Posted on March 3, 2017

Operation Management Help 06

Problem 1: Describe the input-output transformation:
1) A shipping company
2) A new product development project
3) The cash cycle of a company
Problem 2: Is it possible for a process to have the same flow rate, R, with both high inventory I with high flow time, T, and low I with low T? Which would you rather have? Why?
Problem 3: Apply Little’s Law to answer the following two questions.
1) A steel company processes $400 million of iron ore per year. The cost of processing ore is $200 million per year. The average inventory is $100 million. The value of inventory includes both ore and processing cost. How long does a dollar spend in the process?
2) A branch office of an insurance company processes 10,000 claims per year. Average processing time is three weeks. Assume that the office works 50 weeks per year. How many claims are being processed at any given point?
Problem 4: Design a question that requires the application of Little’s Law and provide its solution. Be creative!
Problem 5: Consider the operation of inspecting used cell phones, which includes three steps (from left to right in the graph below): (1) checking for visible physical damage, (2) inspecting for liquid damage, and (3) testing all main function. The processing rates of one employee performing each step are given in the graph. Calculate system parameters, R0, T0, and I0, of this operation.

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Problem 6: Consider the following four-workstation production line.
Number of Machines
Processing Rate (jobs/hour) per Machine
1) What are the bottleneck rate, raw process time and critical inventory of this production line?
2) Assume that the current inventory level in this production line is 42 parts. What is the flow rate under the practical worst case? If the actual flow rate of this line is 10 jobs per hour, is the line running efficiently or not?
3) If we add an identical machine to Station 4 and keep the same number of inventory as in (b), i.e., 42, what is the flow rate under the practical worst case? If after adding this identical machine, the actual flow rate of the line increases to 14 jobs per hour, is the line running efficiently now?
4) Again, assume that the current inventory level in this production line is 42 parts. If we speed up both machines in Station 4 from each processing 6 jobs per hour to each processing 8 jobs per hour and keep the same number of inventory, what is the flow time under the practical worst case? If the actual flow time that we observed from the production line is 4 hours, is the line running efficiently now?
Problem 7: What are some capacity measures for each of the following?
Please name at least three for each.
1) University
2) Hospital
Problem 8: A small firm intends to increase the capacity of a bottleneck operation by adding a new machine. Two alternatives, A and B, have been identified, and the associated costs and revenues have been estimated. Annual fixed costs would be $40,000 for A and $30,000 for B; variable costs per unit would be $10 for A and $11 for B; and revenue per unit would be $15.
1) Determine each alternative’s break-even point in units.
2) At what volume of output would the two alternatives yield the same profit?
3) If expected annual demand is 12,000 units, which alternative would yield the higher profit?
Problem 9: The following diagram describes a process that consists of eight separate operations, with sequential relationships and capacities (units per hour) as shown. Two types of input, A and B, are needed. A and B are processed by Operations 1, 2, and 3 and Operations 4, 5, and 6, respectively, before they are combined and processed by Operations 7 and 8.






1) What is the current capacity of the entire process?
2) If you could increase the capacity of only two operations through process improvement efforts, which two operations would you select, how much additional capacity would you strive for in each of those operations, and what would the resulting capacity of the entire process be?
Problem 10: A product is currently made in a process-focused shop, where fixed costs are $9,000 per year and variable costs are $50 per unit. The firm is considering a fundamental shift in process, to repetitive manufacturing. The new process would have fixed costs of $90,000, and variable costs of $5. What is the crossover point for these processes? For what range of outputs is each process appropriate?
BONUS QUESTION: Problem 11:Provide a short description of the specific meaning of flow time (T), flow rate (R), and inventory level (I) for the following three scenarios.
1) A factory that makes iPhone 6s.
2) A home builder who builds single-family houses.
3) Somerset Café.

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