University of Economics, Prague

Faculty of Business Administration

3BE216
Operations Management
Workbook
with comments and answers
WIP

2022 Ing. Felipe Martinez, PhD.

Advice
This document provides comments to each part on reference to the final exam. It also provides
reference answers to the problems. The original document offers reference problems on each
topic so the student creates its own learning and understanding. Furthermore, the original
document frames the information delivered in the lectures of the operations management
course (3BE216) during the semester. It includes theory and exercises that support the
learning experience of the students enrolled in this specific course and semester. It is not the
only source of knowledge of this course. Students are advised to explore other documents.
The presentations showed at the lectures (posted at the document server at ISIS), the
workshops during classes, the explanations of the exercises and the literature listed in the
course syllabus (also at InSIS) also comprises information that will be part of the final exam.
Additionally, the body of knowledge on the topic has a vast offer of several other documents
such books, textbooks, articles, webpage, etc.; that allow the students to excel in their
knowledge and preparation for the exam.

The basic literature for this document is:

Type Title Author(s)

RQ Operations management SLACK, N. -- CHAMBERS, S. --

JOHNSTON, R.
RQ The goal: a process of ongoing Goldratt, Eliyahu M.
improvement

©Felipe Martinez, 2022

 1. Process mapping
Make, draw and prepare the following process mapping tools for a specific process.
• Process Diagram
• Process Layout
• Process Flow chart
Buying a coffee in a coin-operated coffee machine Okomentoval(a): [FM1]: The idea of this exercise is to practice
these process mapping tools. For the exam, the student must be
Supplier Input Process Output Customer prepare to deliver the complete mapping on reference to the
Use these tools manufacturing process. This process is similar that the one described
on parts 2 and 4 of this document and it is a reference to develop the
to map the warehouse design.
process
• Process
Coin operated Diagram
Coins Coffee Student
coffee machine • Process
Layout
• Process
Flow
chart

Classify the process: Okomentoval(a): [FM2]: Similar, the process that will be
classify is related with process mapping.
• By production • By layout • By the nature of
• By sales order • By continuity of operations
• By technology operations • By time
• By place
2. ABC Method
Identify the piece with the highest total demanded volume in the company using the ABC
method. The factory manufactures different types of furniture. All of their designs use a
subpart. The subpart changes in size. In the following technical drawing, you can notice that
all the dimensions of this subpart are only related with the length (X) of the piece. This means,
that by changing the length (X) of the piece, the other dimensions change proportionally.

Given that: Diameter (A) = 2/3 Diameter Diameter (B) = 1/3 Diameter
Diameter (Y) = 1/8 length (Y) (Y)
(X) Length (a) = 1/20 length (X) Length (b) = 1/4 length (X)
University of Economics, Prague Prepared by: Felipe Martinez
Faculty of Business Administration 1 2022
 Product Volume Product
No. X Demand % No. X Demand Volume m3 %
Ref. m3 Ref.
1 Table Chair 70 900 6 Small lamp 60 6700 17.759816 53.7651%
Round
2 Office table 24 350 7 75 950 4.9183259 14.8895%
table
3 Sofa 85 470 1 Table Chair 70 900 3.78831895 11.4685%
4 Office chair 25 14000 3 Sofa 85 470 3.54213038 10.7232%
Office
5 Big lamp 5 155 4 25 14000 2.68446638 8.1268%
chair
6 Small lamp 60 6700 10 Kids chair 30 750 0.24850489 0.7523%
Round Office
7 75 950 2 24 350 0.0593761 0.1798%
table table
8 Table 12 780 8 Table 12 780 0.01654049 0.0501%
9 Kids table 21 128 9 Kids table 21 128 0.01454714 0.0440%
10 Kids chair 30 750 5 Big lamp 5 155 0.00023777 0.0007%
100% 33.032264 100%

