International American University

Kings College
Architecting future
Kathmandu, Nepal





Operations Management & Supply Chain: Assignment 3
Submitted by: Bikram prajapati
Submitted to: Matthew Keogh




Dec 13, 2013
Supplement to Chapter 5: Decision Theory
6.)









* Present value in $ 00000
Hence, since $5,000,000 is the best, we chose Relocate using the maximax strategy.
Hence, since $ 500,000 million is the best, we chose Renew using the maximin strategy.
Hence, since $ 2,250,000 million is the highest average, we chose Relocate using the Laplace
strategy.
Hence, we use minimax for Regrets strategy, since $ 3,900,000 is the lowest, we chose
Relocate using Regrets strategy.

7.) a.
The probability that the motels application will be approved is 0.35
The probability that the motels application will be rejected is 0.65.
Then expected value is given by
EV
Renew
= 0.35*5 + 0.65*40 = $ 27.75.
EV
Relocate
= 0.35 *50 + 0.65*1 = $ 18.15.
We chose the Renew option because it has highest expected value i.e. $2,775,000


Option Motel
Approved
Motel
Rejected
Maximum
(best)
Minimum
(worst)
Laplace
(Row
Average)
Renew 5* 40 40 5 22.5
Relocate 50 1 50 1 25.5

Regrets Strategy
Option Motel
Approved
Motel
Rejected
Worst
Renew 45 0 45
Relocate 0 39 39


b.)

Approved 0.35
EV= $ 27, 75,000
$ 500,000
Renew
Rejected 0.65
$ 4000,000

Approved 0.35
$ 5000,000
Relocate EV= $ 18, 15,000
Rejected 0.65
$ 100,000

Fig: Decision Tree


c.) Expected profit under certainty = (5000000*0.35) + (4000000*0.65)
=$43, 50,000
Expected value = 2775000
Then,
Expected value perfect information (EVPI) = Profit under certainty EMV
= 4350000 2775000
= $ 1,575,000
Therefore, EVPI exceeds the temporary lease cost; yes management must sign the lease.
8):
Let P
1
, be the probability of motel approved & P
2
be the probability of motel rejected such
that P
1
+P
2
= 1
Therefore, P
2
= (1-P
1
)








Option
45 45
40 40
Expected Pay-Off 35 35 Expected
Pay-Off 30 30 Pay-Off
25 25
20 20
15 15
10 10
5 5
P= 0.464
0 1
50
Renew
Relocate
Fig : sensitivity Graph

Here, Expected pay-off of renew option = Expected payoff of relocate option
500,000*P
1
+ 4000, 000(1-P
1
) = 5000, 000*P
1
+ (1-P
1
) 100,000
Solving for P
1
,
We get P
1
= 0.464
13)
a)
Moderate High Very High Minimum Maximum Laplace
Reassign Staff 50 60 85 50 85 65
New Staff 60 60 60 60 60 60
Redesign
Collection
40 50 90 40 90 60

Hence the maximum value is $ 60, i.e. we chose new staff as the best criteria by minimax
strategy.
Hence the maximum value is $90, i.e. we chose Redesign collection as the best criteria by
maximax strategy.
Hence the minimum value is $60, i.e. we chose Redesign collection or new staff as the best
criteria by Laplace strategy.
Regret Table: subtracting longest cost from all other costs.
Moderate High Very
High
Maximum
Reassign Staff $10 10 25 25
New Staff 20 10 0 20
Redesign
Collection
0 0 30 30

Decision: Hence the minimum cost is $ 20, i.e. we chose new staff as the best criteria by
Regret strategy.




14) Solution:
Given,
Probability of moderate= 0.1
Probability of High =0.3
Probability of Very High= 0.6
a) Calculation of Expected Cost


Moderate High Very
High
Expected cost
Reassign
Staff
$50 60 85 (50*0.1+60*0.3+85*0.6)= 74
New Staff 60 60 60 60
Redesign
Collection
40 50 90 73


b) Moderate 50 EV = $ 74
High 60
Very High 85
Reassign staff
Moderate 60

EV =$ 60 High 60 EV $ 60
New staff
Very High 60

Redesign staff Moderate 40 EV =$ 73
High 50
Very High 90
Fig. Decision Tree

c) Regret table
Moderate High Very
High
Maximum
Reassign
Staff
$10 0 5 10
New Staff 0 0 30 30
Redesign
Collection
20 10 0 20

Therefore,
Expected profit under certainty = 10*0.1+ 30*0.3+20*0.6
= $ 22
Expected maximum Value = $ 74

Therefore,
Expected Value of perfect information = $ (74- 22)
= $ 52





Chapter 6: process selection and facility layout.

