Matching Supply with Demand An Introduction to Operations Management 4Th Edition By Gerard Cachon –

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Description Matching Supply with Demand An Introduction to Operations Management 4Th Edition

By Gerard Cachon – Test Bank Sample Questions Instant Download With Answers Chapter 3 Understanding the Supply Process: Evaluating Process Capacity 1) The Philadelphia Airport has 5 de-icing stations. Each plane uses a single station and each station takes 11.5 minutes to de-ice a plane. How many planes per hour can be deiced at the Philadelphia Airport? (Round the answer to 2 decimal places.)

Answer: 26.09 planes Explanation: Each station de-ices 60 min/11.5 min planes per hour. Five stations can de-ice 60/11.5 * 5 = 26.09 planes.

Difficulty: 3 Hard Topic: Process Utilization and Capacity Utilization AACSB: Analytical Thinking Blooms: Apply

2) Consider a process that has 3 stations, ordered in sequence: 1, 2, and 3. At each station, two consecutive tasks are performed one after the other. The time (in seconds per unit) it takes for a single person to perform each task is given in the table below (e.g., task A2 takes 10 seconds per unit):

Station

# of Workers

Task A1

Task A2

Task B1

1

1

20

10

–

2

2

–

–

40

3

1

–

–

–

The table also gives the number of workers at each station. What is the capacity of this process (in units per minute)? (Round the answer to 1 decimal place.)

Answer: 1.5 units/minute Explanation: The capacity of station 1 is 60/(20 + 10) = 2 units per minute.

Station 2 is 60/(40 + 40) = 0.75 units per worker, or 2 × 0.75 = 1.5 units in total.

Station 3 is 60/(15 + 5) = 3 units per minute. The capacity of the process is the capacity of the bottleneck, which is the slowest step. That is station 2, which produces 1.5 units/min.

Difficulty: 3 Hard Topic: Process Utilization and Capacity Utilization AACSB: Analytical Thinking Blooms: Apply

3) Consider the following four step process:

The following data are available for the four steps:

A

B

C

D

Activity time per unit (min)

0.25

0.33

0.2

0.5

Capacity per worker (units/min)

4

3

5

2

Number of workers

2

3

2

4

Suppose the steps in activity D are made easier, so the activity time per unit in step D is reduced by 50% (to 0.25 minutes per unit). If the assignment of workers to steps remains the same, by how much does the capacity of the entire process increase in units per minute?

Answer: 0 units per minute Explanation: Before the change, the process capacity is min (4 × 2, 3 × 3, 5 × 2, 2 × 4) = 8 units per min. If the activity time is cut in half for stage D, then process capacity for step D is (1/0.25) × 4 = 16 units per min. Step A can only produce 8 units per minute, so the total capacity of the process doesn’t increase.

Difficulty: 3 Hard Topic: How to Draw a Process Flow Diagram; Workload and Implied Utilization AACSB: Analytical Thinking; Knowledge Application Blooms: Analyze

4) Panini, a popular sandwich shop, offers 3 types of sandwiches: grilled vegetables, grilled chicken, and pastrami. The table below provides demand data:

Demand per hour

Grilled Vegetables

Grilled Chi

25

15

There are up to five steps in the process of making sandwiches listed below with activity times. Only 50% of customers want their sandwich toasted, no matter which sandwich is ordered.

Step Pastrami Cut bread

Grilled Vegetables .75 minutes

.75 minutes

Grill

1.4 minutes

1.4 minutes

Slice meat

–

Grilled Chicken

–

.75 minutes – 3 minutes

Toast

2 minutes

2 minutes

2 minutes

Wrap

.5 minutes

.5 minutes

.5 minutes

Suppose Panini employs 1 worker at each step. What is the highest implied utilization of this process? (Round the answer to 3 decimal places.)

Answer: 0.933 Explanation: Evaluate workload per hour on each step: Cut = 0.75 × 50 = 37.5; Grill = 1.4 × 40 = 56; Slice = 3 × 10 = 30; Toast = 2 × 0.5 × 50 = 50; Wrap = 0.5 × 50 = 25.

Implied utilizations are then 37.5/60, 56/60, 30/60, 50/60 and 25/60. The largest one is 56/60. The highest implied utilization = 0.93.

Difficulty: 3 Hard Topic: Workload and Implied Utilization AACSB: Analytical Thinking Blooms: Apply

[The following information applies to questions 5-6.]