Then, since the article “Small Lamp” has the highest percentage share of the total volume in Okomentoval(a): [FM3]: For this exercise is not necessary to
calculate the volume of the holes inside the piece because the used
the warehouse, it must be and “A” item. Similar, the lowest percentage must be a “C”. In this volume of each piece does not change with or without holes. The
volume without the holes is necessary for the warehouse calculations
case “Big Lamp” (Ironic isn’t? ☺). The decision about the classification of the other items must since you will need to review the weights.
be in alignment of the Pareto principle. It means that few items must compile a lot of the total
volume and many of the items includes just few of the total volume. Since the total list of
items is 10, the “A” category should have 1 or 2 items. Then, the “C” category should be 5 up
to 6 items and the rest are “B” items. In this case, let’s keep the Item 6 alone as the “A”
category with 52%. Then, the small items with less than 1% must be “C” category. The
problems arise to determine the “B” category. My suggestion is to determine the “B” category
with the items 7, 1 and 3, which represent 38.5% of the total volume. This is less that the
52.5% of the “A” category and permits to have the rest of the items as “C” category (approx.
9%). Other suggestion is to make and extra level. This means Item 6 “A” with 52.5%, items 7
and 1 “B” with 28.25%, items 3 and 4 as “C” category with 18.25% and finally the rest with less
than 1% and a new category “D” with 1% of the total volume. Finally, you might what to have
the “A” category with 80%. Then, the selection of item 6, 7 and 1 fits this proposal.
Furthermore, we keep the small items with less than 1% as category “C” (1% of the total
volume) and the “B” category will be items 3 and 4 with 18.5%. In practice, the last
arrangement is a decision that uses these three options and other information such as
handling, suppliers’ reliability, etc.

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 3. Scheduling
The manufacturing facility works in 2 shifts of 12 hours. There is a TPM policy of 10min for
cleaning at the beginning and at the end of each shift. Workers need 15min to be ready at the
machines. There is a general organisational policy of 45min lunch (12:15) or supper (17:15)
break and 10min coffee break at each shift (9:00 and 20:00). Calculate the available working
time. Make a table with the shift schedule of the day.

At the document server, you can find the solution for the first test. The bottom slides of page
3 and the first of page 4 show the table requested for this exercise. Just change the number
of shifts and the hours per shift and find the real times of work. This schedule is crucial for you
as an operation manager to answer the question: When the production of an specific order
will be ready?

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 4. Work Standards
A special product can be manufactured with either of the two following technologies: CNC or
Lathe. The next table comprises the basic operations and their C/T:

C/T (min)
Operation
CNC Lathe
Preparing the workplace 2 1
Studying CAD and CAM 6 -
Studying drawing and manufacture procedures - 35
Preparing the tools 10 15
Revising the CAM simulation 0,5 -
Machine adjustment 7 25
Loading the raw materials (Check the capacities) 10 10
Turning one piece 6 12
Checking one (each) piece 1 1
Placing each piece in the box 1 1
Handing over completed work 8 8
Cleaning the tools 4 4
Cleaning workplace 6 6

Moreover, this table does not include the operations related to handling the product and raw
material. But, you had measured them, and you know that the distance between manufacture
orders office and the new CNC is 25mts. The CNC is placed 10mts far from the warehouse. The
lathe is next to the manufacture orders office at just 7mts, while is 45mts far from the
warehouse. The average worker walking speed is about 4 kilometres per hour (km/h). When
handling the raw materials or the final subpart with the hand truck, the speed reduces by 15%.
Okomentoval(a): [FM4]: This is SUPER IMPORTANT. Take a
look of the table and you will see that these are timings with the
machine, next to the machine or simple … here there are NOT all the
batch times of the specific order. Where are they?
Okomentoval(a): [FM5]: Here!

Additionally, you have to consider the size of both machines. The CNC has a length of 4mts
and a wide of 1mts. The loading area for the CNC fits the requirements of the maximum
loading capacity. The CNC’s loading capacity is 10 metal bars of 5mts each, which is the double
of the capacity of the lathe. The CNC’s loaded window is placed in the narrow side of the
machine. The box for final subparts is located under the CNC. The CNC worker needs an area
of 2,5m2 at the side of the machine. On that side, the machine has the keyboard, screen and
other tools to fix the CAD/CAM information if necessary.
Okomentoval(a): [FM6]: But, since the length of the loading
capacity of the machines is related with the raw materials, then, in the
exam, you must ask the people at material purchasing the length of
bars they will buy. The exercise no. 5 repeats the garage exercise for
previous exam, but the principle is the same. After you get to know
the length of these bars, then you will get to know how many meters
to walk from each machine to the office and then to the warehouse
and then back to the machine.
Okomentoval(a): [FM7]: Warning! The length of the bars
influence this exercise due the changes of the distances to walk.
Similar, it influences the LAYOUT of the facilities, the PROCESS
DIAGRAM and respectively the FLOWCHART.