1)
Given,
The longest task = 2.4 minutes
Total time of all tasks = 18 minutes
Line operate =450 min/day

a) Minimum cycle times = length of longest time
= 2.4 minutes
Maximum cycle times = Summation of task time
= 18 minutes


b) We know
With the cycle time 2.4 min,
Output Rate = Operating time per day/ cycle time
= 450/2.4
= 187.5 units per day

With the cycle time 18 min,
Output Rate = 450/18
= 25 units per day

c) Maximum no. of workstations
N = maximum output rate X total time/Operating Time
= 187.5*18/450 =7.5, which rounds to 8

d) Cycle time = 450/125
= 3.6 min per day


e) Potential output with the cycle time 9 min
Output rate = 450/9
= 50 units per day


Potential output with the cycle time 15 min
Output Rate = 450/15
= 30 units per day

3.)
3 2 4


7 4 9 5





5 6






Task Number of follower Time
a 4 3
f 4 5
b 3 2
d 3 7
g 3 6
c 2 4
e 2 4
h 1 9
i 0 5
Total time = 45 min


Given, working time = 56 min per hour
Desire output unit = 4 units
Then, cycle time CT = 56/4 = 14
Number of station = total time / cycle time
= 45/ 14 = 3.27 around up to 4







a
b c
h e i d
g
f
Calculation of idle time

Station I station II station III station IV
a (14-3=11)
f (11-5 = 6)
b (6-2 = 4)
c (4-4 = 0)

d (14-7 = 7)
g (7-6 = 1)
e = (14-4 =10)
h =(10-9=1)
i (14-5=9)
Idle time = 0 min 1 min 1 min 9 min

Total ideal time = 11 min

Now, efficiency = 45/ (4 * 14) = 80%
The overall effectiveness of system is 80%


b.)From positional method

Task Positional weight Time
f 29 5
d 25 7
g 24 6
a 23 3
b 20 2
c 18 4
e 18 4
h 14 9
i 5 5
Total time = 45 min


Calculation of idle time

Station I station II station III station IV
f (14-5=9)
d (9-7 = 2)


g (14-6 =8)
a (8-3= 5)
b( 5-2=3)
c(14-4 =10)
e(10-4=6)
h(14-9=5)
I ( 5-5=0)
Idle time = 2 min 3 min 6 min 0 min

Total ideal time = 11 min
The efficiency of system = 45/14*4 = 80%


5)

a)

0.2 0.4 0.2 1.2


0.4 1.2 1.0



Fig: Precedence Diagram


b) Minimum cycle time = 1.2 min
Maximum cycle time= 4.6 min
Cycle Time =480 240 = 2 min

c) N = sum of task times CT = 4.6 /2 = 2.3 roundup to 3.
Number of station = 3


d)
Station Assign Total time
assigned
Idle time
I a,b,c,d 1.2 0.8
II e 1.2 0.8
III f 1.2 0.8
IV g 1.0 0.1

Calculation of Idle time:

Station I station II station III station IV
a (2-0.2 = 1.8) e (2-1.2 = 0.8) f (2 1.2 = 0.8) g (2-1 =1)
b (1.8-0.4 = 1.4)
c (1.4-0.2 = 1.2 )
d (1.2-0.4 =0.8)

Idle time = 0.8 min idle time = 0.8 min idle time = 0.8 min idle time = 1 min


e.) Efficiency = 4.6/ (4 * 2) = 42.5%.
Idle time = 100%- 42.5%= 57.5%




a
b c
f
d
e g
14)

Location A 2 Location B.4 Location..1



a)
Ranking departments according to highest work and locations according to highest
inter location a distance helps in making assignments


Trip Distance Department
pair
Work
flow
A-B 40 2-4 90
B-C 40 1-4 80
B-D 50 3-4 55
A-D 70 2-3 40
C-D 60 1-3 20
A-C 80 1-2 10


Cost per meter to move any load is $1, the total daily transportation cost for the assignment is
calculated by multiplying each department number of loads by the trip distance and summing
those quantities.




Location D...3
Department 1 2 3 4 Total(Load*distance)
1 -------- 80*10=800 60*20 = 1200 40*80= 3200 5200
2 ------ --------- 70*40 = 2800 40*90 = 3600 6400
3 --------
-
---------- ------- 55*50 = 2750 2750
Total 14350