Department of Motor Vehicles The local Department of Motor Vehicles issues new licenses and renews licenses. (See the diagram below.) The office receives 110 customers per hour. All customers see a receptionist first. The receptionist directs them in one of three directions: 75% go directly to issue license (staffed by 9 workers) where a new photo and license are done, 15% are required to take an eye test (staffed by one worker), and 10% must first take a multiple-choice electronic written test (on one of three computers). Only 85% of people pass the eye test and the remaining 15% exit. The customers who pass the eye test

proceed to the written test where 10% of the people fail it, while 90% pass the test and proceed to issue license.

Data on each station are provided in the following table:

Workers 1

Reception

Activity time per worker (min) 0.4

Eye Test

1

5

Written Test

3

15

Issue License

9

6

5) What is the implied utilization of the Receptionist? (Round the answer to 2 decimal places.)

Answer: 73.33%.

Explanation: Processing Capacity per hour Reception 150 Eye Test 12

Implied Workers utilization 1 73% 1

time (min)

Flow rate

0.4

5

110

110 * 0.15 = 16.5

138%

Written Test 3 12 209%

15

110 * 0.1 + 16.5 * 0.85 = 25.025

Issue License 9 90 117%

6

110 * 0.75 + 25.025 * 0.9 = 105.0225

Flow rate for receptionist = 110 customers per hour, because all customers first see the receptionist. Hourly Capacity for receptionist = 60 minutes/0.4 minutes per customer = 150 per customer. Implied utilization of the receptionist = 73.33%.

Difficulty: 3 Hard Topic: How to Draw a Process Flow Diagram; Workload and Implied Utilization AACSB: Analytical Thinking Blooms: Apply 6) What is the implied utilization of issue license? (Round the answer to 2 decimal places.)

Answer: 116.69% Explanation: Implied Utilization = Demand/CapacityFlow rate for issuing a license 75% of the customers go directly to issuing a new license: 0.75 × 110 = 82.5 customers per hour 15% take the eye exam, 0.15 × 110 = 16.5, and 85% of them pass to go to the written test, 0.85 × 16.5 = 14.025 customers 10% go straight to the written test = 0.1 x 110 = 11 customers 90% of the customer pass the written test = 0.9 (11 + 14.025) = 22.5225 customers The overall flow rate for issuing a license is = 22.5225 + 82.5 = 105.0225 customers per hour. Hourly Capacity for receptionist = 6 minutes/9 workers = 2/3 minutes= 60 minutes / (2/3 minutes) = 90 Implied Utilization of issuing a license = 105.0225/90 = 116.69 The implied utilization of issue license is 116.69%.

Difficulty: 3 Hard Topic: How to Draw a Process Flow Diagram; Workload and Implied Utilization AACSB: Analytical Thinking Blooms: Apply

[The following information applies to questions 7-8.]

Happy Toy Company

The Happy Toy Company’s R&D department is always looking for great ideas for new toys. On average, the R&D department generates about 10 new toy ideas a week. To go from idea to approved product, the idea must go through 5 stages:

In initial screening, a staff member spends 2 hours considering the idea. In mock-up, the idea is sent to one of many suppliers to produce a physical mock-up of the toy. There is essentially unlimited capacity at this stage, but it takes 4 days to get the mock-up built, even though multiple mock-ups can be built simultaneously. In safety testing, each idea requires 2 days from a staff member to have the idea checked for safety. In focus groups, each idea requires 3 hours from a staff member to have the idea test marketed.

Finally, the management team meets for 4 hours per idea to decide if the toy should be added to its line of products sold to customers.

At the end of each stage, successful ideas enter the next stage. All other ideas are dropped. The following table summarizes the process:

Time per idea put

stage Screening

Pr(Success) 60%

Pr(Fail) 40%

Staffing 2

Mock-up

into this 2 hours 4 days

Safety

50%

50%

7

2 days

Focus group

35%

65%

1

3 hours

Final decision

20%

80%

1

4 hours

For example, there are 7 staff members that work in the safety stage. In each stage, each idea is processed by only one staff member. For example, once one of the 7 staff members starts working on an idea in the safety stage, the idea completes that stage in 2 days and either exits or moves to the focus group stage. Everyone works 8 hours per day, 5 days a week.