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The lathe is placed between the manufacture orders office and the new CNC. It also has
4x1mts. The working area for the operator is 2m 2. The operation to load the machine is similar
than the operation at the CNC. The worker places the final subparts in a box under the lathe.

Based on this information, make the layout of the factory, make the process diagram for both
technologies and complete the table with all the operations.

C/T (min)
Operation Okomentoval(a): [FM8]: In a similar table you must include
CNC Lathe ALL the activities of the manufacturing process. The table is an
example. It does not mean that you must fit all the activities in this
table. The complete table is the same that will be used for Process
Diagram.

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Calculate
a. Unit time, batch time and shift time.
b. Which operation is the bottleneck of this process?
c. What is the manufacture takt time?
d. What is the lead-time of the first piece?
e. How many final subparts are in the box before the first break? (Based on the
answer of scheduling)
f. When will the order be finished? Express your answer in shifts, days and specific
hour and date.

5. Materials Purchasing
A construction company has an order to build 5 garages. The structure needs 4 steel metal Okomentoval(a): [FM9]: Make this exercise based on the
exercise No. 2 and 4 of this document.
bars with a length of 5.6 m. These steel metal bars are sold in bars with a length of 12 meters.
The supplier also offers a length of 7 m, because these are leftovers from another job.
a) Calculate the total demand of steel metal bars in meters and the coefficient of
material utilisation for both metal bar lengths 7 meters and 12 meters. (Do not
include the material losses due Cold saw. The material tolerance covers this waste).
b) Decide on the length of the steel metal bars. Argue your answer.
c) Next, consider whether it would be beneficial to buy steel metal bars on the exact
length required dimensions. The supplier offers this option at 12% extra of the
purchase price.
(SVOBODOVÁ, et al., 2012)

At the document server, you can find the solution for the first test. The page no. 4, 5 and 6
includes the solution of this exercise. For the final exam, just fit the exercise to answer the
issues of exercise No. 2 and 4.

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 6. Selection of a new technology. Okomentoval(a): [FM10]: The second test includes this type of
exercises.
The finance department of the company asks you to evaluate both technologies and the
option to outsource the manufacture of these pieces. You must calculate the materials costs
CZK/unit based on the required volume of the piece, the density of the material and the
average of the international price of the material. The exchange rate is 24,8CZK/USD. They
suggest you round up the materials costs CZK/unit.

CNC Lathe Outsource

Rent CZK / Month 0 0 350 000
Depreciation CZK / Month 70 000 90 000 0
Other fixed costs CZK / Month 35 000 190 000 115 000
Mat. costs CZK / unit ??? ??? 200
Payroll costs CZK / unit 80 40 0
Cost per unit 0 0 20
Monthly capacity 6 000 3 000 11 000

Calculate
a. Calculate the material cost of the raw material at the CNC and at the Lathe. Ask
your colleague from purchase for this data.

At the final exam, the material purchase department will be handling this information. For this
exercise, use the volume of the item with highest % of total volume (It should be an “A” item).
Add the percentage of material lost due cold saw and/or CMU. Check the density of the
material and the price and then make the calculation.
In this case, let’s assume that the
there is not lost due cold saw. The article to manufacture has 60cm length and the purchasing
possibilities are 12m and 7m. Then, it is possible to manufacture 200 units from the 12m bar
and 117 units from the 7m bar.
The price of Nickel 200 (check warehouse exercise in this document) is US $1-30 / Kilograms
(https://bit.ly/2Eh2CGg). Then, as longer the bars, the cheapest it is. I will assume that the
price is 1USD/kg since I will by 12mts bars. The total amount of the purchase it is not necessary Okomentoval(a): [FM11]: This decision influence the process
mapping including the distances and times!
for this exercise but it is for the warehouse.
The volume of one item 6 is 0.00265072m3. The density of Nickel 200 is 8890kg/m3. Then, ONE
item requires 23.56kg of raw material and its price will be 23.56USD or 584CZK. Okomentoval(a): [FM12]: Use the volume of the item with
holes and you will get 22.35kg weight of the time to be stock in the
warehouse.

