Operations Management
Take-Home Portion, Final Exam
Case 1 The Hotel Monaco
Tatyana Kasykina, manager of the Hotel Monaco, is considering how to restructure the front desk to reach an optimum level of staff efficiency and guest service. At present, the hotel has five clerks on duty, each with a separate waiting line, during peak check-in time of 3:00 pm to 5:00 pm. Observation of arrivals during this period shows an average of 90 guests arrive each hour
( although there is no upward limit on the number that could arrive at any given time ) . It takes an average of 3 minutes for the front-desk clerk to register each guest.
Ms. Kasykina is considering three plans for improving guest service by reducing the length of time guests spend waiting in line. The first proposal would designate one employee as a quick-service clerk for guests registering under corporate accounts, a market segment that fills about 30% of all occupied rooms. Because corporate guests are pre-registered , their registration takes just 2 minutes. With these guests separated from the rest of the clientele, the average time for registering a typical guest would climb to 3.4 minutes. Under this plan, non-corporate guests would choose any of the remaining four lines.
The second plan is to implement a single line system. All guests would form a single waiting line to be served by whichever of five clerks became available. This option would require sufficient lobby space for what could be a substantial queue.
The use of an automatic teller machine ( ATM) for check-in’s is the basis of the third proposal. This ATM would provide about the same service rate as would a clerk. Because initial use of this technology might be minimal, Kasykina estimates 20% of customers, primarily frequent guests, would be willing to use the machines. ( This might be a conservative estimate if guests perceive direct
benefits from using the ATM , as bank customers do. Citibank reports some 95% of its Manhattan customers use its ATM’s.) Ms. Kasykina would set up a single queue for customers who prefer human check-in clerks. This line would be served by the five clerks, although Kasykina is hopeful the ATM machine will allow a reduction to four.
a. Determine the average time a guest spends checking in. How would this change under each of the stated options?
b. which option do you recommend? Specifically state the type of queue configuration. Do NOT say, for example, ‘option 8.’
Case 2 Jackson Manufacturing Company - Dominika Wojdat, vice president of operations at Jackson Manufacturing Company, has just received a request for quote ( RFQ ) from DeKalb Electric Supply for 400 units per week of a motor armature. The components are standard and either easy to work into the existing production schedule or readily available from established suppliers on a JIT ( just-in-time ) basis. But, there is some difference in assembly. Ms. Wojdat has identified eight tasks that Jackson must perform to assemble the armature. Seven of these tasks are very similar to the ones performed by Jackson in the past ; therefore, the average time and resulting labor standard of those tasks is known. The eighth task, an overload test , requires performing a task that is very different from any performed previously, however, Dominika has asked you to conduct a time study on the task to determine the standard time. Then an estimate may be made of the cost to assemble the armature. This information, combined with other cost data, will allow the firm to put together the information needed for the RFQ .
To determine a standard time for the task, an employee from an existing assembly station was trained in the new assembly process. Once proficient, the employee was then asked to perform the task 17 times so a standard could be determined. The actual times observed were as follows ( in minutes ) :
1234567891011121314151617
2.051.922.011.891.771.801.861.831.931.961.952.051.791.821.851.851.99
The worker had a 115% performance rating. The task may be performed in a sitting position at a well-designed ergonomic workstation in an air-conditioned facility. Although the armature itself weights 10.5 pounds, there is a carrier that holds it so the operator need only rotate the armature. But, the detail work remains high :” therefore, the fatigue allowance will be 8%. The company has an established personal allowance of 6%. Delay should be very low. Previous studies of delay in this department average 2%. This standard is to use the same figure.
The workday is 7.5 hours, but operators are paid for 8 hours at an average of $12.50 per hour.
Questions
In your report to Ms. Wojdat , you realize you will want to address several factors :
a) how large should the sample be for a statistically accurate standard ( at ,
say, the 99.73 % confidence level and accuracy of 5% ? )
b) is the sample size adequate ?
c) how many units should be produced at this workstation per day ?
e)what is the cost per unit for this task in direct labor cost ?
Case 3 Sanghavi’s Bicycle Comany
Sanghavi Bicycle Company ( SBC) , located in NYC , is a wholesale distributor of bicycles and bicycle parts. Formed in 2009, by Baruch College alumnus, Siddgarth Sanghavi , the firm’s primary retail outlets are located within a 400 mile radius of the distribution center. These retail outlets receive the order from SBC within 2 days after notifying the distribution center, provided the stock is available. However, if an order isn’t fulfilled by the firm, no backorder is placed ; the retailers arrange to get their shipment from other distributors, and SBC loses that amount of business.
The firm distributes a wide variety of bicycles. The most popular model, and the major source of revenue to the firm, is the AirWing. SBC receives all the models from a single manufacturer in India, and shipment takes as long as 4 weeks from the time an order is placed. With the cost of communication, paperwork, and customs clearance included, SBC estimates each time an order is placed, it incurs a cost of $65. The purchase price paid by SBC, per bicycle, is roughly 60% of the suggested retail price for all the styles available, and the inventory carrying cost is 1% per month ( 12% per year) of the purchase price paid by SBC. The retail price ( paid by the customers ) for the AirWing is $170 per bicycle.
SBC desires to develop an inventory plan for 2011. The firm wants to maintain a 95% service level with its customers to minimize the losses on the lost orders. The data collected for the past two years are noted in the below table. A forecast for AirWing model sales in 2011 has been developed and will be used to make an inventory plan for SBC.
Demand For AirWing Model
Month20092010Fcst for 2011
Jan 6 7 8
Feb121415
Mar242731
Apr465359
May758697
Jun475460
Jul303439
Aug182124
Sep131516
Oct121315
Nov222528
Dec384247
Total343391439
a) develop an inventory plan to help SBC. In particular, what would you suggest to be the EOQ?
b) discuss ROP and total costs
c) how can you address demand that is not at the level of the planning horizon? How can you incorporate yield management to better manage and influence the demand pattern. You should draw the demand curve and demonstrate ( graphically and descriptively) your thoughts as regards better managing the demand faced by SBC.
Case 4 Roger Adams Irrigation, Inc.
Roger Adams Irrigation, Inc. has summarized the price list from four potential suppliers of an underground control valve. Note the below table. Annual usage is 2,400 valves ; order cost is $10 per order, and annual inventory holding costs are $3.33 per unit.
Which vendor should be selected and what order quantity is best if Adams Irrigation wants to minimize total cost?
Vendor AVendor BVendor CVendor D
QtyPriceQtyPriceQtyPriceQtyPrice
1-29$35.00 1-74$34.75 1-99$34.50 1-199$34.25
30-74 34.7575-149 34.00100-199 33.75200-399 33.00
75-149 33.55150-299 32.80200-399 32.50400+ 31.00
150-299 32.35300-499 31.60400+ 31.10
300-499 31.15500+ 30.50
500+ 30.75