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

SOLUTION MANUAL FOR u x u x




Matching Supplywith Demand An Introduction to Operations Management, 5th Edition Cachon
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Chapter 2-19
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Chapter 2 ux




The Process View of the Organization
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Q2.1 Dell ux




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




#1:For2001,wefindinDell’s10-k: Inventory=$400(inmillion) ux ux ux ux ux ux ux u x ux ux ux ux




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




26,442$/year
#3:Inventory turns= =66.105turnsper year 400$
ux ux u x




ux u x ux ux ux ux ux ux ux




40% per year
#4: Per unit Inventory cost = =0.605%per year
u x u x




ux ux ux u x
u x ux ux ux




66.105 per year u x u x




Q2.2. Airline ux




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




inventory level: ux ux




FlowTime=Inventory/FlowRate=35passengers/255passengersper hour =0.137hours ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




=8.24minutes ux ux




Q2.3 Inventory Cost
ux ux




(a) Sales=$60,000,000per year/$2000per unit =30,000unitssoldper year ux ux ux ux ux ux ux ux ux ux ux ux ux ux




Inventory = $20,000,000/$1000 per unit = 20,000 units in inventory
ux ux ux ux ux ux ux ux ux ux ux ux




Flow Time = Inventory/Flow Rate = 20,000/30,000 per year = 2/3 year =8 months Turns =
u x ux ux ux u x ux ux ux ux u x u x u x ux ux ux ux u x ux ux ux ux




1/Flow Time=1/(2/3 year) =1.5 turns per year
ux ux ux ux ux ux ux ux ux ux ux u x u x




Note: we can also get this number directly by writing: ux ux ux ux ux ux ux ux ux u x Inventory turns = COGS/Inventory ux ux ux ux ux




(b) Cost of Inventory: 25%per year/1.5 turns =16.66%. For a $1000 product, this would ux ux u x ux ux ux ux ux ux ux ux u x u x ux ux




make an absolute inventory cost of $166.66. ux ux ux ux ux ux u x ux




Q2.4. Apparel Retailing
ux ux




(a) Revenue of $100Mimplies COGS of $50M (because of the 100% markup). ux u x ux ux ux u x u x ux ux ux ux




Turns = COGS/ Inventory = $50M/$5M =10 . u x u x ux u x u x ux u x ux ux




(b) The inventory cost, given 10 turns, is 40%/10 = 4%. For a 30$ item, the inventory cost ux ux ux ux ux ux u x ux ux ux ux ux u x u x ux ux ux




is 0.4$30 = $1.20 per unit . ux u x ux ux ux ux ux ux




Q2.5. La Villa ux ux




(a) Flow Rate = Inventory/ Flow Time =1200 skiers/10 days = 120 skiers per day u x u x u x ux ux u x u x ux ux ux ux u x ux u x u x u x




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




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




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




Last year =0.1$50+0.9$30=$32 This ux ux ux ux ux ux ux ux




year =0.2$50+0.8$30=$34
ux ux ux ux ux ux ux




%change=($34−$32)/$32=6.25%increase
ux ux ux ux ux ux ux ux ux




Q2.6. Highway
ux




We look at 1 mile of highwayas our process. Since the speed is 60 miles per hour, it takes a car 1
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




minute to travel through the process (flow time).
ux ux ux ux ux ux ux ux




There are 24 cars on ¼ of a mile, i.e. there are 96 cars on the 1 mile stretch (inventory). Inventory
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




= Flow Rate * Flow Time: 96 cars = Flow Rate * 1 minute
ux ux ux ux ux ux ux ux ux ux ux ux ux ux




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




Q2.7. Strohrmann Baking
ux ux




The bread needs to be in the oven for 12 minutes (flow time). We want to produce at a flow rate
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




of 4000 breads per hour, or 4000/60 = 66.66 breads per minute.
ux ux ux ux ux ux u x ux ux u x ux ux




Inventory= Flow Rate * Flow Time: Inventory = 66.66 breads per minute* 12 minutes Thus, ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




Inventory = 800 breads, which is the required size of the oven.
ux ux ux ux ux ux ux ux ux ux ux ux




Q2.8. Mt Kinley Consulting
ux ux ux




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




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




that level) ux level)
Associate 200 4 years ux




Manager 60 6 years ux




Partner 20 10 years ux




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




Rate * Flow Time; 200 consultants = Flow Rate * 4 years; thus, the flow rate is 50
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




consultants per year, which need to be recruited to keep the firm in its current size (note:
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




while there are also 50 consultants leaving the associate level, this says nothing about how
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many of them are dismissed vs how many of them are promoted to Manager level).
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




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




there is 10 consultants. In order to have 10 consultants as a flow rate at the manager level,
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we need to promote 10 associates to manager level (remember, the firm is not recruiting to
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the higher ranks from the outside). Hence, every year, we dismiss 40 associates and
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promote 10 associates to the manager level (the odds at that level are 20%)
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, Now, consider the partner level. The flow rate there is 2 consultants per year (obtained via the
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




same calculations as before). Thus, from the 10 manager cases we evaluate every year, 8 are
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dismissed and 2 are promoted to partner (the odds at that level are therebyalso 20%).
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In order to find the odds of a new hire to become partner, we need to multiply the promotion
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probabilities: 0.2*0.2 = 0.04. Thus, a new hire has a 4% chance of makingit to partner.
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




Q2.9. Major US Retailers
ux ux ux




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




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




$0.2049 atWal-Mart u x ux




Q2.10. McDonald’s ux




a. Inventoryturns for McDonald’s were 92.3. They were 30.05 for Wendy’s. ux ux ux ux ux ux ux ux ux ux




