.) Role of CEO in Strategic Management
Ans: The CEO must understand that strategic management is his responsibility. Parts of this
task, but certainly not all of it, can be delegated.
The CEO is responsible for establishing a climate in the organization that is congenial to
strategic management.
The CEO is responsible for ensuring that the design of the process is appropriate to the unique
characteristics of the company.
The CEO is responsible for determining whether there should be a corporate planner. If so, the
CEO generally should appoint the planner (or planners) and see that the office is located as close
to that of the CEO as practical.
The CEO must get involved in doing planning.
The CEO should have face-to-face meetings with executives for making plans and should ensure
that there is a proper evaluation of the plans and feedback to those making them.
The CEO is responsible for reporting the results of the strategic management process to the
board of directors.
To give direction and leadership the achievement of the organization philosophy, strategy and its
annuals goals and objectives.
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7.) Difference between HRD and HRM
Difference between HRM and HRD
HRM HRD
1. HRM deals with all aspects of the human
resources function
1. HRD only deals with the development
part.
2. HRM is concerned with recruitment,
rewards among others
2. HRD is concerned with employee skills
development.
3. HRM functions are mostly formal 3. HRD functions can be informal like
mentorship.
4. HRM is a routine and administrative
process.
4. HRD is continuous process
HRM is a subset of the entire management processes of an organization. HRD is a subset of
HRM.
Scope of HRM is wider. Scope of HRD as compared to HRM is narrower.
HRM takes decisions on HRD plans. HRD thus depends on the decisions of HRM.
HRM manages and develops the human elements of an organization in its entirety on longer term
basis. HRD focuses on those learning experiences which are organized for a specific period to bring about the desired behavioral changes.
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8.) Meta marketing in era of globalization
This new instrument of communication and distribution - World Wide Web enables producers to
obtain the convergence between ,,their own desire for economies of scale'' and the desires of consumers, linked by profusion and by the variety of products and services designed to meet a
specific set of needs.
Equally, we can speak of a meta-market also to the level of an industry or sector, such aschemical industry, where the producers can sell the excess of the production and identify the
sources of new suppliers and new sales forces.
These types of markets are more easily to be identified and applied in the web, being able to provide a high level for the work efficiency and effectiveness.
The global concept of meta-market is the result of the convergence process of three industriesthat were created at an interval of 50 years, such as telephony industry (1890), the televisionindustry (1930) and industrial computers (1980).
The convergence describes a process of change in industrial structures, which combines theeconomic and the technological dimensions of markets with the need to satisfy the consumer
needs.
This process of change appears as being generated by the trend of substitution the products
trough the competition and by merging products and services, but also as a result of the
interference of these two patterns.
In this case the process of Convergence is defined as ,,a phenomenon through which independent
sectors of activities come to be part of a broader structure, called meta-market''(Greeanstein, S.,
Khanna, T), the last one generating the effect of fusion.
The industry defines the globalization of the industry sectors on vertical dimension, from the
production of the raw materials, to the processing of products which are designed for the
intermediate or final consumption.
Besides the general concept of meta-market, the literature brings to front another concept,
namely the multimedia metamarket, generated by the progressive convergence process, which
involves television, the information systems and telecommunications industry.
The concept of metamarket comes from a simple idea, but profound insight: customers think
about products and markets in a very different manner from the way in which products and
markets are physically combined and placed on the market.
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10.) Sick Indsutrial units:
Sick industrial unit is defined as a unit or a company (having been in existence for not less thanfive years) which is found at the end of any financial year to have incurred accumulated losses
equal to or exceeding its entire net worth.
The net worth is calculated as sum total of paid up capital and free reserves of a company lessthe provisions and expenses, as may be prescribed.
An industrial unit is also regarded as potentially sick or weak unit if at the end of any financial
year, it has accumulated losses equal to or exceeding 50 per cent of its average net worth in theimmediately preceding four financial years and has failed to repay debts to its creditor(s) in three
consecutive quarters on demand made in writing for such repayment.
The two basic factors which may result in sickness of an industrial unit are:-
Internal factors are those which arise within an organisation. They include:-
Mismanagement in various functional areas of a company like finance, production, marketing
and personnel;
Wrong location of a unit;
Overestimation of demand and wrong dividend policy;
Poor implementation of projects which may be due to improper planning or managerialinefficiency;
Poor inventory management in respect of finished goods as well as inputs;
Unwarranted expansion and diversion of resources such as personal extravagances,excessiveoverheads, acquisition of unproductive fixed assets,etc.;
Failure to modernise the productive apparatus, change the product mix and other elements of marketing mix to suit the changing environment;
Poor labour-management relationship and associated low workers' morale and low
productivity,strikes,lockouts, etc.
External factors are those which take place outside an organisation. They include:-
Energy crisis arising out of power cuts or shortage of coal or oil;
Failure to achieve optimum capacity due to shortage of raw materials as a result of production
set-backs in the supply industries, poor agricultural output because of natural reasons,changes inthe import conditions,etc.
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words, phrases, symbols, and designs. Common types of intellectual property rights include
copyright, trademarks, patents, industrial design rights and in some jurisdictions trade secrets.
If A has given the cow to B only for custody to take care of (may be in his absence), then A
continues to be the owner of the cow, as he has not sold it to B.
Hence A will get the cow back from B along with the calf. This is just like giving your own flat
on rent to a lessee who does not get ownership rights over the flat but only possesses it for a fee.
B is just an employee of A therefore the cow does not belong to him.