Solution Manual for Matching Supply with Demand An Introduction to Operations Management, 5th Edition Cachon

Testbank
SOLUTION MANUAL FOR
MatchingSupplywithDemandAnjIntrod
uctiontoOperationsManagement,5thEdi
tionCachon

Chapter2-19

Chapter2
TheProcessViewoftheOrganization
j j j




Q2.1Dell
Thefollowingsteps referdirectlytoExhibit2.1.
#1:For2001,wefindinDell’s10-k: Inventory=$400(inmillion)
#2:For2001,wefindinDell’s10-k: COGS=$26,442(inmillion)
j j



26, 442$/year
#3:Inventory turns= =66.105turnsperyear400$
b




40% per year
#4:PerunitInventory cost= =0.605%per year
66.105 per year

Q2.2.Airline
WeuseLittle’slawtocomputetheflowtime,sinceweknowboththeflowrateaswell as the
j j j



inventorylevel:
FlowTime=Inventory/FlowRate=35passengers/255passengersperhour =0.137hours
=8.24minutes

Q2.3InventoryCost

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, (a) Sales =$60,000,000peryear/$2000perunit=30,000unitssoldperyear
b




Inventory =$20,000,000/$1000 per unit = 20,000 unitsin inventory

Flow Time= Inventory/Flow Rate= 20,000/30,000 per year = 2/3year =8monthsTurns=
j j j




1/FlowTime= 1/(2/3year)= 1.5turns per year
b




Note:wecanalsogetthisnumberdirectlybywriting:
j j Inventoryturns= COGS /Inventory
j b




(b) CostofInventory: 25%peryear/1.5turns=16.66%.Fora $1000 product,thiswould
j




makeanabsoluteinventorycostof $166.66.

Q2.4.ApparelRetailing
j




(a) Revenueof $100MimpliesCOGSof $50M (becauseofthe100%markup).
j j



Turns = COGS/Inventory =$50M/$5M = 10.
(b) Theinventorycost,given10turns,is 40%/10= 4% .Fora 30$ item,theinventorycost is
j j b j



0.4$30=$1.20perunit.

Q2.5.LaVilla
(a) FlowRate=Inventory/Flow Time= 1200skiers /10days= 120 skiers per day b j




(b) Lastyear:onanygivenday,10%(1of10)ofskiersareontheirfirstdayofskiing
j j j j j j




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, Thisyear:onanygivenday,20%(1of5)ofskiersareontheirfirstdayofskiing j j j j




Averageamountspentinlocalrestaurants(perskier)
j



Last year=0.1$50+0.9$30=$32 This year
=0.2$50+0.8$30=$34
%change=($34−$32)/$32=6.25% increase b




Q2.6.Highway
Welookat1mileofhighwayasourprocess.Sincethespeedis60milesperhour,ittakesacar 1
j j



minutetotravelthroughtheprocess(flowtime).
Thereare24carson¼ofamile,i.e.thereare96carsonthe1milestretch(inventory).
Inventory=FlowRate*FlowTime:96cars=FlowRate*1minute j



Thus,theFlowRateis96carsperminute,correspondingto96*60=5760carsperhour.
j j




Q2.7.StrohrmannBaking
j



Thebread needs tobein theoven for12minutes(flowtime).Wewanttoproduceat aflowrate of
b j



4000breadsperhour,or 4000/60=66.66 breadsperminute.
j




Inventory=FlowRate*FlowTime:Inventory=66.66breadsperminute*12minutesThus, j



Inventory=800breads,whichistherequiredsizeoftheoven. j




Q2.8.MtKinleyConsulting
j




Wehavethefollowinginformationavailablefromthequestion: j




Level Inventory(numberofconsultantsat FlowTime(timespentatthat level) j



thatlevel) j



Associate 200 4years
Manager 60 6years
Partner 20 10years

(a) WecanuseLittle’slawtofindtheflowrateforassociateconsultants:Inventory=Flow Rate*
j



FlowTime;200consultants=FlowRate*4years;thus,theflowrateis50 consultantsper j



year,whichneedtoberecruitedtokeepthefirminitscurrentsize(note: whiletherearealso50
j j j j



consultantsleavingtheassociatelevel,thissaysnothingabouthow manyof
themaredismissedvshowmanyofthemarepromotedto Managerlevel).

(b) Wecanperformasimilaranalysisatthemanagerlevel,whichindicatesthattheflowrate
j j j



thereis10consultants.Inordertohave10consultantsasaflowrateatthemanagerlevel, we
j j



needtopromote10associatestomanagerlevel(remember,thefirmisnotrecruiting tothe
j j j j j j j j



higherranksfrom theoutside).Hence,everyyear,wedismiss40associatesand promote10
j j j j



associatestothemanagerlevel(theoddsatthatlevel are20%)




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, Now,considerthepartnerlevel.Theflowratethereis2consultantsperyear(obtainedviathe same j j



calculationsasbefore).Thus,fromthe10managercasesweevaluateeveryyear,8are j j



dismissedand2arepromotedtopartner(theoddsatthatlevelaretherebyalso20%).
j j j




Inordertofindtheoddsofanewhiretobecomepartner,weneedtomultiplythepromotion
j j j j



probabilities:0.2*0.2=0.04.Thus,anewhirehasa4%chanceofmakingittopartner.


Q2.9.MajorUSRetailers
j



a. Productstaysonaveragefor31.9daysinCostco’sinventory
b. Costcohasfora$5productaninventorycostof$0.1311whichcomparestoa j j



$0.2049 atWal-Mart

Q2.10.McDonald’s
a. InventoryturnsforMcDonald’swere92.3.Theywere30.05forWendy’s. j



b. McDonald’shasperunitinventorycostsof0.32%,whichfora3$mealabout j



$0.00975.Thatcomparesto0.998%atWendy’swherethecostpermealis $0.0299.
j j j




Q2.11.BCH
I=400associates,T=2years. R =I/T=400associates /2yrs=200associates/yr.
b b




Q2.12.Kroger
Turns = R/I =76858/6244 =12.3
j j j j




MatchingSupplywithDemand:AnIntroductiontoOperationsManagement5e
SolutionstoChapterProblems

Chapter3
UnderstandingtheSupplyProcess:EvaluatingProcessCapacity


Q3.1ProcessAnalysiswithOneFlowUnit
j



(a) Capacityofthethreeresourcesinunitsperhourare 602/10 =12 , 601/6=10;603 j j



/16=11.25.Thebottleneckisthe resourcewith thelowest capacity,whichisresource 2.
j j j



(b) Theprocesscapacityisthecapacityofthebottleneck,whichis 10units/hr. j j




(c) If demand =8units/hr, then theprocessisdemandconstrained and theflowrateis
j j j j j



8units/hr
(d) Utilization=FlowRate/Capacity.Forthethreeresourcestheyare 8/12, 8/10,and
8/11.25.




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