7) On average, how many ideas are in the mock-up stage? (Round the answer to 1 decimal place.)

Answer: 4.8 ideas

Explanation: Demand for initial screening = 10 ideas per week. Output from initial screening = 10 * 60% = 6 ideas per week. 6 ideas pass the screening stage and then enter the mock-up stage per week. Each idea spends 4 days (5 days per week) or 0.8 weeks in the mock-up stage. Use Little’s Law, 6 * 0.8 = 4.8 ideas in the mock-up stage.

Difficulty: 3 Hard Topic: Process Utilization and Capacity Utilization AACSB: Analytical Thinking; Knowledge Application Blooms: Apply

8) Among these stages, what is the highest implied utilization? (Round the answer to 2 decimal places.)

Answer: 34.29% Explanation: The highest implied utilization is safety, 34.29%.

screening

Pr (success)

Pr (Fail)

Staffing

time per idea (hours)

60%

40%

2

2

mock-up

100%

0

32

safety

50%

50%

7

16

focus group

35%

65%

1

3

final dicision

20%

80%

1

4

Difficulty: 3 Hard Topic: Workload and Implied Utilization AACSB: Analytical Thinking; Knowledge Application Blooms: Analyze

[The following information applies to questions 9-10.]

Comfy Shoes, Inc. — Implied Utilization Comfy Shoes, Inc. builds shoes tailored to meet each individual customer’s needs.

Customers who visit the downtown offices of Comfy Shoes in Philadelphia can choose one or more of the following four custom-tailoring services. Customers receive their shoes in the mail within a week of their initial visit.

Service

Description

A. Walking Basics

Take measurements for basic walking shoes.

B. Walking Plus

Choose a specific design (e.g. material, color selection).

C. Running Basics

Take measurements for tailor-made running shoes.

D. Running Adv

Consult physical therapist and obtain precise needs for runn shoes and choose a specific design.

The company offers the following packages to their customers:

Package 1: Includes only Walking Basics (Service A) Package 2: Includes Walking Basics and Walking Plus (Services A and B) Package 3: Walking Basics, Walking Plus, and Running Basics (Services A, B, and C) Package 4: All four services (A, B, C, and D)

Customers of Comfy Shoes visit the store at a constant rate (you can ignore any effects of variability) of 20 customers per day. Of these customers, 45% buy Package 1, 10% buy Package 2, 20% buy Package 3 and 25% buy Package 4. The mix does not change over the course of the day. The store operates 12 hours a day.

9) What is the implied utilization of the attendant in service D?

Answer: Service D has an implied utilization of 28%.

Explanation: The calculations are summarized below:

Package Time Task 1.

#

Avail.

1

2

(min) workers

Walking Basics 12 1 0.33 2.

Walking Plus 12 1 3.

Running Basics 10 1 0.125

60 60

60

3

4

Cap.

Total Utilization

0.45

9

0.10 0.20

2 2

4 4

3.33

5 5

0.25 20

11 4.166 7.5

0.183

4.

Running Adv 40 1 0.278 Difficulty: 3 Hard

60

16.66 16.66

Topic: Workload and Implied Utilization AACSB: Analytical Thinking Blooms: Analyze 10) Which resource has the highest implied utilization?

1.

2.

3.

4.

A) Service A (Walking Basics) B) Service B (Walking Plus) C) Service C (Running Basics) D) Service D (Running Adv)

Answer: A Explanation: Service A (Walking Basics) has the highest implied utilization.

Difficulty: 3 Hard Topic: Workload and Implied Utilization AACSB: Analytical Thinking Blooms: Analyze

[The following information applies to questions 11-12.]

Comfy Shoes, Inc. — Bottleneck

At the end of the spring season, Comfy Shoes anticipates an increase in the demand to 50 customers per day. A change in the mix of packages demanded is also expected: 30% of the customers ask for Package 1, 10% for Package 2, 10% for Package 3 and 50% for Package 4. The company will hire an additional attendant to help with Service A (Walking Basics).

11) What will be the bottleneck in the process given this new demand pattern?

1.

2.

3.

4.

A) Service A (Walking Basics) B) Service B (Walking Plus) C) Service C (Running Basics) D) Service D (Running Adv)

Answer: D Explanation: Calculations are as follows:

Package Time

#

Task 1.

2.

3.

4.

Avail.