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 CNC Lathe Outsource
Rent CZK / Month 0 0 350 000
Depreciation CZK / Month 70 000 90 000 0
Other fixed costs CZK / Month 35 000 190 115 000
000
Mat. costs CZK / unit 534 534 200
Payroll costs CZK / unit 80 40 0
Cost per unit 0 0 20
Monthly capacity 6 000 3 000 11 000

CNC Lathe Outsource

FC 105000 280000 465000
VC 614 574 220
Cap 6 000 3 000 11 000

b. Determine the range of units on which each option is the cheapest one.

Units
Q - cnc/lathe 4375
Q - cnc/out 913
Q - lathe/out 522

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University of Economics, Prague Prepared by: Felipe Martinez
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Then,
Number of Units – w/o Number of Units – with
From To From To
capacities capacities
CNC 0 913 CNC 0 913
Outsourcing 913 ∞ Outsourcing 913 11000

c. Review your calculations based on the monthly capacities. Okomentoval(a): [FM13]: You know the answer from the
second test
d. What mathematical conditions, at the CNC and at the lathe, are needed in
Okomentoval(a): [FM14]: Check the graph… what should
order to totally reject the possibility of outsourcing? happen?

e. Why outsourcing? Based on your calculations, argue the reasons to outsource. Okomentoval(a): [FM15]: Make an argument.

7. Sequencing
You have decided to explore the difference between both technologies by calculating the lead-
time of the possible sequencing plan at each technology. The order is 50 units. The production
process has 4 operations. The only change in the production process is the second operation,
which can be performed by the CNC or by the lathe. The parameters of the other operations
are presented in the next table.

Operation C/T Setup Time P S

Materials 9 20 2 1
CNC / Lathe 2/3 25/30 1 1
Assembly 10 0 1 4
Packaging 10 10 2 2

Calculate
- Lead time for gradual sequencing for CNC and lathe with and without setup
time.
With Setup time Without Setup time
CNC 640 605
Lathe 695 655

- Lead time for parallel sequencing for CNC and lathe with and without setup
time.
With Setup time Without Setup time
CNC 269 269
Lathe 271 271

- Lead-time for DBR for CNC and lathe with and without setup time.
With Setup time Without Setup time
CNC 269 269
Lathe 271 271

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 - R&D department needs an extra product at each technology for testing.
Calculate the lead-time for gradual, parallel and DBR for this new batch.
• Lead time for gradual sequencing for CNC and lathe with and without
setup time.
With Setup time Without Setup time
CNC 651 616
Lathe 707 667

• Lead time for parallel sequencing for CNC and lathe with and without
setup time.
With Setup time Without Setup time
CNC 278 278
Lathe 280 280

• Lead-time for DBR for CNC and lathe with and without setup time.
With Setup time Without Setup time
CNC 278 278
Lathe 280 280

- How will you sequence the work to manufacture 300units of the same product?
I will go for CNC in DBR. How about you? Why?

8. Warehouse
Several changes in the manufacturing process imply a new layout for the warehouse of final
subparts. The new warehouse operational capacity is 75%. The selected product will be
storage in space with dimensions of 10m x 25m. The floor loading capacity of the entire
facilities is 4100 kg/m2. The boxes with final subparts are stored in wooden EUR pallets. The
boxes dimensions are 25x20x10cms. The final subparts in the box are separated by special soft
layers. The packaging materials are up to 2,5kg. The hand truck has a maximum loading
capacity of 1 ton. It needs an aisle of 130cms wide.

