OM 411 Business Process Management

ASSIGNMENT 1

Due: Sunday, January 19, 11:59 PM

Instructions
Each assignment will include a PDF file (like this one) with the assignment questions and an Excel file. Complete
your work for each part of each question in the Excel file and enter your final answers into the worksheet,
“Answers” (use ​Copy > Paste Special, Values​ to ensure that values copy correctly). Use two decimal places for
answers, where appropriate.
You may create additional worksheets in the Excel file. Label the worksheets to reflect the question for which
the work corresponds for quick reference.
When you have entered your work and answers, save, upload, and submit the Excel file through eClass.
Your grade will be based on your answers in the “Answers” worksheet, but you must show your work in the
other worksheets to receive full marks. Marks will be deducted if you do not show your work in the Excel file or
if your answers are not properly copied to the “Answers” worksheet.

Total Points: 48

Questions

1. Car Rental

A process flow chart for a car rental company is shown below.

A car rental company rents cars at the Chicago airport. The car rental market consists of two segments: the
short-term segment, which rents for an average of 0.5 week, and the medium-term segment, which rents for
an average of 2 weeks. The company currently rents an average of 130 cars a week to the short-term segment
and 70 cars a week to the medium-term segment.

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Approximately 90% of the cars returned (evenly distributed across both segments) do not need repairs and are
cleaned, filled with gas, and made available for rent. The remaining cars returned are found to be defective
and in need of repairs before they are cleaned, filled with gas, and made available for rent again. On average,
there are 100 cars waiting to be cleaned and 40 cars waiting to be repaired. On average, it takes 0.05 weeks to
clean a car and the average cost of cleaning is $40 per car. Cars needing repairs spend an average of 0.5 weeks
in the repair shop and incur an average cost of $750 per car. Assume that cars are rented as soon as they are
available for rent, that is, as soon as they have been cleaned.

Short-term renters pay $600 per week, while medium-term renters pay $520 per week. Assume that each car
loses $80 in value per week because of depreciation.

a) For each stage of the process, report inventory (I), throughput (R), and flow time (T). (7.5 pts)

b) How many cars does the company own? On average, how many cars are on rent to the short-term and
the medium-term segment? (6 pts)

c) What profit does Cheapest earn per week with the current system (ignoring any other revenue or cost
components not mentioned above)? (4 pts)

2. Online Store

A process flow chart for an online store is provided below.

On average, 1,600 customers visit an online store every hour to select a product for purchase. After a customer
selects a product for purchase, the system generates a quote and suggests other products. At this point, 20%
of the customers go back to product selection stage and another 20% proceed to payment. The rest of the
customers leave the website without buying a product.

Based on historical data, product selection takes 30 minutes on average. Customers spend 3 minutes in Buffer
1 and 6 minutes in Buffer 2, on average. It is estimated that at any given time, the website is busy generating
80 quotes and processing 20 payments.

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a) For each stage of the process, report inventory (I), throughput (R), and flow time (T). (7.5 pts)

Hint: you may find it easier to calculate throughput starting from the end of the process.

b) Report the following: (6 pts)

i) Average number of customers in the website at any point in time
ii) Average amount of time that the customer spends in the website
iii) Inventory turnover rate for the process

3. Evanstonian Hotel

The Evanstonian is an upscale independent hotel that caters to both business and leisure travelers. When a
guest calls
room service at The Evanstonian, the room service manager takes down the order. The service manager then
submits an order ticket to the kitchen to begin preparing the food. She also gives an order to the sommelier
(i.e., the wine waiter) to fetch wine from the cellar and/or prepare any other alcoholic beverages. Finally, she
assigns the order to a waiter. It takes 4 minutes to take down the order and to assign the work to the kitchen,
sommelier, and waiter. It takes the kitchen 18 minutes to prepare the typical order. It takes the sommelier 10
minutes to prepare the drinks for the order. While the kitchen and the sommelier are doing their tasks, the
waiter readies a cart (i.e., puts a tablecloth on the cart and gathers silverware). This takes 5 minutes per order.
Once the food, wine, and cart are ready, the waiter delivers it to the guest’s room. It takes the waiter 8
minutes to deliver the meal to the customer. It takes the waiter additional 4 minutes to
return to the station and debit the guest’s account. All the times mentioned represent flow time at the various
activities, and include the effects of waiting. The process begins upon receipt of order, and ends upon debit of
account.

a) What is the flow time of the process? (3 pts)

b) What is the effect on the process flow time if the waiter could prepare the cart in 2
minutes instead of 5? (2 pts)

c) What is the effect on the process flow time if the waiter could deliver the order in 5
minutes instead of 8? (2 pts)

4. Manufacturing Process

A manufacturing process consists of the following processes to convert raw inputs into one of the products
that the company sells. The activities are carried out in the order specified in the chart below (preceding
activity is the activity or activities that must be completed before that specific activity is started; succeeding

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activity is the activity or activities that are started after that specific activity is complete). The flow time and
activity time (theoretical flow time) for each activity is also specified in the chart.

Activity Preceding Succeeding Flow Time Activity Time

Activity Activity (minutes) (minutes)

Start n/a 1, 2 0 0

1 Start 4 30 10

2 Start 3 10 5

3 2 4 20 7

4 3, 1 5 50 15

5 4 6, 7 10 5

6 5 8 60 20

7 5 8 60 15

8 6, 7 End 20 4

End 8 n/a 0 0

a) What is the average flow time, theoretical flow time, and flow time efficiency of the process (in
minutes)? (6 pts)

b) Activity 7 is found to not be adding value and it is therefore eliminated. What is the new flow time
of the process without activity 7? (2 pts)

c) After activity 7 is eliminated, it is determined that activity 5 and activity 6 can be done in parallel
(following completion of activity 4). Activity 8 is started when activities 5 and 6 are both complete.
What is the new flow time of the process with this change (removal of activity 7 and activities 5 and
6 occuring in parallel)? (2 pts)

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