1

2

(min) workers Walking Basics 12 2 Walking Plus 12 1 Running Basics 10 1 Running Adv 40 1

120 60 60 60

3 Cap. 15

4

Total

Utilization

0.3

0.10

0.10

5 5

5 5

0.5

25 50 0.417 25 35 0.58 4.166 20.83 25 0.4166 83.33 83.33 1.388

Difficulty: 3 Hard Topic: Bottleneck, Process Capacity, and Flow Rate (Throughput) AACSB: Analytical Thinking Blooms: Analyze

12) How many customers a day will not be served?

Answer:7 customers Explanation: Service D receives 0.5*(50/12)*40=83.33 minutes of work every hour.

Only 60 minutes of work can be served. Thus, every hour, 23.33 minutes of work, or 23.33/40th of a customer is not served. Customers not served in a day = [(83.333 – 60)/40]*12=7 customers a day will not be served. Put another way, the worker has 60×12=720 minutes available each day. 40 min per customer means that 720/40=18 customers can be served. 50% of 50 = 25 customers arrive each day, so 25–18=7 cannot be served.

Difficulty: 3 Hard Topic: Bottleneck, Process Capacity, and Flow Rate (Throughput)

AACSB: Analytical Thinking; Knowledge Application Blooms: Analyze

[The following information applies to questions 13-15.]

Old City Photographics Located alongside a cobblestoned street in Old City, Old City Photographics (OCP) specializes in the processing of the traditional 35mm negative film, a once dominant photographic medium now in decline due to the popularity of digital photography. OCP offers three packages to their customers. With the standard package, the customer gets a set of 6″×4″ prints for $19.99. The deluxe package adds to the standard package a CD-ROM of high-resolution scans of the pictures for $29.99. Finally, the $39.99 pro package is similar to the deluxe package in that it comes with a CD-ROM, although the customer gets a contact print rather than a set of prints. (A contact print is an 8″×10″ sheet of photographic paper that has all pictures on the roll of film printed next to each other at reduced dimensions and is used as an index.) The workflow for OCP is shown below (s = standard, d = deluxe, p = pro):

OCP is operated by one person at every station.

13) On average, OCP receives 13 jobs per hour which consist of 44% standard, 37% deluxe and 19% pro. Which of the following statement best describes OCP’s process?

1.

2.

3.

4.

5.

A) The process is demand-constrained.

B) The process is capacity-constrained and “process film” is the bottleneck C) The process is capacity-constrained and “scan film” is the bottleneck.

D) The process is capacity-constrained and “make 6″×4″ prints” is the bottleneck.

E) The process is capacity-constrained and “make contact print” is the bottleneck.

Answer: A

Explanation: Implied utilization is:

(100% * 13 jobs/hr * 2min/job ) / (60 min/hr) = 0.43 at “process film” ((37% + 19%) * 13 jobs/hr * 5 min/job ) / (60 min/hr) = 0.61 at “scan film” ((44% + 37%) * 13 jobs/hr * 4 min/job) / (60 min/hr) = 0.70 at “make 6″×4″ prints” (19% * 13 jobs/hr * 10 min/job) / (60 min/hr) = 0.41 at “make contact print” As implied utilization is less than 1.0 at all steps, the process is demand-constrained.

Difficulty: 3 Hard Topic: Bottleneck, Process Capacity, and Flow Rate (Throughput) AACSB: Analytical Thinking; Knowledge Application Blooms: Analyze

14) What is the implied utilization (ratio of workload relative to capacity) at “Scan Film”?

1.

2.

3.

4.

5.

6.

A) less than 50% B) 50% to 60% C) 60% to 70% D) 80% to 90% E) 90% to 100% F) more than 100%

Answer: C Explanation: ((37% + 19%) * 13 jobs/hr * 5 min/job ) / (60 min/hr) = 0.61 Difficulty: 3 Hard Topic: Workload and Implied Utilization AACSB: Analytical Thinking Blooms: Apply

15) Fixing the relative proportions of job types, what is the largest number of jobs per hour that OCP can handle? Choose the answer from the list below that is closest to the correct answer.

1.

2.

3.

4.

5.

6.

7.

8.

9.

