SOLUTION MANUAL
All Chapters Included
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,© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw Hill LLC.
, 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 OrderQuantity 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-toInventory Model
Chapter 17:Risk-Pooling Strategies to Reduce and Hedge Uncertainty
Chapter 18:Revenue Management with Capacity Controls
Chapter 19:Supply Chain Coordinatio
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw Hill LLC.
, Chapter 2-19
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 = $26,442 (in million)
26, 442$/ year
#3: Inventory turns 66.105 turns per
year400$
40% per
#4: Per unit Inventory 0.605% per year
year
cost
66.105 per
year
Q2.2. Airline
We use Little’s law to compute the flow time, since we know both the flow rate
as wellas 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 yearInventory $20,000,000 /$1000 per unit 20,000
units in inventory
Flow Time Inventory/ Flow Rate 20,000 /30,000 per year 2/ 3 year 8
monthsTurns 1/ Flow Time 1/(2/ 3 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
wouldmake 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
inventorycost 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
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw Hill LLC.
All Chapters Included
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw Hill LLC.
,© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw Hill LLC.
, 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 OrderQuantity 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-toInventory Model
Chapter 17:Risk-Pooling Strategies to Reduce and Hedge Uncertainty
Chapter 18:Revenue Management with Capacity Controls
Chapter 19:Supply Chain Coordinatio
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw Hill LLC.
, Chapter 2-19
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 = $26,442 (in million)
26, 442$/ year
#3: Inventory turns 66.105 turns per
year400$
40% per
#4: Per unit Inventory 0.605% per year
year
cost
66.105 per
year
Q2.2. Airline
We use Little’s law to compute the flow time, since we know both the flow rate
as wellas 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 yearInventory $20,000,000 /$1000 per unit 20,000
units in inventory
Flow Time Inventory/ Flow Rate 20,000 /30,000 per year 2/ 3 year 8
monthsTurns 1/ Flow Time 1/(2/ 3 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
wouldmake 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
inventorycost 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
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw Hill LLC.
