Operations management

Individual Assignment 6: Chapter 9 and Chapter 10 (Solutions)

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Chapter 9

1. What options are available for altering the capacity of (a) an elementary school, (b) a prison, and (c) an
airline?

Solution
a. Classroom sizes could be expanded, schools could be open longer hours, more days of the week, more
days during the year, or more seasons of the year, students could be bused to less crowded schools,
learning could take place off-site, students could be allowed to advance at their own pace, teaching
could be compressed, and students could attend school in shifts (i.e., morning, afternoon, evening).
b. More prisoners per cell, early release, temporary housing, alternative waking/sleeping hours, reduced
sentences, and alternatives to incarceration are all possibilities.
c. More flights on a certain route, more routes, larger aircraft, and more utilization of aircraft are all
possible.

2. Discuss the advantages and disadvantages of using part-time workers, subcontracting work, and building up
inventory as strategies for meeting demand.

Solution

Part-time workers are very flexible, and they cost less than full-time workers because of fewer benefits,
lower wage rate, etc. However, turnover is high, availability may be a problem, training may be costly or
lengthy, and the quality of work may not be as high or as consistent as with a full-time work force.

Subcontracting can get work out faster, but care must be taken to ensure acceptable quality levels. Also,
trade secrets may be a risk with subcontracting, and over an extended period of time, the company may
lose its ability to perform the subcontracted work.

Inventory is expensive to maintain. It must be moved, sorted, loaded, unloaded, and tracked. Money tied
up in inventory that’s just sitting around could be invested for a higher return. Inventory can “go bad”
through obsolescence, pilferage, or expired shelf life. It’s hard to predict the consumer’s demand
preferences ahead of time, and companies may find themselves stuck with excess inventory.

3. How is the aggregate planning process different when used for services rather than for manufacturing?

Solution
Services typically experience more dramatic demand swings over shorter periods of time. Building and depleting
inventory may not be an option. Demand is difficult to predict, and capacity is not easy to measure. Resources,
however, are more flexible, since most services are labor intensive and most workers are cross trained.

4. Demand for Quiggly Pops (QP) follows an up-and-down pattern over the four quarters of a year, with peaks in
the spring and winter months when special promotions are held. Production is handled by a highly skilled local
workforce during a regular 40-hour week (i.e., overtime and subcontracting are not used). The company likes to
zero out its inventory at the end of a year so that it can start fresh each January. QP currently uses a level
production strategy but would like to evaluate other options. Create a production plan and calculate the cost of
the plan for each strategy listed below. Which plan would you recommend to QP?
a. Level Production
b. Chase Demand
c. Produce 70,000 in period 1, and 100,000 in periods 2 through 4.
d. Produce 90,000 in periods 1 through 3, and 100,000 in period 4.
Quarter Demand Forecast
1 70,000
2 100,000
3 50,000
4 150,000
Beginning workforce = 40 workers
Production per employee = 1,250 units per quarter
Hiring cost = $500 per worker
Firing cost = $500 per worker
Inventory carrying cost = $1 per unit per quarter
Regular production cost = $10 per unit

Solution
a. Input: Beg. Wkrs 40 Regular $10 Hiring $500 Level production
Units/wkr 1250 Inventory $1 Firing $500 Cost: $3,812,000
Beg. Inv. 0

QTR Demand Reg Inv #Wkrs #Hired #Fired

1 70,000 92,500 22,500 74 34 0
2 100,000 92,500 15,000 74 0 0
3 50,000 92,500 57,500 74 0 0
4 150,000 92,500 0 74 0 0
Total 370,000 370,000 95,000 34 0

b. Input: Beg. Wkrs 40 Regular $10 Hiring $500 Chase Demand

Units/wkr 1250 Inventory $1 Firing $500 Cost: $3,780,000
Beg. Inv. 0

QTR Demand Reg Inv #Wkrs #Hired #Fired

1 70,000 70,000 0 56 16 0
2 100,000 100,000 0 80 24 0
3 50,000 50,000 0 40 0 40
4 150,000 150,000 0 120 80 0
Total 370,000 370,000 0 120 40

c. Input: Beg. Wkrs 40 Regular $10 Hiring $500 Mixed

Units/wkr 1250 Inventory $1 Firing $500 Cost: $3,770,000
Beg. Inv. 0 Best solution