A) 10 B) 11 C) 12 D) 13 E) 14 F) 15 G) 16 H) 17 J) 18

Answer: J Explanation: From the calculations for OCP1, we know that “make 6″×4″ prints” will become the bottleneck once the process is capacity-constrained (if the mix of jobs does not change). The answer to our present question is given by the solution X to the equation ((44% + 37%) * X jobs/hr * 4 min/job) / (60 min/hr) = 1.00.

Re-arranging the equation yields X = (60 min/hr) / (81% * 4 min/job) = 18.5 jobs/hr.

Difficulty: 3 Hard Topic: Multiple Types of Flow Units AACSB: Analytical Thinking; Knowledge Application Blooms: Analyze

Matching Supply with Demand: An Introduction to Operations Management, 4e (Cachon) Chapter 5 Batching and Other Flow Interruptions: Setup Times and the Economic Order Quantity Model [The following information applies to questions 1-2.]

The Yum and Yee food truck near the business school serves customers during the lunch hour by taking orders and making fresh batches of stir-fry. Customers have only one choice during the lunch hour since the objective is to maximize the number of customers served. Assume that each customer places just one lunch order, and all lunch orders are the same size—one unit of stir-fry.

The stir-fry cooking works in this manner. First, a batch of orders is cooked in a wok by one person. The cooking depends upon the number of orders in the batch. The time to

cook just one order is 3 minutes. For each additional order in the batch, it takes 0.5 minutes more to cook. Thus, cooking two orders in a batch takes 3.5 minutes, cooking three orders takes 4 minutes, and so on.

The other process is bagging and accepting payments (done by a separate person), which takes 0.80 minutes per order.

1) If Yum and Yee operates with batch sizes of 8 units, what is their process capacity (in orders per minute)?

Answer: 1.23 units per minute Explanation: The capacity for cooking setup time is 2.5 min. and processing time per order is 0.5min. The food truck produces 8 units with 2.5min + 0.5min * 8 = 6.5 min.

The capacity is 8/6.5 min = 1.23 units/min.

The capacity for bagging and accepting payments: 1min/0.8min = 1.25units/min.

The process capacity is the capacity of cooking(bottleneck) = 1.23unit/min.

Difficulty: 3 Hard Topic: The Impact of Setups on Capacity AACSB: Analytical Thinking Blooms: Analyze

2) Calculate the batch size (in orders) that will maximize the overall flow rate (assume there is ample demand)? Do NOT round the batch size (i.e., assume for this calculation that a non-integer batch size is possible).

Answer: 8.33 units per batch

Explanation: Optimal order size should equalize the capacity of the cooking step and the bagging step. That is, suppose the batch size is denoted by x, then we have (2.5 + 0.5 * x) /x = 0.8 min. Solve for x; x = 8.33 units/batch.

Or use the formula: Capacity = 1/0.8 min = 1.25 orders/min Batch size = Capacity * setup time /(1- capacity * processing time) = 1.25 * 2.5 / (1- 1.25 * 0.5) = 8.33 units/batch.

Difficulty: 3 Hard Topic: Interaction between Batching and Inventory AACSB: Analytical Thinking Blooms: Analyze

3) Recall the salt production process. At a facility on the island of Vanuatu, they have 7 salt pans, each covering 6 acres. The pans are flooded with sea water, and evaporation leaves the pan dry, covered with sea salt. From the time the pan is flooded, it takes 10 weeks on average for a salt pan to be ready for harvesting. Harvesting the salt involves using bulldozers to scoop up the salt, which is then carted off to a terminal to be loaded on a ship. A single bulldozer requires 3 days to harvest each acre of salt, and this facility has 2 of them. There is ample capacity of trucks to transport salt from the pans to the terminal. Harvesting can occur any day during the week, and clearly, the pan cannot be flooded during harvesting. Each acre yields 1000 cubic meters (m3) of salt. After the salt is harvested from a pan, it is flooded with sea water to begin the process again.

Assume (i) there is ample demand for salt, and (ii) ship capacity and the loading process is sufficiently fast so that they do not constrain the process. How much salt can this facility produce per day on average (in m3)?

Answer: 532 m3 Explanation: Every 6 acres require 10 weeks for evaporation. With one bulldozer, 18 days are required for harvesting, but they have 2, so the harvesting of the pan can be done in 9 days. So, 6 acres can be produced in 10 × 7 + 9 = 79 days. Six acres yield 1,000 m3, and 6,000 / 79 = 75.9 m3 is produced per pan per day. There are 7 pans, so the total production is 7 × 75.9 = 532 m3 Difficulty: 3 Hard

Topic: Interaction between Batching and Inventory AACSB: Knowledge Application Blooms: Apply

[The following information applies to questions 4-6.]

