SOLUTION MANUAL FOR kk kk
Matching Supply with Demand An Introduction to Operations Management, 5th Edition
kk kk kk kk kk kk kk kk kk kk
Cachon Chapter 2-19
kk kk kk
Chapter 2 kk
The Process View of the Organization
kk kk kk kk kk
Q2.1 Dell kk
The following steps refer directly to Exhibit 2.1.
kk kk kk kk kk kk kk
#1: For 2001, we find in Dell’s 10-k: Inventory = $400 (in million)
kk kk kk kk kk kk kk kk kk kk kk kk
#2: For 2001, we find in Dell’s 10-k: COGS = $26,442 (in million)
kk kk kk kk kk kk kk k k kk kk kk kk
26,442$/ year
#3: Inventory turns 66.105 turns per year
k kk kk
kk kk kk kk kk kk kk kk
400$ kk
40% per year
0.605% per year
kk kk
#4: Per unit Inventory kk kk kk kk kk kk
cost k k
66.105
kk
per kk
year kk
Q2.2. Airline
kk
We use Little’s law to compute the flow time, since we know both the flow rate as
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
well as the inventory level:
kk kk kk kk kk
Flow Time Inventory/ Flow Rate 35 passengers/ 255 passengers per hour 0.137 hours
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
8.24 minutes kk kk
Q2.3 Inventory Cost
kk kk
(a) Sales $60,000,000 per year / $2000 per unit 30,000 units sold per
kk kk kk kk kk k kk kk kk kk kk kk kk
year Inventory $20,000,000 / $1000 per unit 20,000 units in
kk kk kk kk kk kk kk kk kk kk kk kk
inventory kk
Flow Time Inventory/ Flow Rate 20,,000 per year year 8
kk kk kk kk kk kk kk kk kk k k k k kk kk kk kk kk k k kk
months Turns 1/ Flow Time 1/( year) 1.5 turns per year
kk kk kk k kk kk kk k k k kk kk k kk kk kk
Note: we can also get this number directly by writing:
kk kk kk kk kk kk kk kk kk k k Inventory kkturns kk kkCOGSkk/ kkInventory
(b) Cost of Inventory: 25% per year /1.5 turns 16.66%. For a $1000 product, this
kk kk k k kk kk kk kk kk k kk kk k k k k kk
would make an absolute inventory cost of $166.66 .
kk kk kk kk kk kk kk k k kk
Q2.4. Apparel Retailing
kk kk
(a) Revenue of $100M implies COGS of $50M (because of the 100% markup).
kk k k kk kk kk k k k k kk kk kk kk
Turns COGS/ Inventory $50M/ $5M 10 . kk kk kk kk kk kk kk kk kk
(b) The inventory cost, given 10 turns, is 40%/10 4% . For a 30$ item, the
kk kk kk kk kk kk k k kk kk kk kk kk k k k k kk
inventory cost is 0.4 $30 $1.20 per unit .
kk kk kk k k kk kk kk kk kk kk
Q2.5. La Villa
kk kk
(a) Flow Rate Inventory / Flow Time 1200 skiers /10 days 120 skiers per
kk kk kk kk kk kk kk kk kk kk kk kk kk kk k k k k day
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written
kk kk kk kk kk kk kk kk kk kk kk kk kk kk
consent of McGraw Hill LLC. kk kk kk kk kk
, (b) Last year: on any given day, 10% (1 of 10) of skiers are on their first day of skiing
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written
kk kk kk kk kk kk kk kk kk kk kk kk kk kk
consent of McGraw Hill LLC.
kk kk kk kk kk
, This year: on any given day, 20% (1 of 5) of skiers are on their first day of skiing
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
Average amount spent in local restaurants (per skier)
kk kk kk kk kk kk kk
Last year 0.1$50 0.9$30 $32
kk kk kk kk kk kk kk
This year 0.2$50 0.8$30 $34
kk kk kk kk kk kk kk kk
% change ($34 $32) / $32 6.25% increase
kk kk kk kk kk kk kk kk kk
Q2.6. Highway
kk
We look at 1 mile of highway as our process. Since the speed is 60 miles per hour,
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
it takes a car 1 minute to travel through the process (flow time).
kk kk kk kk kk kk kk kk kk kk kk kk kk
There are 24 cars on ¼ of a mile, i.e. there are 96 cars on the 1 mile stretch
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
(inventory). Inventory = Flow Rate * Flow Time: 96 cars = Flow Rate * 1 minute
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
Thus, the Flow Rate is 96 cars per minute, corresponding to 96*60 = 5760 cars per hour.
