# EMBA 638 Final Exam

Question

EMBA 638 –Operations Management

Summer 2013 Final Exam

Your interpretation of a question, if any, is part of the exam. Only clarification questions will be answered.

Part

Topic

Value

Grade

I

Quality Control

11

II

Inventory Management

11

II

Process Analysis and Queuing

35

IV

Short Answer Questions

18

V

Multiple Choice, T/F Questions

25

Total

100

* 2 = ____/200

The Honor Pledge:

On my honor, I have neither given nor received unauthorized aid on this exam.

__________ _________________

Student Signature (type your name)

GOOD LUCK!

Part I –Quality Control (11 points)

Southwest keeps gate time of its planes at a minimum in order to maximize the flying time, hence capacity utilization of its planes. They want to achieve a turnaround time of 20 minutes on average with a maximum of 25 minutes and a minimum of 15 minutes. (Although faster would be fine with them, the FAA and passengers might think they are cutting corners and not doing everything correctly).

At the Baltimore airport (BWI), 3 gates a day were sampled over four days to determine how the Southwest ground crew at BWI was doing on this standard. The average of the process was 20.5 minutes and the standard deviation was 1.5 minutes.

(2 points) Fill in the following table.

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20 minutes

USL

25 minutes

LSL

15 minutes

(5 points) Is the process centered and capable? Why or why not?

Why? Our Cpk value is 1.00. A Cpk of 1.00 is needed to make a process centered and capable.

c. (4 points) What is the probability that a plane will have a turnaround time of greater than 25 minutes?

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Part II: Inventory Management (11 points)

2. Southside restaurant uses a fixed quantity (continuous replenishment) system. Daily demand for bags of coffee is normally distributed with a mean of 36 and standard deviation of 8. The lead time is constant at 5 days. The management wants to have a 92 percent service level and the restaurant is open 365 days per year. Holding costs are $0.50 per year and the ordering costs are $2.5 per order. .

a. (3 points) Determine the order quantity at which the total inventory costs would be minimized?

b. (4 points) What is the reorder point and the time between orders?

c. (4 points) Illustrate the order quantity, re-order point, safety stock and lead time on a diagram where the Y-axis represents the number of coffee bags and the x-axis represents the time? What is the maximum possible inventory in the system at any point of time?

Part III – Process Analysis andQueuing (35 points)

You have taken a job as manager of Cupcake Heaven in Old Town Alexandria, Virginia. It is located on a busy street with lots of walk-in traffic. The owner, Sue, is thrilled at the prospect of you helping her analyze her operations. Cupcake Heaven currently operates in the following manner.

The baker arrives each morning at 5 am. It takes her 30 min to mix and bake a batch of cupcakes. A batch is 50 cupcakes. While a batch bakes she is cleaning up from the first batch and therefore cannot start a second batch until the first has finished baking. The decorator, who frosts and decorates the cupcakes, arrives at 5:30 am. It takes him 40 minutes to decorate a batch. The baker finishes baking at 10 am. She then finishes cleaning up, makes coffee for customers, takes inventory, and places a replenishment order to be delivered later that day for the next day’s baking. The store opens at 10 am and remains open until 8 pm. Some days the cupcakes sell out by 2 pm, other days they have leftovers. Averaging the demand for an entire day, they have found demand to be about 40 cupcakes per hour with a standard deviation of 5.

Sue wants you to answer the following questions for her.

1. (3 points) What is the current daily capacity of the baking/decorating process? Is it sufficient to meet the daily average demand?

2. (4 points) What is the maximum inventory level of cupcakes (in batches) waiting to be decorated?

3. (5 points) What is the maximum length of time for which a batch of cupcakes will wait (in inventory) to be decorated? What time is the decorator finished decorating?

4. (14 points) Now consider the customer’s service experience. Customers start arriving at 10 am. However, the weekday is really only busy at lunch time 11:30-1:30 and after school 2:30-4:30. Weekends are different, with pretty steady customer arrivals all day. Customers during the weekday busy periods tend to buy just one cupcake, while on weekends the average order is for 3 cupcakes. When you ask, Sue is not sure what the arrival process is during the weekday busy periods but knows on average she sells 150 cupcakes during each two hour busy period. It takes the cashier about 30 seconds to write up and ring up an order and accept payment, but sometimes customers don’t know what they want and other times, they pay with cash which takes longer. On average Sue estimates a cashier takes about 45 seconds to ring someone up, but it is pretty random. Sue has space inside for 5 people in line and 5 people waiting for their cupcakes. In addition, there is a line demarcated by ropes outside that can hold 5 more people.

Fill out the following table based on weekday lunch time two-hour rush. Show your work and and include appropriate units.

?

Average interarrival time

?

Average service time

Utilization

S

Ca

Cs

Lq

Ls

Wq

Ws

How much free time do(es) the server(s) have for clean up, refilling napkin holders etc. during the two hour period?

Now turn to the ordering/packaging process. The packaging process though can be lengthy. A customer tells the cashier what he wants, the cashier marks it on a slip of paper, and puts it on the packaging table behind the counter. This part on average takes 30 seconds. The packaging person gets the cupcake (or cupcakes) from the correct tray (15 seconds), folds the package container (10 seconds), places the cupcake in the package and closes the package (15 seconds), then calls the customer’s name and waits for the customer to get the package (20 seconds). Ignore variability in the process and assume that there is one cashier and one packaging person.