Sarah’s Organic Soap Company makes four kinds of organic liquid soap: regular, lavender, citrus, and tea tree. The demand for the four scents are 150, 120, 75, and 50 kg per hour respectively. Sarah’s production process can produce any soap at the rate of 450 kg per hour, but 1.5 hours are needed to switch between scents. During those switchover times, the process doesn’t produce any soap. Sarah wants to choose a production schedule that (i) cycles repeatedly through the four scents, (ii) meets the required demand and (iii) minimizes the amount of inventory held.

4) How many kg of regular soap should Sarah produce before switching over to another scent?

Answer: 7,363.636 kg Explanation: The total setup time is 1.5 * 4 = 6 hours. The total demand for all four scents per hour is 150 + 120 + 75 + 50 = 395 kg/hour. The process capacity equals the demand, which is 395 kg/hr. The processing time = 1/450 hr. The batch size = capacity * setup time / (1- capacity * processing time) = 395 * 6 / (1- 395/450) = 19,390.91 kg.

In each batch, 150/395 * 19,390.91 = 7,363.636 kg of regular soap should be produced.

Difficulty: 3 Hard Topic: Setup Times and Product Variety AACSB: Knowledge Application Blooms: Apply

5) Sarah needs to purchase organic palm oil to make her soaps. She needs 1,000 kg of palm oil per day on average. The supplier charges a $60 delivery fee per order (which is independent of the order size) and $4.75 per kg. Sarah’s annual holding cost is 25%.

Assume 52 weeks per year and 5 days per week. If Sarah wants to minimize inventory holding and ordering costs, how much palm oil should she purchase with each order (in kg)?

Answer: 5,125.786 kg Explanation: Use EOQ formula, Q = sqrt (2 * fixed cost * flow rate/holding cost) = sqrt (2 * $60 * 1,000/ ($4.75 * 0.25/(52 * 5))) = 5,125.786 kg.

Difficulty: 3 Hard Topic: Balancing Setup Costs with Inventory Costs: The EOQ Model AACSB: Analytical Thinking Blooms: Analyze

6) Sarah’s supplier is willing to sell her palm oil at a 5% discount if she purchases 10,000 kg at a time. If she were to purchase 10,000 kg per order, what would be her average inventory holding and delivery fees per day (in $)? (Note: Do not include her purchasing costs per day, which would be 1,000 × 4.75 × 95%.)

Answer: Inventory cost per day: $21.6947; Delivery fees per day: $6 Explanation: Delivery cost per day will be $60/(10,000kg/1,000kg/day) = $6/day.

The average inventory level is 10,000/2 = 5,000kg. Inventory cost per day will be $4.75 * (1-5%) * (25%/52/5) * 5,000kg = $21.6947. The sum of the two is $27.6947.

Difficulty: 3 Hard Topic: Balancing Setup Costs with Inventory Costs: The EOQ Model AACSB: Analytical Thinking

Blooms: Analyze

[The following information applies to questions 7-9.]

Joe needs to purchase malt for his micro-brew production. His supplier charges $35 per delivery (no matter how much is delivered) and $1.20 per gallon. Joe’s annual holding cost per unit is 35% of the dollar value of the unit. Joe uses 5,000 gallons of malt per week.

7) How many gallons should Joe order from his supplier with each order?

Answer: 6,583 gallons Explanation: Suppose Joe orders x gallons per order. The fixed portion of the delivery cost is $35 * 5,000 * 52/x per year. The average annual inventory holding cost is x/2 * 1.2 * 35%. Then, the total weekly cost is $35 * 5,000 * 52/x + x/2 * 1.2 * 35%. The cost is minimized at x = sqrt (35 * 5,000 * 52/ (0.6 * 35%)) = 6,583 gallons.

Difficulty: 3 Hard Topic: Balancing Setup Costs with Inventory Costs: The EOQ Model AACSB: Analytical Thinking Blooms: Analyze

8) Suppose Joe were to order 3,800 gallons each time he orders. How many orders per year would he place on average?