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
Q2.7. Strohrmann Baking
kk kk
The bread needs to be in the oven for 12 minutes (flow time). We want to produce
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
at a flow rate of 4000 breads per hour, or 4000/60 = 66.66 breads per minute.
kk kk kk kk kk kk kk kk kk kk k k kk kk k k kk kk
Inventory = Flow Rate * Flow Time: Inventory = 66.66 breads per minute* 12
kk kk kk kk kk kk kk kk kk kk kk kk kk
minutes Thus, Inventory = 800 breads, which is the required size of the oven.
kk kk kk kk kk kk kk kk kk kk kk kk kk kk
Q2.8. Mt Kinley Consulting
kk kk kk
We have the following information available from the question:
kk kk kk kk kk kk kk kk
Level Inventory (number of consultants at kk kk kk kk Flow Time (time spent at that
kk kk kk kk kk
that level) kk level)
Associate 200 4 years
kk
Manager 60 6 years
kk
Partner 20 10 years kk
(a) We can use Little’s law to find the flow rate for associate consultants: Inventory
kk kk kk kk kk kk kk kk kk kk kk kk kk
= Flow Rate * Flow Time; 200 consultants = Flow Rate * 4 years; thus, the
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
flow rate is 50 consultants per year, which need to be recruited to keep the
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
firm in its current size (note: while there are also 50 consultants leaving the
kk kk kk kk kk kk kk kk kk kk kk kk kk kk
associate level, this says nothing about how many of them are dismissed vs
kk kk kk kk kk kk kk kk kk kk kk kk kk
how many of them are promoted to Manager level).
kk kk kk kk kk kk kk kk kk
(b) We can perform a similar analysis at the manager level, which indicates that the
kk kk kk kk kk kk kk kk kk kk kk kk kk
flow rate there is 10 consultants. In order to have 10 consultants as a flow rate
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
at the manager level, we need to promote 10 associates to manager level
kk kk kk kk kk kk kk kk kk kk kk kk kk
(remember, the firm is not recruiting to the higher ranks from the outside).
kk kk kk kk kk kk kk kk kk kk kk kk kk
Hence, every year, we dismiss 40 associates and promote 10 associates to the
kk kk kk kk kk kk kk kk kk kk kk kk kk
manager level (the odds at that level are 20%)
kk kk kk kk kk kk kk kk kk
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written
kk kk kk kk kk kk kk kk kk kk kk kk kk kk
consent of McGraw Hill LLC. kk kk kk kk kk
, Now, consider the partner level. The flow rate there is 2 consultants per year
kk kk kk kk kk kk kk kk kk kk kk kk kk
(obtained via the same calculations as before). Thus, from the 10 manager cases
kk kk kk kk kk kk kk kk kk kk kk kk kk
we evaluate every year, 8 are dismissed and 2 are promoted to partner (the odds at
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
that level are thereby also 20%).
kk kk kk kk kk kk
In order to find the odds of a new hire to become partner, we need to multiply the
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
promotion probabilities: 0.2*0.2 = 0.04. Thus, a new hire has a 4% chance of
kk kk kk kk kk kk kk kk kk kk kk kk kk kk
making it to partner.
kk kk kk kk
Q2.9. Major US Retailers
kk kk kk
a. Product stays on average for 31.9 days in Costco’s inventory
kk kk kk kk kk kk kk kk kk
b. Costco has for a $5 product an inventory cost of $0.1311 which compares to a
kk kk kk kk kk kk kk kk kk kk kk kk kk kk
$0.2049 at Wal-Mart kk kk
Q2.10. McDonald’s
kk
a. Inventory turns for McDonald’s were 92.3. They were 30.05 for Wendy’s.
kk kk kk kk kk kk kk kk kk kk
b. McDonald’s has per unit inventory costs of 0.32%, which for a 3$ meal about kk kk kk kk kk kk kk kk kk kk kk kk kk
$0.00975. That compares to 0.998% at Wendy’s where the cost per meal is $0.0299 .
kk kk kk kk kk kk kk kk kk kk kk kk k k kk
Q2.11. BCH kk
I = 400 associates, T = 2 years. R I / T 400 associates / 2 yrs 200 associates / yr .