The product to be stored is made of Nickel 200

(See http://www.engineeringtoolbox.com/metal-alloys-densities-d_50.html).
Each box storage 90% of its volume in Nickel 200

Calculate
a. Technical capacity
1025tons

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 b. Technological capacity
• Draw the warehouse layout according to the manufacturing layout.
Ask your colleague for the details. I assume here ONE door in the Okomentoval(a): [FM16]: This means in the final exam that the
students working in the layout will define where is the door between
middle of one of the shorter sides of the warehouse. the manufacturing facilities and the warehouse. This influences the
1 2 3 4 5 6 warehouse layout.
80 160 80 80 160 80 80 160 80 1000
10

1 120

10

2 120

10

3 120

10

4 120

10

5 120

10

6 120

10

7 120

10

8 120

10

9 120

10

10 120

10

11 120

10

12 120

10

13 120

10

14 120

10

15 120

10

16 120

10

17 120

10

18 120

10

19 120

30
2500

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 • Draw the boxes arrangement over one pallet.
X 20 20 20 20 20 20
25
Number of boxes over
25 18
one layer of a pallet
25

The issue now is… how many layers? You need to find out the weight
of ONE item 6 as a final subpart. It is about 22.36kg. Now, how many Okomentoval(a): [FM17]: Check exercise no.2 and no.6/

items 6 fit in one of the boxes? Unfortunately, the boxes we have are
smaller than the item to store. So, the decision is to storage the final
subpart item 6 just covered with the special soft layers. We assume
than those packaging materials requires 0.1cm more over the item 6
diameter. Therefore, the item over one pallet will looks like this.

• Draw the product arrangement in one box.

Unfortunately, the boxes we have are smaller than the item to store.

• Calculate the technological capacity.

396.517 tons

c. Operational capacity
297.38775 tons

d. Warehouse rate
51.48%

e. What suggestions you have in order to increase the warehouse rate?

In this case, the index is higher than 50% so it is fine. An improvement might be
reduce the required handling aisle. However, now is 130cms and the pallet is
120cm. This is the minimum possible.

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 9. Little’s Law
a) A queue at the local coffee shop has 10 persons. One Barista is able to process orders
around 5 minutes/per customer. Calculate how many baristas are needed to serve
these 10 customers in 25 min (FACTORY PHYSICS, 2014).
2 baristas
b) A product is scheduled to wait for 2 days in finished goods inventory before shipping
to the customer. Use Little’s law to determine the total amount of inventory in
finished goods. Manufacture facilities provide 10 finished goods per day (FACTORY
PHYSICS, 2014).
20 finished goods.
c) A system at peak processes 8000 Transactions/Hour with an average response time
of ~5s per transaction. The average Think Time per user is ~30s. What is the number
of concurrent users on the system? (Practical Performance Analyst, 2014)
77 users.