QTR Demand Reg Inv #Wkrs #Hired #Fired

1 70,000 70,000 0 56 16 0
2 100,000 100,000 0 80 24 0
3 50,000 100,000 50,000 80 0 0
4 150,000 100,000 0 80 0 0
Total 370,000 370,000 50,000 40 0

d. Input: Beg. Wkrs 40 Regular $10 Hiring $500 Mixed

Units/wkr 1250 Inventory $1 Firing $500 Cost: $3,800,000
Beg. Inv. 0

QTR Demand Reg Inv #Wkrs #Hired #Fired

1 70,000 90,000 20,000 72 32 0
2 100,000 90,000 10,000 72 0 0
3 50,000 90,000 50,000 72 0 0
4 150,000 100,000 0 80 8 0
Total 370,000 370,000 80,000 40 0
5. Complete the available-to-promise table below:

On Hand = 30 Period
1 2 3 4 5 6
Forecast 100 50 100 50 100 50
Customer Orders 75 50 116 73 45 23
Master Production Schedule 100 50 100 50 100 50
Available-to-Promise

Solution

On Hand = 30

ATP in period 1 = ( 30 + 100 ) − 75 = 55 16

ATP in period 2 = ( 50 − 50 ) = 0
ATP in period 3 = 100 − 116 = −16 0
ATP in period 4 = 50 − 73 = −23 0
ATP in period 5 = 100 − 45 = 55
ATP in period 6 = 50 − 23 = 27

Chapter 10

1. What are the objectives, inputs, and outputs of an MRP system?

Solution
The objective of an MRP system is to ensure the availability of material while maintaining the lowest possible
level of inventory. The major inputs to MRP are: the master schedule, the product structure record, and the item
master file. The output from MRP can take the form of work orders, purchase orders, and various reports, such as
planned order reports or action reports.

2. Explain how MRP could be applied to (a) scheduling university classes, (b) a chain of restaurants, and hotel
renovations.
Solution
(a) classes can be scheduled based on a bill of courses for students in a particular major;
(b) food purchases can be exploded from a bill of menu offerings; (c) hotel renovations can be scheduled from a
bill of materials by style of room.
3. Referring to the product structure diagram for product A. Determine the following:
(a) how many Ks are needed for each A,
(b) how many Fs are needed for each A,
(c) the low-level code for item F.

Solution
(a) 213 = 6
(b) (12) + (113) = 5
(c) LLC = 3

4. The Alpha Beta Company produces two products, A and B, that re made from components C and D. Given
the following product structure, master scheduling requirements, and inventory records, determine when orders
should be release for A, B, C, and D and the size of those orders:
Item Oh Hand Scheduled Receipts Lot Size MPS
A 10 0 L4L 100, period 8
B 5 0 L4L 200, period 6
C 140 0 Min 150 -
D 200 250, period 2 Mult 125 -

Solution
Item: A LLC: 0 Period
Lot Size: L4L LT: 3 1 2 3 4 5 6 7 8
Gross Requirements 100
Scheduled Receipts
Projected on Hand 10 10 10 10 10 10 10 10 0
Net Requirements 90
Planned Order Receipts 90
Planned Order Releases 90

Item: B LLC: 0 Period

Lot Size: L4L LT : 2 1 2 3 4 5 6 7 8
Gross Requirements 200
Scheduled Receipts
Projected on Hand 5 5 5 5 5 5 0 0 0
Net Requirements 195
Planned Order Receipts 195
Planned Order Releases 195
Item: C LLC: 1 Period
Lot Size: Min 150 LT: 4 1 2 3 4 5 6 7 8
Gross Requirements 270
Scheduled Receipts 0
Projected on Hand 140 140 140 140 140 20 20 20 20
Net Requirements 130
Planned Order Receipts 150
Planned Order Releases 150

Item: D LLC: 1 Period

Lot Size: Mult 125 LT: 2 1 2 3 4 5 6 7 8
Gross Requirements 585 180
Scheduled Receipts 250 0 0 0
Projected on Hand 200 200 450 450 115 60 60 60 60
Net Requirements 135 65
Planned Order Receipts 250 125
Planned Order Releases 250 125