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
Q2.12. Kroger kk
Turns R / I 12.3
kk kk kk kk kk kk kk kk kk
Matching Supply with Demand: An Introduction to Operations
kk kk kk kk kk kk kk
Management 5e kk kk
Solutions to Chapter Problems kk kk kk
Chapter 3 kk kk
Understanding the Supply Process: Evaluating Process Capacity kk kk kk kk kk kk
Q3.1 Process Analysis with One Flow Unit
kk kk kk kk kk kk
(a) Capacity of the three resources in units per hour are 602 /10 12 , 601/ 6
kk kk kk kk kk kk kk kk kk k k kk kk kk k k kk
10; 603 /16 11.25 . The bottleneck is the resource with the lowest
kk kk kk kk kk kk kk kk kk kk kk kk kk
capacity, which is resource 2.
kk kk kk kk kk
(b) The process capacity is the capacity of the bottleneck, which is 10 units/hr .
kk kk kk kk kk kk kk kk kk kk kk kk kk
(c) If demand 8 units / hr , then the process is demand constrained and the flow rate is
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
8 units/hr kk
(d) Utilization = Flow Rate / Capacity . For the three resources they are 8 /12 , 8 /10 , and
kk kk kk kk kk kk kk kk kk kk kk kk kk kk k kk kk kk k kk kk
8 /11.25 . kk k
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written
kk kk kk kk kk kk kk kk kk kk kk kk kk kk
consent of McGraw Hill LLC. kk kk kk kk kk
Matching Supply with Demand An Introduction to Operations Management, 5th Edition
kk kk kk kk kk kk kk kk kk kk
Cachon Chapter 2-19
kk kk kk
Chapter 2 kk
The Process View of the Organization
kk kk kk kk kk
Q2.1 Dell kk
The following steps refer directly to Exhibit 2.1.
kk kk kk kk kk kk kk
#1: For 2001, we find in Dell’s 10-k: Inventory = $400 (in million)
kk kk kk kk kk kk kk kk kk kk kk kk
#2: For 2001, we find in Dell’s 10-k: COGS = $26,442 (in million)
kk kk kk kk kk kk kk k k kk kk kk kk
26,442$/ year
#3: Inventory turns 66.105 turns per year
k kk kk
kk kk kk kk kk kk kk kk
400$ kk
40% per year
0.605% per year
kk kk
#4: Per unit Inventory kk kk kk kk kk kk
cost k k
66.105
kk
per kk
year kk
Q2.2. Airline
kk
We use Little’s law to compute the flow time, since we know both the flow rate as
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
well as the inventory level:
kk kk kk kk kk
Flow Time Inventory/ Flow Rate 35 passengers/ 255 passengers per hour 0.137 hours
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
8.24 minutes kk kk
Q2.3 Inventory Cost
kk kk
(a) Sales $60,000,000 per year / $2000 per unit 30,000 units sold per
kk kk kk kk kk k kk kk kk kk kk kk kk
year Inventory $20,000,000 / $1000 per unit 20,000 units in
kk kk kk kk kk kk kk kk kk kk kk kk
inventory kk
Flow Time Inventory/ Flow Rate 20,,000 per year year 8
kk kk kk kk kk kk kk kk kk k k k k kk kk kk kk kk k k kk
months Turns 1/ Flow Time 1/( year) 1.5 turns per year
kk kk kk k kk kk kk k k k kk kk k kk kk kk
Note: we can also get this number directly by writing:
kk kk kk kk kk kk kk kk kk k k Inventory kkturns kk kkCOGSkk/ kkInventory
(b) Cost of Inventory: 25% per year /1.5 turns 16.66%. For a $1000 product, this
kk kk k k kk kk kk kk kk k kk kk k k k k kk
would make an absolute inventory cost of $166.66 .