Answer: 68.42 orders per year Explanation: 5,000 * 52 /3800 = 68.42 Difficulty: 3 Hard Topic: Balancing Setup Costs with Inventory Costs: The EOQ Model

AACSB: Knowledge Application Blooms: Apply

9) If Joe places an order for 15,000 gallons, then he will receive a 4% discount off the regular price of $1.20. If Joe were to do this with each order, what would be his average weekly total cost (in $)? Note: Include the cost to purchase the units, the delivery charges, and inventory holding costs.

Answer: $5,830 is the average weekly total cost Explanation: With a 4% discount, the malt is 1.2 * (1 – 0.04) = $1.152 per gallon. The weekly purchase cost is $1.152 * 5,000 = $5,760. Weekly delivery charges equal 5,000/15,000 * $35 = $11.67. The weekly inventory holding cost is 15,000/2 * $1.152 * (35%/52) = $58.15. The total cost is $5,760 + $11.67 + $58.15 = $5,830.

Difficulty: 3 Hard Topic: Balancing Setup Costs with Inventory Costs: The EOQ Model AACSB: Analytical Thinking Blooms: Analyze

10) It is costly to hold inventory (e.g., storage costs, obsolescence costs, etc.) but inventory can also be useful in a process because… (choose the best answer) 1.

2.

3.

4.

5.

A) Adding inventory to a process will shorten the average time a unit spends in a process.

B) Adding inventory to a process can increase the capacity of the process.

C) Adding inventory to a process is likely to increase quality.

D) None of the above.

E) All of the above.

Answer: B Explanation: Adding inventory (or adding buffer) reduces the chance that the process is starving for items to work on, thus improves the processes capacity. The average time that a unit spends in a process is the sum of processing time at each step and the time spent waiting for servers to be available. Adding inventory will not affect the processing

time nor the waiting time, as waiting time is determined by the processing time of each step. Thus, A is not correct. Inventory does not influence quality either.

Difficulty: 3 Hard Topic: Choosing a Batch Size in the Presence of Setup Times AACSB: Reflective Thinking Blooms: Analyze

11) Which of the following most directly expresses the motivation behind the expression “Do not block the bottleneck!”?

1.

2.

3.

4.

5.

A) If the bottleneck has nothing to work on, the overall capacity of the process will be lower than it could be.

B) If the bottleneck is prevented from working (e.g., it has nowhere to put its output,) the overall capacity will be reduced.

C) Blocking the bottleneck will increase the coefficient of variations of the arrival process, which decreases capacity.

D) Blocking the bottleneck increases inventory turns, which increases the annual holding costs.

E) It is not good to block the bottleneck because there are economies of scale in inventory management.

Answer: B Explanation: To prevent a reduction in capacity, processing at the bottleneck must remain constant. If work at the bottleneck location is blocked, then overall production is affected.

Difficulty: 3 Hard Topic: Choosing a Batch Size in the Presence of Setup Times AACSB: Reflective Thinking Blooms: Analyze

12) Which of the following most directly expresses the motivation behind the expression “Buffer or Suffer”?

1.

2.

3.

4.

5.

A) Adding product variety to a process with setup times is likely to increase the average amount of inventory needed.

B) To increase capacity, it is important to reduce setup times in a process.

C) If you want to increase the capacity of a process, add capacity first to the bottleneck.

D) If there is variability in the arrival process, or during activity times, make sure there is sufficient inventory between stages, otherwise capacity will be reduced.

E) When there are setup costs, producing in large enough batches is important to avoid reducing capacity.

Answer: D Explanation: The addition of extra inventory, or buffer, helps prevent a loss in production time during periods of inactivity. Production capacity is maximized when there is a safety stock of supplies between production stages.

Difficulty: 3 Hard Topic: Interaction between Batching and Inventory AACSB: Reflective Thinking Blooms: Analyze

13) Henry Ford famously proclaimed, “You can have any color you want, as long as it is black.” Which of the following best reflects his motivation for this position?

1.

2.

3.

4.

5.

A) He believed that customers didn’t like other colors, so why go through the hassle of making different color cars.

B) With more than one color, the process would have switch over time, and that could reduce the overall utilization of the process.

C) He wanted to establish “black” cars as part of his company’s brand image at that time.

D) Assembling non-black cars takes longer than black cars.

E) He understood that increasing inventory in a process could lead to a longer flow time through the process.

Answer: B Explanation: With more than one color, the process would have to switch from one color to another, which would incur idle time on switchovers and utilization would decrease.