10. Concepts and theory Okomentoval(a): [FM18]: Review the slides of the sessions
presentations.
Please answer the following questions:
1) What is operations management?
2) What questions will you address to an Operations Manager?
3) Compare the definitions of “process” from ISO 9001:2015 and Hammer & Champy,
1996. Are they different? Are they similar?
4) Explain: P = S + OE
5) Argue the importance of standards.
6) Define Target Costing.
7) Explain each of the five performance objectives of operations management. Present
your answer in a comparative table. Give examples.
8) What are the external effects of the five performance objectives of operations
management? Present your answer graphically.
9) Make the relationships between competitive factors and performance objectives. If
the customer values these…, then the operation will need to excel at these…. (SLACK,
et al., 2010 p. 69)
10) Explain the differences between the processes of Mass production, Series production
and Piece production in relation with the Volume (number of produced units) and
the Variety (number of product types). Present your answer graphically. Use Volume
in the X axe and Variety on the Y axe.
11) Define and explain the different types of processes.
12) What is the difference between Outsourcing, Insourcing, Off-shore, Re-shore and
Next-Shore? Explain each concept and argue about which of them is the best for a
bakery in Prague 1.
13) What information you obtain from a “Bill of Materials”?
14) What information is at a Process diagram?
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 15) What information is at a Process layout?
16) What information is at a Process flowchart?
17) What information you obtain from the following process mapping tools. Process
Diagram, Process Layout, Process Flow chart. Present your answer in a comparative
table.
18) How many hours have 1 TMU?
19) What capacity is?
20) What type of pieces can you make in a lathe?
21) What is a lathe?
22) Argue the reasons to use Little’s law in a hospital?
23) What is the relation between HR and OM?
24) What is the goal of the organisation? (GOLDRATT, et al., 2004)
25) What principle did Alex learn with the scouts? (GOLDRATT, et al., 2004)
26) Are robots efficient? (GOLDRATT, et al., 2004)
27) There are 100 WIPs. The purchase cost of each WIP is 100EUR. Calculate the value in
money of the WIPs if each final subpart needs just one of these WIPS and it is sold at
10.000 EUR.
28) Define facility management and its importance for operation management.
29) Why stock?
30) Please explain 5W1H in the context of inventories.
31) What is an EUR pallet? Explain its importance, make a sketch, add measures of size
and weight.
32) What does mean that a company is certified ISO9001:2015?
33) Define the different types of stock
34) Does TPM belong to the value chain of the organization? Argue your answer.
35) The technical capacity of a warehouse is 200 tons. Its technological capacity is half of
it. What is the operational capacity of the warehouse if the operational warehouse
rate is 75%?
36) What is product portfolio?
37) What is the difference between product line and product family?
38) What is the difference between declaration of conformity and product certification?
39) What is the difference between planning and control?
40) Which operational management activity must be done before doing the activity of
operational planning?
41) If the Demand Time (D) is 20% of the Production Time (P), what P:D ration the
process has?
42) Based on the answer in F), what type of Customer Order Decoupling Point is more
likely to have the process?
43) engineer-to-order (ETO)
44) make-to-order (MTO)
45) assemble-to-order (ATO)
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 46) make-to-stock (MTS)
47)
48) What are the 4 operation management activities for operation planning?
49) Define the 4 sections of the TPS philosophy.
50) What is the difference between Lean and Six Sigma methodologies?
51) Write the 5 steps of the TOC method.
52) What principle is used in ABCXYZ method?
53) How Pull, JIT, JIS and kanbans are related?
54) Could an operation have kanbans in push system?
55) Explain DBR and relation with kanbans.
56) Explain and give one example in manufacturing of the technology Advanced Robotics.
57) Explain and give one example in manufacturing of the technology Big Data.
58) Explain and give one example in manufacturing of the technology Digital modelling.
59) Explain and give one example in manufacturing of the technology Internet of things.
60) Explain and give one example in manufacturing of the technology Human-Machine
Interaction.
61) Explain and give one example in manufacturing of the technology Augmented reality.
62) Explain and give one example in manufacturing of the technology Virtual Assistants.
63) Explain and give one example in manufacturing of the technology Energy sourcing.
64) Explain and give one example in manufacturing of the technology New sensors.
65) Explain and give one example in manufacturing of the technology Machine learning.
66) Explain and give one example in manufacturing of the technology Biosensors.
67) Explain and give one example in manufacturing of the technology Terahertz .
68) Explain and give one example in manufacturing of the technology Autonomous
robots.
69) Explain and give one example in manufacturing of the technology Brain interface.
70) Explain and give one example in manufacturing of the technology Cognitive
computing.
71) Explain and give one example in manufacturing of the technology Quantum
technologies.
72) Explain and give one example in manufacturing of the technology New graphene
characteristics.

Literature
FACTORY PHYSICS. 2014. FACTORY PHYSICS. Principle (Little's Law). [Online] EZsitePRO, 2014. [Cited:
10 4, 2014.] http://www.factoryphysics.com/Principle/LittlesLaw.htm.

GOLDRATT, Eliyahu M and COX , Jeff. 2004. The goal: a process of ongoing improvement. . Great
Barrington : North River Press, 2004. ISBN 0-88427-178-1.

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MARTINEZ, Felipe. 2016. Slides of the Lectures at the document server. Prague : s.n., 2016.

Practical Performance Analyst. 2014. Practical Performance Analyst. What Is Little’s Law. [Online]
Practical Performance Analyst, 2014. [Cited: 10 4, 2014.]
http://www1.practicalperformanceanalyst.com/resources/important-formulae/what-is-littles-law/.

SLACK, Nigel, CHAMBERS, Stuart and JOHNSTON, Robert. 2010. Operations Management. Harlow :
Financial Times/Prentice Hall, 2010. 978-0-273-73046-0.

SVOBODOVÁ, Hana and MEJDRECH, Vlastimil. 2012. Provozní management: příklady. 2. přeprac.
Praha : Oeconomica, 2012. 978-80-245-1845-9.

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