kk kk kk kk kk kk kk k k kk
Q2.4. Apparel Retailing
kk kk
(a) Revenue of $100M implies COGS of $50M (because of the 100% markup).
kk k k kk kk kk k k k k kk kk kk kk
Turns COGS/ Inventory $50M/ $5M 10 . kk kk kk kk kk kk kk kk kk
(b) The inventory cost, given 10 turns, is 40%/10 4% . For a 30$ item, the
kk kk kk kk kk kk k k kk kk kk kk kk k k k k kk
inventory cost is 0.4 $30 $1.20 per unit .
kk kk kk k k kk kk kk kk kk kk
Q2.5. La Villa
kk kk
(a) Flow Rate Inventory / Flow Time 1200 skiers /10 days 120 skiers per
kk kk kk kk kk kk kk kk kk kk kk kk kk kk k k k k day
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written
kk kk kk kk kk kk kk kk kk kk kk kk kk kk
consent of McGraw Hill LLC. kk kk kk kk kk
, (b) Last year: on any given day, 10% (1 of 10) of skiers are on their first day of skiing
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written
kk kk kk kk kk kk kk kk kk kk kk kk kk kk
consent of McGraw Hill LLC.
kk kk kk kk kk
, This year: on any given day, 20% (1 of 5) of skiers are on their first day of skiing
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
Average amount spent in local restaurants (per skier)
kk kk kk kk kk kk kk
Last year 0.1$50 0.9$30 $32
kk kk kk kk kk kk kk
This year 0.2$50 0.8$30 $34
kk kk kk kk kk kk kk kk
% change ($34 $32) / $32 6.25% increase
kk kk kk kk kk kk kk kk kk
Q2.6. Highway
kk
We look at 1 mile of highway as our process. Since the speed is 60 miles per hour,
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
it takes a car 1 minute to travel through the process (flow time).
kk kk kk kk kk kk kk kk kk kk kk kk kk
There are 24 cars on ¼ of a mile, i.e. there are 96 cars on the 1 mile stretch
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
(inventory). Inventory = Flow Rate * Flow Time: 96 cars = Flow Rate * 1 minute
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
Thus, the Flow Rate is 96 cars per minute, corresponding to 96*60 = 5760 cars per hour.
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
Q2.7. Strohrmann Baking
kk kk
The bread needs to be in the oven for 12 minutes (flow time). We want to produce
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
at a flow rate of 4000 breads per hour, or 4000/60 = 66.66 breads per minute.
kk kk kk kk kk kk kk kk kk kk k k kk kk k k kk kk
Inventory = Flow Rate * Flow Time: Inventory = 66.66 breads per minute* 12
kk kk kk kk kk kk kk kk kk kk kk kk kk
minutes Thus, Inventory = 800 breads, which is the required size of the oven.
kk kk kk kk kk kk kk kk kk kk kk kk kk kk
Q2.8. Mt Kinley Consulting
kk kk kk
We have the following information available from the question:
kk kk kk kk kk kk kk kk
Level Inventory (number of consultants at kk kk kk kk Flow Time (time spent at that
kk kk kk kk kk
that level) kk level)
Associate 200 4 years
kk
Manager 60 6 years
kk
Partner 20 10 years kk
(a) We can use Little’s law to find the flow rate for associate consultants: Inventory
kk kk kk kk kk kk kk kk kk kk kk kk kk
= Flow Rate * Flow Time; 200 consultants = Flow Rate * 4 years; thus, the
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
flow rate is 50 consultants per year, which need to be recruited to keep the
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
firm in its current size (note: while there are also 50 consultants leaving the
kk kk kk kk kk kk kk kk kk kk kk kk kk kk
associate level, this says nothing about how many of them are dismissed vs
kk kk kk kk kk kk kk kk kk kk kk kk kk
how many of them are promoted to Manager level).
