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

SOLUTION MANUAL FOR pp pp


Matching Supply with Demand An Introduction to Operations Management, 5th Edition
pp pp pp pp pp pp pp pp pp pp



Cachon Chapter 2-19
pp pp pp




Chapter 2 pp


The Process View of the Organization
pp pp pp pp pp




Q2.1 Dell
pp


The following steps refer directly to Exhibit 2.1.
pp pp pp pp pp pp pp


#1: For 2001, we find in Dell’s 10-k: Inventory = $400 (in million)
pp pp pp pp pp pp pp pp pp pp pp pp



#2: For 2001, we find in Dell’s 10-k: COGS = $26,442 (in million)
pp pp pp pp pp pp pp p p pp pp pp pp



26,442$/ year
#3: Inventory turns   66.105 turns per year
p pp pp
pp pp pp pp pp pp pp pp

400$ pp


40% per
 0.605% per year
pp
#4: Per unit Inventory pp pp pp pp pp pp
year
cost 
pp
p p pp

66.105 per pp


year pp




Q2.2. Airline
pp


We use Little’s law to compute the flow time, since we know both the flow rate as
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp


well as the inventory level:
pp pp pp pp pp


Flow Time  Inventory/ Flow Rate  35 passengers/ 255 passengers per hour  0.137 hours
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp


 8.24 minutes pp pp




Q2.3 Inventory Cost
pp pp


(a) Sales  $60,000,000 per year / $2000 per unit  30,000 units sold per
pp pp pp pp pp p pp pp pp pp pp pp pp


year Inventory  $20,000,000 / $1000 per unit  20,000 units in
pp pp pp pp p pp pp pp pp pp pp pp


inventorypp




Flow Time  Inventory/ Flow Rate  20,,000 per year  year  8
pp pp pp pp pp pp pp pp pp pp p p pp pp pp pp pp pp pp


months Turns  1/ Flow Time  1/( year)  1.5 turns per year
pp pp pp p pp pp pp p p p pp pp p pp pp pp




Note: we can also get this number directly by writing:
pp pp pp pp pp pp pp pp pp p p Inventory ppturns pp ppCOGSpp/ ppInventory

(b) Cost of Inventory: 25% per year /1.5 turns  16.66%. For a $1000 product, this
pp pp p p pp pp pp pp pp p pp pp p p p p pp



would make an absolute inventory cost of $166.66 .
pp pp pp pp pp pp pp p p pp




Q2.4. Apparel Retailing
pp pp




(a) Revenue of $100M implies COGS of $50M (because of the 100% markup).
pp p p pp pp pp p p p p pp pp pp pp


Turns  COGS/ Inventory  $50M/ $5M  10 .
pp pp pp pp pp pp pp pp pp



(b) The inventory cost, given 10 turns, is 40%/10  4% . For a 30$ item, the
pp pp pp pp pp pp p p pp pp pp pp pp p p p p pp


inventory cost is 0.4 $30  $1.20 per unit .
pp pp pp p p pp pp pp pp pp pp




Q2.5. La Villa
pp pp



© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written
pp pp pp pp pp pp pp pp pp pp pp pp pp pp

consent of McGraw Hill LLC. pp pp pp pp pp

, (a) Flow Rate  Inventory / Flow Time  1200 skiers /10 days  120 skiers per day
pp pp pp pp pp pp pp pp pp pp pp pp pp pp p p p p


(b) Last year: on any given day, 10% (1 of 10) of skiers are on their first day of skiing
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp




© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written
pp pp pp pp pp pp pp pp pp pp pp pp pp pp

consent of McGraw Hill LLC.
pp pp pp pp pp

, This year: on any given day, 20% (1 of 5) of skiers are on their first day of skiing
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp




Average amount spent in local restaurants (per skier)
pp pp pp pp pp pp pp


Last year  0.1$50  0.9$30  $32
pp pp pp pp pp pp pp


This year  0.2$50  0.8$30  $34
pp pp pp pp pp pp pp pp


% change  ($34 $32) / $32  6.25% increase
pp pp pp pp pp pp pp pp pp




Q2.6. Highway
pp


We look at 1 mile of highway as our process. Since the speed is 60 miles per hour,
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp


it takes a car 1 minute to travel through the process (flow time).
pp pp pp pp pp pp pp pp pp pp pp pp pp


There are 24 cars on ¼ of a mile, i.e. there are 96 cars on the 1 mile stretch
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp


(inventory). Inventory = Flow Rate * Flow Time: 96 cars = Flow Rate * 1 minute
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp


Thus, the Flow Rate is 96 cars per minute, corresponding to 96*60 = 5760 cars per hour.
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp




Q2.7. Strohrmann Baking
pp pp


The bread needs to be in the oven for 12 minutes (flow time). We want to produce
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp


at a flow rate of 4000 breads per hour, or 4000/60 = 66.66 breads per minute.
pp pp pp pp pp pp pp pp pp pp p p pp pp p p pp pp




Inventory = Flow Rate * Flow Time: Inventory = 66.66 breads per minute* 12
pp pp pp pp pp pp pp pp pp pp pp pp pp


minutes Thus, Inventory = 800 breads, which is the required size of the oven.
pp pp pp pp pp pp pp pp pp pp pp pp pp pp




