Student Name: …

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HOMEWORK – SUPPLY CHAIN DESIGN

CHAPTER 5: CAPACITY PLANNING

Question 1: (25 points)

Melanie is the manager of the Clean Machine car wash and has gathered the following
information. Customers arrive at a rate of eight per hour according to a Poisson distribution.
The car washer can service an average of ten cars per hour with service times described by an
exponential distribution. Melanie is concerned about the server’s performance and she has
asked you to calculate the following system characteristics:
(a) Average system utilization
(b) Average number of customers in the system
(c) Average number of customers waiting in line
(d) The average time a customer spends in the system
(e) The average time a customer spends waiting in line
(f) The probability of having more than three customers in the system
(g) The probability of having more than four customers in the system

Question 2: (30 points)

If Melanie adds an additional server at Clean Machine car wash, the service rate changes to
an average of 16 cars per hour. The customer arrival rate is 10 cars per hour. Melanie has
asked you to calculate the following system characteristics:
(a) Average system utilization
(b) The probability that no customers are in the system
(c) Average number of customers waiting in line
(d) The average time a customer spends waiting in line
(e) The average time a customer spends in the system
(f) Average number of customers in the system
(g) The probability of having more than three customers in the system
(h) The probability of having more than four customers in the system

Question 3: (10 points)

An automobile brake supplier operates on two 8-hour shifts, 5 days per week, 52 weeks per
year. The table below shows time standards, lot sizes, and demand forecasts for three
components. Because of demand uncertainties, the operations manager obtained three
demand forecasts (pessimistic, expected and optimistic). The manager believes that a 20%
capacity cushion is best.
(a) What is the minimum number of machines needed?
(b) If the operation currently has two machines, what is the capacity gap?

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Student Name: …
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  Processing, p Setup, s Lot size, Q Demand Forecast, D

(unit/hour) (hour/lot) (pair/lot) (pair)
Component A 0.05 1 60 18,000
Component B 0.2 4.5 80 13,000
Component C 0.05 8.2 120 25,000

Question 4: (15 points)

Bob Greer operates Bob's Garage and Manhole Cover Recycling Center at
the corner of Lookout Highway and Ruff Road. Bob's Garage has one bay dedicated to wheel
alignments. Although the recycling center is open at night, the garage normally is open only
on weekdays from 7 A.M to 7 P.M and on Saturdays from 7 A.M to noon. An alignment
takes an average of 60 minutes to complete, although Bob charges customer for two hours
according to a nationally published mechanic’s labor-standard manual. During March, the
height of pothole season, Bob’s Garage is open from 6 A.M to 10 P.M on weekdays and from
6 A.M to 6 P.M on Saturdays.
(a) What are the garage’s peak and effective capacities, in alignments per week?
(b) During the second week in March, Bob’s Garage completed 90 alignments.
What is the utilization as a percent of peak capacity?
What is the utilization as a percent of effective capacity?
(c) Then, what is the capacity cushion as a percent of peak capacity?
What is the capacity cushion as a percent of effective capacity?

Question 5: (20 points)

Roche Brothers is considering a capacity expansion of its supermarket. The landowner will
build the addition to suit in return for $200,000 upon completion and a 5-year lease.
The increase in rent for the addition is $10,000 per month. The annual sales projected through
year 5 follow. The current effective capacity is equivalent to 500,000 customers per
year. Assume a 2 percent pretax profit on sales.
(a) If Roche expands its capacity to serve 700,000 customers per year now (end of year
0), what are the projected annual incremental pretax cash flows attributable to this
expansion?
(b) If Roche expands its capacity to serve 700,000 customers per year at the end of year
2, the landowner will build the same addition for $240,000 and a 3-year lease at
$12,000 per month. What are the projected annual incremental pretax cash flows
attributable to this expansion alternative?

Year 1 2 3 4 5
Customers 560,000 600,000 685,000 700,000 715,000
Average Sales per Customer $ 50.00 $ 53.00 $ 56.00 $ 60.00 $ 64.00