kk kk kk kk kk kk kk kk kk
(b) We can perform a similar analysis at the manager level, which indicates that the
kk kk kk kk kk kk kk kk kk kk kk kk kk
flow rate there is 10 consultants. In order to have 10 consultants as a flow rate
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
at the manager level, we need to promote 10 associates to manager level
kk kk kk kk kk kk kk kk kk kk kk kk kk
(remember, the firm is not recruiting to the higher ranks from the outside).
kk kk kk kk kk kk kk kk kk kk kk kk kk
Hence, every year, we dismiss 40 associates and promote 10 associates to the
kk kk kk kk kk kk kk kk kk kk kk kk kk
manager level (the odds at that level are 20%)
kk kk kk kk kk kk kk kk kk
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written
kk kk kk kk kk kk kk kk kk kk kk kk kk kk
consent of McGraw Hill LLC. kk kk kk kk kk
, Now, consider the partner level. The flow rate there is 2 consultants per year
kk kk kk kk kk kk kk kk kk kk kk kk kk
(obtained via the same calculations as before). Thus, from the 10 manager cases
kk kk kk kk kk kk kk kk kk kk kk kk kk
we evaluate every year, 8 are dismissed and 2 are promoted to partner (the odds at
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
that level are thereby also 20%).
kk kk kk kk kk kk
In order to find the odds of a new hire to become partner, we need to multiply the
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
promotion probabilities: 0.2*0.2 = 0.04. Thus, a new hire has a 4% chance of
kk kk kk kk kk kk kk kk kk kk kk kk kk kk
making it to partner.
kk kk kk kk
Q2.9. Major US Retailers
kk kk kk
a. Product stays on average for 31.9 days in Costco’s inventory
kk kk kk kk kk kk kk kk kk
b. Costco has for a $5 product an inventory cost of $0.1311 which compares to a
kk kk kk kk kk kk kk kk kk kk kk kk kk kk
$0.2049 at Wal-Mart kk kk
Q2.10. McDonald’s
kk
a. Inventory turns for McDonald’s were 92.3. They were 30.05 for Wendy’s.
kk kk kk kk kk kk kk kk kk kk
b. McDonald’s has per unit inventory costs of 0.32%, which for a 3$ meal about kk kk kk kk kk kk kk kk kk kk kk kk kk
$0.00975. That compares to 0.998% at Wendy’s where the cost per meal is $0.0299 .
kk kk kk kk kk kk kk kk kk kk kk kk k k kk
Q2.11. BCH kk
I = 400 associates, T = 2 years. R I / T 400 associates / 2 yrs 200 associates / yr .
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
Q2.12. Kroger kk
Turns R / I 12.3
kk kk kk kk kk kk kk kk kk
Matching Supply with Demand: An Introduction to Operations
kk kk kk kk kk kk kk
Management 5e kk kk
Solutions to Chapter Problems kk kk kk
Chapter 3 kk kk
Understanding the Supply Process: Evaluating Process Capacity kk kk kk kk kk kk
Q3.1 Process Analysis with One Flow Unit
kk kk kk kk kk kk
(a) Capacity of the three resources in units per hour are 602 /10 12 , 601/ 6
kk kk kk kk kk kk kk kk kk k k kk kk kk k k kk
10; 603 /16 11.25 . The bottleneck is the resource with the lowest
kk kk kk kk kk kk kk kk kk kk kk kk kk
capacity, which is resource 2.
kk kk kk kk kk
(b) The process capacity is the capacity of the bottleneck, which is 10 units/hr .
kk kk kk kk kk kk kk kk kk kk kk kk kk
(c) If demand 8 units / hr , then the process is demand constrained and the flow rate is
kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk kk
8 units/hr kk
(d) Utilization = Flow Rate / Capacity . For the three resources they are 8 /12 , 8 /10 , and
kk kk kk kk kk kk kk kk kk kk kk kk kk kk k kk kk kk k kk kk
8 /11.25 . kk k
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written
kk kk kk kk kk kk kk kk kk kk kk kk kk kk
consent of McGraw Hill LLC. kk kk kk kk kk