Q2.8. Mt Kinley Consulting
pp pp pp




We have the following information available from the question:
pp pp pp pp pp pp pp pp




Level Inventory (number of consultants at pp pp pp pp Flow Time (time spent at that
pp pp pp pp pp


that level) pp level)
Associate 200 4 years
pp


Manager 60 6 years
pp


Partner 20 10 years pp




(a) We can use Little’s law to find the flow rate for associate consultants: Inventory
pp pp pp pp pp pp pp pp pp pp pp pp pp


= Flow Rate * Flow Time; 200 consultants = Flow Rate * 4 years; thus, the
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp


flow rate is 50 consultants per year, which need to be recruited to keep the
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp


firm in its current size (note: while there are also 50 consultants leaving the
pp pp pp pp pp pp pp pp pp pp pp pp pp pp


associate level, this says nothing about how many of them are dismissed vs
pp pp pp pp pp pp pp pp pp pp pp pp pp


how many of them are promoted to Manager level).
pp pp pp pp pp pp pp pp pp




(b) We can perform a similar analysis at the manager level, which indicates that the
pp pp pp pp pp pp pp pp pp pp pp pp pp


flow rate there is 10 consultants. In order to have 10 consultants as a flow rate
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp


at the manager level, we need to promote 10 associates to manager level
pp pp pp pp pp pp pp pp pp pp pp pp pp


(remember, the firm is not recruiting to the higher ranks from the outside).
pp pp pp pp pp pp pp pp pp pp pp pp pp


Hence, every year, we dismiss 40 associates and promote 10 associates to the
pp pp pp pp pp pp pp pp pp pp pp pp pp


manager level (the odds at that level are 20%)
pp pp pp pp pp pp pp pp pp




© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written
pp pp pp pp pp pp pp pp pp pp pp pp pp pp

consent of McGraw Hill LLC. pp pp pp pp pp

, Now, consider the partner level. The flow rate there is 2 consultants per year
pp pp pp pp pp pp pp pp pp pp pp pp pp


(obtained via the same calculations as before). Thus, from the 10 manager cases
pp pp pp pp pp pp pp pp pp pp pp pp pp


we evaluate every year, 8 are dismissed and 2 are promoted to partner (the odds at
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp


that level are thereby also 20%).
pp pp pp pp pp pp




In order to find the odds of a new hire to become partner, we need to multiply the
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp


promotion probabilities: 0.2*0.2 = 0.04. Thus, a new hire has a 4% chance of
pp pp pp pp pp pp pp pp pp pp pp pp pp pp


making it to partner.
pp pp pp pp




Q2.9. Major US Retailers
pp pp pp


a. Product stays on average for 31.9 days in Costco’s inventory
pp pp pp pp pp pp pp pp pp


b. Costco has for a $5 product an inventory cost of $0.1311 which compares to a
pp pp pp pp pp pp pp pp pp pp pp pp pp pp


$0.2049 at Wal-Mart pp pp




Q2.10. McDonald’s
pp


a. Inventory turns for McDonald’s were 92.3. They were 30.05 for Wendy’s.
pp pp pp pp pp pp pp pp pp pp


b. McDonald’s has per unit inventory costs of 0.32%, which for a 3$ meal about pp pp pp pp pp pp pp pp pp pp pp pp pp


$0.00975. That compares to 0.998% at Wendy’s where the cost per meal is $0.0299 .
pp pp pp pp pp pp pp pp pp pp pp pp p p pp




Q2.11. BCH pp


I = 400 associates, T = 2 years. R  I / T  400 associates / 2 yrs  200 associates / yr .
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp




Q2.12. Kroger pp


Turns  R / I  12.3
pp pp pp pp pp pp pp pp pp




Matching Supply with Demand: An Introduction to Operationspp pp pp pp pp pp pp



Management 5e pp pp




Solutions to Chapter Problems pp pp pp




Chapter 3 pp pp


Understanding the Supply Process: Evaluating Process Capacity pp pp pp pp pp pp




Q3.1 Process Analysis with One Flow Unit
pp pp pp pp pp pp


(a) Capacity of the three resources in units per hour are 602 /10 12 , 601/ 6
pp pp pp pp pp pp pp pp pp p p pp pp pp p p pp


10; 603 /16 11.25 . The bottleneck is the resource with the lowest
pp pp pp pp pp pp pp pp pp pp pp pp pp


capacity, which is resource 2.
pp pp pp pp pp


(b) The process capacity is the capacity of the bottleneck, which is 10 units/hr .
pp pp pp pp pp pp pp pp pp pp pp pp pp



(c) If demand  8 units / hr , then the process is demand constrained and the flow rate is
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp


8 units/hr pp



(d) Utilization = Flow Rate / Capacity . For the three resources they are 8 /12 , 8 /10 , and
pp pp pp pp pp pp pp pp pp pp pp pp pp pp p pp pp pp p pp pp



8 /11.25 . pp p




© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written
pp pp pp pp pp pp pp pp pp pp pp pp pp pp

consent of McGraw Hill LLC. pp pp pp pp pp