1

1: Purchasing It
Affluence of a new generation of cosmopolitan, educated, successful
executives from Alberta has turned management of the cellar in a top
restaurant in Canmore particularly challenging. According to the
operations manager, a famous Saint-Emilion has been selling like
water over recent months. In fact, demand has averaged 14 cases
with a standard deviation of 5 cases per month Wine is bought at with a standard deviation of 5 cases per month. Wine is bought at
$540, delivered in 3 weeks, and sold at $1,350 per case. Holding costs
are estimated at $118.80 per year for wine and cellar maintenance.
Purchasing costs are estimated at $200 per order. To minimize
stockouts, management has decided to keep 8 cases at all times as
safety stock. The restaurant uses a continuous review system.
1. What inventory policy will minimize annual inventory costs?
2. What annual inventory costs are associated to this policy (including
safety stock holding costs)?
3 How many replenishments will be made per year?
OPMA601 Tutorial Giovani J. C. da Silveira
3. How many replenishments will be made per year?
4. How often will management place orders with the distributor?
5. What is the sales margin after product and inventory costs?
6. The distributor offered a discount in the wine price if management
tripled the order size. What percentage of discount would breakeven?
7. What is the current probability of stockouts?
months 0.75 weeks 3 LT cases; 8 SS
/case/year 8 . 118 $ C
/order 200 $ C e; $1,350/cas SP $540/case; OP
h cases/mont 5 ; cases/year 168 h cases/mont 14
H
O
= =
=
= = =
= =
u
u o
;
cases 24 78 . 23
8 . 118
200 168 2 2
EOQ ~ =

=

=
H
O
C
C U
cases 19 5 . 18 8 75 . 0 14 ~ = + = + = SS LT u ROP
OPMA601 Tutorial Giovani J. C. da Silveira
| |
496 , 94 376 , 2 400 , 1 720 , 90
) 8 . 118 ( 8
2
24
) 200 (
24
168
540 168 TC
SS 24
= + +
=
(

|
.
|

\
|
+ +
(

+ =
+
2
r orders/yea 7 168/24 U/Q N = = =
days/order 14 . 2 5 /7 65 3 T/N Tb = = =
% 3 . 58
1350 168
496 , 94
1
TC
1 1 Margin
ss 24
= |
.
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+
SP U REVENUE
COST
1350 168
. \

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. \
SP U REVENUE
| |
( )
( )
% 14 . 2 1 979 . 0
720 90
13 . 775 , 88
227 , 5 67 . 466 720 , 90 496 , 94
) 8 . 118 ( 8
2
3 24
) 200 (
3 24
168
540 168 496 , 94
= = = =
+ + =
(

|
.
|

\
|
+

+
(

+ =
x Discount x
x
x
OPMA601 Tutorial Giovani J. C. da Silveira
720 , 90
% 22 . 3 ) ( ; 9678 . 0 85 . 1
5 75 . 0 8 ) (
= =
= =
stockouts P z
z LT z SS
u
o
2: Delivering It
The well-informed patrons of the restaurant will
return any Saint-Emilion that is not served at return any Saint-Emilion that is not served at
temperatures ranging from 14.1C to 16.5C. In
winter months (September to June), bottles
averaged 14.8C with 0.3C of standard deviation
(SD) at opening. In summer months (July to
August), they averaged 15.6C with 0.2C SD.
OPMA601 Tutorial Giovani J. C. da Silveira
1. Has the restaurant been capable of meeting
customer specifications in winter? Why or why not?
2. Has it been capable in summer? Why or why not?
3
33 . 1
) 3 . 0 ( 6
1 . 14 5 . 16
=

=
pW
C ( )
42 .
14.1 - 16.5 1/2
15.3 - 14.8
=

=
W
k
( ) ( )
2
) 2 . 0 ( 6
1 . 14 5 . 16
=

=
pS
C
( ) ( ) 77 . 42 . 1 33 . 1 1 = = =
w pw pkw
k C C
( )
25 .
14.1 - 16.5 1/2
15.3 - 15.6
=