Difficulty: 3 Hard

Topic: Interaction between Batching and Inventory AACSB: Reflective Thinking Blooms: Analyze

14) A high-volume paper manufacturer borrows $1M to purchase a new printing machine. The annual debt payment is $150,000. The machine can make different types of paper, but the machine must be shut down for one day each time it switches production to a different kind of paper. The manufacturer spends about 24 days per year due to produce changeovers. Dividing the annual debt payment over those 24 days yields $6,250 per day. Should this cost, $6,250, be used as an input to the EOQ model to determine optimal batch sizes for each type of paper? Choose the best answer/explanation.

1.

2.

3.

4.

5.

A) Yes, $6,250 is incurred per day independent of the subsequent production volume, so it is the setup cost in the EOQ model.

B) Yes, $6,250 is incurred per day independent of the subsequent production volume, so it is the holding cost in the EOQ model.

C) No, the square root of $6,250 should be input into the EOQ model as the setup cost.

D) No, $150,000 should be input into the EOQ model as the holding cost because it is the opportunity cost of capital.

E) None of the above

Answer: E Explanation: The annual debt payment is a sunk cost and should not be used in the calculations of the batch sizes.

Difficulty: 3 Hard Topic: The Impacts of Setup on Capacity AACSB: Reflective Thinking Blooms: Analyze

[The following information applies to questions 15-18.]

Kick Scooters Metal frames for kick scooters are manufactured in two steps: stamping and assembly.

Each frame is made up of three pieces: one unit of part A and two units of part B.

The parts are fabricated by a single stamping machine that requires a setup time of 90 minutes switching between the two part types. Once the machine is set up, the activity time for parts, regardless of type, is 30 seconds each piece. Currently, the stamping machine rotates its production between one batch of 120 part A’s and 240 part B’s.

Completed parts move only when the entire batch is produced.

During assembly, parts are assembled manually to form the finished products. The three parts and a number of small purchased components are required for each unit of final product. Each product requires 30 minutes of labor time to assemble. There are 12 workers in assembly. There is sufficient demand to sell every scooter the system can make.

15) At the current batch sizes, the bottleneck of the system is 1.

2.

3.

4.

A) stamping B) assembly C) they both have the same capacity D) cannot be determined

Answer: A Explanation: The capacity at stamping is 120/(90 + 120 * 0.5 + 9 + 240 * 0.5) * 60 = 20 units per hour. The capacity at assembly is 1/30 * 12 * 60 = 24 units per hour.

Therefore, stamping is the bottleneck.

Difficulty: 3 Hard Topic: Choosing a Batch Size in the Presence of Setup Times AACSB: Analytical Thinking Blooms: Analyze

16) At the current batch sizes, what is the process capacity in units per hour? Choose the answer below that is closest to the correct answer. A unit refers to a complete scooter frame (i.e. one part A and two parts B).

1.

2.

3.

4.

5.

6.

A) 1 unit/hour B) 5 units/hour C) 10 units/hour D) 20 units/hour E) 30 units/hour F) 40 units/hour

Answer: D Explanation: Since stamping is the bottleneck, its capacity is also the process capacity.

Difficulty: 3 Hard Topic: Choosing a Batch Size in the Presence of Setup Times AACSB: Knowledge Application Blooms: Analyze 17) One way to increase process capacity is to 1.

2.

3.

4.

A) increase the batch size at the stamping step B) decrease the batch size at the stamping step C) add more workers at assembly D) none of the above

Answer: A Explanation: At a batch-producing step, increasing the batch size increases the capacity at the step.

Difficulty: 3 Hard Topic: Choosing a Batch Size in the Presence of Setup Times AACSB: Reflective Thinking Blooms: Analyze

18) Which batch size for the stamping machine would minimize inventory without decreasing the current flow rate? Choose the answer below that is closest to the correct answer.

1.

2.

3.

4.

5.

A) 60 sets B) 120 sets C) 180 sets D) 240 sets E) 300 sets

Answer: C Explanation: At a batch size of 180, the capacity at stamping is 180/(90 +180 * 0.5 + 90 + 360 * 0.5) * 60 = 24 units per hour.

Difficulty: 3 Hard Topic: Choosing a Batch Size in the Presence of Setup Times AACSB: Knowledge Application Blooms: Apply