SOLUTIONS MANUAL for Matching Supply with Demand: An Introduction to Operations Management, 5th Edition by Gerard Cachon

Matching Supply with Demand 5th Edition an Introduction to Operations Management Gerard Cachon TABLE OF CONTENTS CHAPTER 1: Introduction CHAPTER 2: The Process View of the Organization CHAPTER 3: Understanding the Supply Process: Evaluating Process Capacity CHAPTER 4: Estimating and Reducing Labor Costs CHAPTER 5: Batching and Other Flow Interruptions: Setup Times and the Economic Order Quantity Model CHAPTER 6: The Link between Operations and Finance CHAPTER 7: Quality and Statistical Process Control CHAPTER 8: Lean Operations and the Toyota Production System CHAPTER 9: Variability and Its Impact on Process Performance: Waiting Time Problems CHAPTER 10: The Impact of Variability on Process Performance: Throughput Losses CHAPTER 11: Scheduling to Prioritize Demand CHAPTER 12: Project Management CHAPTER 13: Forecasting CHAPTER 14: Betting on Uncertain Demand: The Newsvendor Model CHAPTER 15: Assemble -to-Order, Make -to-Order, and Quick Response with Reactive Capacity CHAPTER 16: Service Levels and Lead Times in Supply Chains: The Order -up-to Inventory Model CHAPTER 17: Risk -Pooling Strategies to Reduce and Hedge Uncertainty CHAPTER 18: Revenue Management with Capacity Controls CHAPTER 19: Supply Chain Coordination © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC. Chapter 2 The Process View of the Organization Q2.1 Dell The following steps refer directly to Exhibit 2.1. #1: For 2001, we find in Dell’s 10-k: Inventory = $400 (in million) #2: For 2001, we find in Dell’s 10-k: COGS = $26,442 (in million) #3: Inventory turns = 26, 442$/ year = 66.105 turns per year 400$ #4: Per unit Inventory cost = 40% per year 66.105 per year = 0.605% per year Q2.2. Airline We use Little’s law to compute the flow time, since we know both the flow rate as well as the inventory level: Flow Time = Inventory/ Flow Rate = 35 passengers/ 255 passengers per hour = 0.137 hours = 8.24 minutes Q2.3 Inventory Cost (a) Sales = $60,000,000 per year / $2000 per unit = 30,000 units sold per year Inventory = $20,000,000 / $1000 per unit = 20,000 units in inventory Flow Time = Inventory/ Flow Rate = 20,000 / 30,000 per year = year = 8 months Turns = 1/ Flow Time = 1/( year) = 1.5 turns per year Note: we can also get this number directly by writing: Inventory turns = COGS / Inventory (b) Cost of Inventory: 25% per year /1.5 turns = 16.66% . For a $1000 product, this would make an absolute inventory cost of $166.66 . Q2.4. Apparel Retailing (a) Revenue of $100M implies COGS of $50M (because of the 100% markup). Turns = COGS/ Inventory = $50M/ $5M = 10 . (b) The inventory cost, given 10 turns, is 40%/10 = 4% . For a 30$ item, the inventory cost is 0.4 $30 = $1.20 per unit . Q2.5. La Villa (a) Flow Rate = Inventory / Flow Time = 1200 skiers /10 days = 120 skiers per day (b) Last year: on any given day, 10% (1 of 10) of skiers are on their first day of skiing