=
S
k
OPMA601 Tutorial Giovani J. C. da Silveira
( ) ( ) 5 . 1 25 . 1 2 1 = = =
s ps pks
k C C
3: Serving It
Sommeliers received extensive training on
pouring without spilling wine on
costumers and their food. Managers were
not convinced and implemented SQC (z =
"bad"
Week servings
1 3
2 9
p (
3) to control accidents. The table shows
the number of accidents in serving
samples (n = 40) observed in the eight
weeks of summer.
1. The historical number of accidents has
been 4.5/50 servings. What does the chart
say about the process?
2 9
3 4
4 7
5 8
6 3
7 6
8 4
OPMA601 Tutorial Giovani J. C. da Silveira
2. What conclusions would follow if z = 2?
3. What z-value would you use and why?
4. What do results tell about sommelier
capabilities?
4
( )
0 045 . 0 ) 045 . 0 ( 3 09 . 0 LCL
225 . 0 ) 045 . 0 ( 3 09 . 0 UCL
045 . 0
40
09 . 0 1 09 . 0 ) 1 (
; 09 . 0
= = =
= + = + =
=

= =
p p
p p
p
z p
z p
n
p p
p
o
o
o
UCL above samples no 9 40 225 . 0
) (
=
p p
p
18 . 0 ) 045 . 0 ( 2 09 . 0 UCL
2 With
= + = + =
=
p p
z p
z
o
OPMA601 Tutorial Giovani J. C. da Silveira
UCL above samples 2 2 . 7 40 18 . 0
0 ) 045 . 0 ( 2 09 . 0 LCL
=
= = =
p p
z p o
4: Charging It
Tips to sommeliers are optional but dully expected.
However, many wondered if tips would fall in line o e e , a y o de ed t ps ou d a e
with the GST reduction from 7% to 6%, as most
customers seem to follow the GST x 2 rule in
determining a fair tip.
The table on the next slide shows the averages and
ranges of tips obtained through the seven days
sampled of each of the 20 weeks before and 20
OPMA601 Tutorial Giovani J. C. da Silveira
weeks after the new GST legislation. Use the
before data to calibrate SQC charts and the after
data to determine if the amount of tipping is out of
control.
5
Week Day Avg Range Week Day Avg Range
1 1,182 $ 408 $ 21 1,355 $ 420 $
2 1,418 $ 372 $ 22 1,213 $ 519 $
3 1,388 $ 356 $ 23 1,428 $ 408 $
4 1,184 $ 402 $ 24 1,298 $ 354 $
5 1,576 $ 284 $ 25 1,258 $ 552 $
6 1,250 $ 339 $ 26 1,346 $ 411 $
"Before" samples "After" samples
7 1,551 $ 328 $ 27 1,390 $ 456 $
8 1,360 $ 427 $ 28 1,585 $ 399 $
9 1,286 $ 245 $ 29 1,183 $ 450 $
10 1,528 $ 480 $ 30 1,452 $ 420 $
11 1,476 $ 411 $ 31 1,249 $ 444 $
12 1,488 $ 350 $ 32 1,437 $ 336 $
13 1,458 $ 347 $ 33 1,351 $ 516 $
14 1,555 $ 378 $ 34 1,295 $ 495 $
15 1,202 $ 317 $ 35 1,221 $ 435 $
16 1 325 $ 510 $ 36 1 568 $ 492 $
OPMA601 Tutorial Giovani J. C. da Silveira
16 1,325 $ 510 $ 36 1,568 $ 492 $
17 1,563 $ 471 $ 37 1,150 $ 441 $
18 1,612 $ 336 $ 38 1,399 $ 339 $
19 1,349 $ 350 $ 39 1,245 $ 357 $
20 1,335 $ 345 $ 40 1,674 $ 399 $
Mean 1,404 $ 373 $ 1,355 $ 432 $
n = 7
A
2
= 0.419
D
3
= 0.076
D 1 924 D
4
= 1.924
UCL
X
= 1404 + (0.419 x 373) = 1560.29
LCL
X
= 1404 (0.419 x 373) = 1247.71
UCL
R
= 373 x 1.924 = 717.65
LCL = 373 x 0 076 = 28 35
OPMA601 Tutorial Giovani J. C. da Silveira
LCL
R
= 373 x 0.076 = 28.35
Is the process out of control for means? Yes
Is the process out of control for range? No
6
5. Project Management
The following table shows a project with three
paths What path has the highest probability paths. What path has the highest probability
of being completed in less than 15 days?
Path ET o
2
A-B-C-H 15.80 0.25
A D E H 15 60 0 13
OPMA601 Tutorial Giovani J. C. da Silveira
A-D-E-H 15.60 0.13
A-F-G-H 16.10 0.58
Path ET
o
2
z P(<15)
A-B-C-H 15.80 0.25 0.50 -1.60 (1-.945)=.055
A-D-E-H 15.60 0.13 0.36 -1.66 (1-.951)=.049
A-F-G-H 16.10 0.58 0.76 -1.44 (1-.925)=.075
OPMA601 Tutorial Giovani J. C. da Silveira