Case 1

The City’s Department of Transportation (on its own and as a client to the Department of
Design and Construction) uses about 400,000 tons of asphalt each year to repave streets. There
are 8 asphalt plants located in and around New York City, one of which is owned by the City
and staffed by City employees. Each plant’s maximum capacity along with the price for which
it is willing to sell asphalt to the City (the cost to the City at the plant) are listed in Table 1.

Plant Maximum capacity (Tons) Cost per Ton

Grace Asphalt 80,000 $29,70
Tully Construction 75,000 $28.40
Van Bro Materials 100,000 $26.95
Nigro Corp 60,000 $27.32
Yonkers Contractors 75,000 $28.01
New York Paving 60,000 $29.50
Sopranos Inc 65,000 $30.25
Hamilton Ave (City Owned) 100,000 $19.85

Asphalt is produced at about 350 degrees F, dropped from the silo into trucks, then delivered
to a job site where it is used to make bumpy, potholed streets smooth. It must be placed on the
street at no less than 220 degrees. Below that temperature it becomes difficult to work with and
to roll to a smooth finish. Since it loses temperature as it travels from the plant to the job site,
there is a limit to how far it can be trucked. The City estimates that to truck it more than 25
miles is too risky. Since the specific streets that will be paved are all over a borough, the
Department uses a central point to determine distance from the plants to job sites. It costs $0.15
per ton per mile to truck asphalt from a plant to a job site. Each truck carries 20 tons of asphalt.
Distances from each plant to the Borough centres are displayed in Table 2.

Plant Manhattan Bronx Brooklyn Queens Staten Island

Grace 8.5 6.2 10.5 2.1 14.8
Tully 8.3 7.1 9.9 1.8 13.9
Van Bro 12.1 19.4 7.3 16.2 2.7
Nigro 11.6 5.9 14.9 10.3 22.5
Yonkers 10.9 5.2 13.7 12.1 23.6
New York 8.4 6.6 9.7 1.5 13.1
Sopranos 6.8 13.1 4.2 8.2 9.1
Hamilton 5.5 12.4 5.4 9.3 10.1

Queens is a large Borough. It has 38% of the City’s street mileage. Manhattan has 8%. But
Manhattan’s streets need to be paved more often because they get more use and are cut into for
utility work far more often. Table 3 displays the amount of asphalt each borough expects to
need in the next year.
 Borough Requirements
Manhattan 65,000
Bronx 55,000
Brooklyn 85,000
Queens 125,000
Staten Island 70,000

Questions:
a) Which plants should the City buy asphalt from? The City can buy from as many plants as
it wants.
b) How much should it take from each plant?
c) Would it make sense for the City to expand its own plant? How much would it be willing
to invest in that expansion? Assume it can expand without limit and produce at the same
cost.

Case 2

Gamma is a company that produces furniture on order and supplies many big retailers
throughout the country. Gamma’s budget for September 2019 reports expected sales and
unitary costs for the two company’s signature products (see table below).

Product 1 Product 2
Expected production and sales volumes 20000 15000
Selling price $40 $70
Commercial variable cost 2 4
Production variable cost 26 46
Production fixed cost 8 12
SG&A fixed cost 2.6 3.2
Total unitary cost 38.6 65.2

The company has a monthly production capacity equal to 25200 hours of labor. In order to
produce Product 1, 0.5 hours of labor are needed, while for one unit of Product 2, 1 hour of
labor is required.
Additionally, the company received a special order from Delta company of 1000 units of
Product 1. The client offers to pay $45 for each unit but only if Gamma is willing to invest in
some technical improvement for the assembly line that will increase the production variable
cost of Product 1 by $4/unit. There would not be any increase in the commercial variable costs
and in the hours of labor required for production.

Questions:
a) Verify if the company has the production capacity to satisfy the special order from
Delta.
b) In case that the special order can be satisfied only partially, and that in order to make
enough space for this order Gamma is willing to reduce the production of Product 2,
evaluate the cost effectiveness of accepting the order from Delta.
 Case 3

ABC Corp is facing short-term capacity problems in its paper printing operations on its custom
line for printing textured paper. The company has currently received more orders than usual
leading to the management thinking of a revised scheduling strategy that best meets the order
commitments on the given due dates.
You are a consultant to ABC Corp and have to make recommendations for the scheduling
strategy to be used which all the managers can understand and approve to be the best and reason
out the trade-offs for other possible schedules.
Having studied operations management during your MBA you recall your learnings and call
the production control office to confirm the pad printing schedule. The office confirms that
printing runs one 8-hour shift per day. You are also informed that the production will be
running 23 days in the month of September, beginning Tuesday, September 3(September 2 and
September 11 are official holidays) and there is no production on Sundays. You start
developing your plan based on the inputs you just received. Your motive is to make your
solution as clear as possible so that the management has no issues in understanding the solution
and will really like and appreciate it.
ORDER LIST
Job Date Order Set-up Time Production Due Date
Received Time
A Aug 4 2 hrs 6 days 11 Sep
B Aug 7 4 hrs 2 days 8 Sep
C Aug 12 2 hrs 8 days 25 Sep
D Aug 14 4 hrs 3 days 19 Sep
E Aug 15 4 hrs 9 days 29 Sep
Note: Setup time involves setting the printer as per the custom order and has to be done at the
start of the job. It involves thorough cleaning of the printing heads and ink reservoirs, installing
the new pad(s) and ink supply, and carefully aligning the machine. Setup at the beginning of a
new day with the same job is insignificant.
Hint: Examine the following rules and summarizing your findings on the best possible strategy
Rules to be considered: FCFS, SPT, DD and CR.

Case 4

You are the manager at XYZ Company and are considering outsourcing manufacturing for component
T178 (bracket) which is currently produced at XYZ Company. T178 is an accessory part used for
providing strength to the final product Z101 which is a very exclusive product. Each unit of Z101
required 20 units of T178 for production. Annual production of Z101 is 40 units per year, with two
thirds produced during the period November to April.
The subassembly parts – T67, T75, T69, T70 and T77 were processed on a burn table, which cut the
raw material to size. Although the burn table could work with eight stations, this machine had only
been operating with one station. The final assembly operation, T70 was performed at a manual
welding station.
Manufacturing lead time for the bracket was two weeks. The supply and production of T178 is well
coordinated with assembly operations and inventory levels are kept to a minimum. Inventory holding
costs for XYZ Company are 20 percent per annum.
Outsourcing decision
Based on assessment of the bids received from various suppliers the bid from Super Suppliers has
been shortlisted to be the best among the possible options with a cost of $108.20. The breakdown of
the costs is given in the table below.
 Part XYZ Company Supper Suppliers
T67 $17.92 $14.60
T75 $17.92 $21.10
T69 $45.20 $18.50
T77 $10.37 $13.00
T70 $58.69 $41.00
Total $150.10 $108.20
Based on your experience in the company you know that fixed costs are about 20 percent. Also, as
per your calculations, it will cost around $75 to place an order with Super Suppliers. Quoted delivery
lead time is four weeks. So, you will have to arrange for extra storage space. Super Suppliers has an
excellent track record and so there is no need to carry safety stock, but you need to decide the order
quantity. Also, keep in mind that the decision is acceptable only if you can cut down costs by
outsourcing.
Analyse the situation and make a recommendation.