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




$0.00975. That compares to 0.998% at Wendy’s where the cost per meal is $0.0299. ux ux ux ux ux ux ux ux ux ux ux ux u x ux




Q2.11. BCH ux




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




Q2.12. Kroger ux




Turns = R / I = 76858/ 6244 =12.3 ux ux ux ux ux ux ux ux ux




Matching Supplywith Demand:An Introduction to Operations Management 5e ux ux ux ux ux ux ux ux ux




SolutionstoChapterProblems x
u x
u x
u




Chapter 3 ux ux




Understanding the Supply Process: Evaluating Process Capacity ux ux ux ux ux ux




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




(a) Capacity of the three resources in units per hour are 602 /10 =12 , 601/ 6 =10; 603 ux ux ux ux ux ux ux ux ux u x ux ux ux u x ux ux ux




/16=11.25. The bottleneck is the resource with the lowest capacity, which is resource 2.
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




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




(c) If demand =8 units /hr , then the process is demand constrained and the flow rate is
u x u x ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




8units/hr ux




(d) Utilization=FlowRate/Capacity.Forthethreeresourcestheyare 8/12, 8/10,and ux ux ux ux ux ux ux ux ux ux ux ux u x ux ux ux u x ux ux ux ux




8/11.25. ux ux




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ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




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, Q3.2 Process Analysis with Multiple Flow Units
ux ux ux ux ux ux




a) Bottleneck is resource 3 because it has the highest implied utilization of 125%. The demands ux ux ux ux ux ux ux ux ux ux ux ux ux ux




per hour of the three products are 40/8=5 , 50/8=6.25and 60/8=7.5. The
ux ux ux ux ux ux ux u x ux ux ux ux u x ux ux ux ux ux u x ux ux ux ux u x u x




total minutes of work demanded per hour at resource 1 is 5 × 5 + 6.25 * 5 + 7.5 * 5 = ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




93.75. Two workers at resource 1 produce 2 * 60 = 120 min of work per hour. So ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




resource 1’s utilization is 93.75 /120 = 0.78. Utilization at the other resources are
ux ux ux ux u x ux ux ux ux ux ux ux ux ux




similarly evaluated. ux ux




b) Thecapacity of resource 3 is 60/15 = 4 units per hour. Given the ratio of units produced must ux ux ux ux ux u x
ux ux ux ux u x
ux ux ux ux ux ux ux ux




be 4 to 5 to 6, the process can produce 4 units/ hr of A, 5 units/hrof B and
ux ux ux ux ux ux ux ux ux ux u x
ux ux u x
ux u x
ux ux ux ux
ux ux




6units/hrof C. ux ux ux ux
ux




Q3.3. Cranberry ux




Cranberries arrive at a rate of 150 barrels per hour. They get processed at a rate of 100 barrels per hour. ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




Thus, inventory accumulates at a rate of 150-100 = 50 barrels per hour. This happens while trucks
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




arrive, i.e. from 6am to 2pm. The highest inventory level thereby is 8h*50 barrels per hour = 400
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




barrels. From these 400 barrels, 200 barrels are in the bins, the other 200 barrels are in trucks.
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




(a) 200 barrels ux




(b) From 2pm onwards, no additional cranberries are received. Inventorygets depleted at a rate of
ux ux ux ux ux ux ux ux ux ux ux ux ux ux




100 barrels per hour. Thus, it will take 2h until the inventory level has dropped to 200 barrels, at
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




which time all waiting cranberries can be stored in the bins (no more truck waiting)
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




(c) It will take another 2 hours until all the bins are empty
ux ux ux ux ux ux ux ux ux ux ux




(d) Since the seasonal workers only start at 10:00am, the first 4 hours of the day we accumulate 4hours
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




* 50barrels per hour = 200 barrels. For the remaining time that we receive incoming cranberries,
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




our processing rate is higher (125 barrels per hour). Thus, inventory only accumulates at a rate of
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




25 (150-125 barrels per hour). Given that this happens over 4 hours, we get another 100 barrels in
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




inventory. At 2pm, we thereby have 300 barrels in inventory. After 2pm, we receive no further
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




cranberries, yet we initially process cranberries at a rate of 125 barrels per hour. Thus, it only takes
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




100barrels/125barrels/hour =0.8hours =48minutes
u x ux ux ux ux ux ux ux ux ux




until all bins are empty. From then, we need another 2h until the bins are empty.
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




Q3.4. Western Pennsylvania Milk ux ux ux




We start the daywith 25,000 gallons of milk in inventory. From 8am onwards, we produce 5,000
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




gallons, yet we ship 10,000 gallons. Thus inventoryis depleted at a rate of 5000 gallons per hour, which
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




leaves us without milk after 5 hours (at 1pm). From then onwards, clients will have to wait. This
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




situation gets worse and worse and by 6pm (last client arrives), we are short 25,000 gallons.
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




(a) 1pm
(b) Clients will stop waiting when we have worked off our 25,000 gallon backlog that we are facing ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




at 6pm. Since we are doing this at a rate of 5,000 gallon per hour, clients will stop waiting at
ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux ux




11pm (after 5 more hours).
ux ux ux ux ux




(c) At 6pm, we have a backlog of 25,000 gallons, which is equivalent to 20 trucks
ux ux ux ux ux ux ux ux ux ux ux ux ux ux




(d) The waiting time is the area in the triangle ux ux ux ux ux ux ux ux




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