(3 points) Draw a flow chart, label each step and determine the capacity of each step.

(3 points) Where is the system capacity? What is the cycle time of the process?

(3 points) If the packaging person goes on break and the cashier has to do all the steps, what is the cycle time of the process?

Part IV –Short Answer Questions (18 points)

1. (4 points) We have discussed in class how service companies cope with demand variability. Please briefly describe two techniques to adjust service demandand two techniques to adjust service supply that can be used to deal with this variability. Be sure to identify (label) which adjust service demand and which adjust service supply.

2. (4 points) What might you do in designing a two-stage process where each process had equal average process time but with high process time variability in the first stage and low variability in the second stage? Identify at least 2 options. Why are these good possibilities?

3. (6 points total, 1.5 points each) Practice your Japanese: Please fill in the appropriate English meaning as discussed in class for the Japanese word and provide an example of the concept.

Concept

English Meaning/Definition

Example

Poke-yoke

Kanban

Kaizen

Muda

4. (2 points) The best current events topic was _________________________________ because:

(2 points) The best case was ________The Wal-Mart China Case________________________________because:

Part V –Multiple Choice and True/False (25 points)

Multiple choice (16 points, 2 points each): Please highlight (in yellow) the correct answer.

1. Animal shelters tend to order Sodium Barbipentathol in large batches (e.g., enough to last 6 months or more). Smaller quantities would be ordered (e.g., a couple of weeks worth) except government regulations require extensive and detailed paperwork to be submitted with each order. This example is most closely related to the following managerial insight:

a. the order quantity increases as the holding cost rate decreases

b. the order quantity increases as the cost per order increases

c. the order quantity increases as the shortage cost rate decreases

d. the order quantity increases as the trade balance decreases

2. Which one of the following does not exemplify JIT/Lean used for competitive advantage?

a. Acme Foods decides to decrease the number of its suppliers to just a few.

b. Cajun Contractors has reduced the amount of space for inventory.

c. Cheramie Trucking trains workers to specialize and become very efficient in one job.

d. Ardoyne Builders has a scheduled preventive maintenance program.

e. Ajax, Inc. is proud to announce that incoming goods are delivered directly to the point of use.

A tennis ball manufacturer has identified several causes of variability in the bounce and has collected data on the number of times those causes have led to high variability over the past month. They now need to decide which causes to try to eliminate first. Which tool should they use?

a. 5S

b. Pareto diagram

c. ABC Analysis

d. R-chart

e. PDCA

4. Which of the following offers a potential for reducing inventory costs in a supply chain?

a. sharing POS data across the supply chain

b. sharing components across different products

c. having more warehouses

d. a and b

e. a and c

f. b and c

5. Another term for a postponement strategy is

a. Speculation

b. delayed differentiation

c. mass customization

d. decreased differentiation

e. None of the above

6. Which of the following phrases describes the chart below about the reasons for unsatisfying hotel stays?

a. H is the most important problem

b. 80% of the reasons cause 20% of the dissatisfaction.

c. A is the most important problem

d. 20% of the reasons cause 60% of the dissatisfaction

e. None of the above.

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7. Which of the following statements is not a characteristic of pull supply chains?

a. Inventory levels are typically low

b. Ordering decisions are based on long-term forecasts

c. Firms respond to specific customer orders

d. Allows faster response to changing markets

8. If a production process is in statistical control , which of the following statements is incorrect

a. There are no special causes of variation in the process

b. The process will always be capable of meeting the customer specifications

c. There are common causes of variation in the process

d. The range of the process is in statistical control

True/False (1 point each, 9 points)

1. ________ Variation in production systems that is caused by factors that can be clearly identified and possibly even managed is called assignable variation.

2. ________ EOQ balances purchase cost and ordering cost.

The balance inventory order costs and carrying costs.

3. ____ Your supplier’s supplier is a third tier supplier.

4. ______ Under the assumptions of the Basic EOQ model, if one increases the order quantity, then the length of the order cycle decreases (with demand and cost parameters remaining the same).

5. ___ A high-end, customized furniture manufacturer, would most likely employ an assembly-line type of process.

6. ________ Productivity is the total value of outputs produced divided by the total value of all inputs to the transformation process.

7. _____ Under constant lead time, the key drivers of safety stock are lead time, standard deviation of demand, and the safety factor (or service level).

8. ________ The idea behind Pareto charts is that working with the majorityof possible causes is needed to significantly improve quality.

9. _____ Under the assumptions of EOQ model, if the total optimal cost (fixed ordering cost + holding cost) is $10,000, then the holding cost part is $5,000.

That’s the end! You have now completed the challenge of learning many of the concepts, tools and techniques that are employed in Operations Management; clearly a very important part of businesses today. Congratulations!!!!!

I have enjoyed being your instructor over the summer and I wish you well in your professional careers. I hope you will be able to apply some these techniques and concepts. Grades will be available on Blackboard. Please email me with any questions or clarifications about the grading.

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