Operations Management Midterm

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Question 1: You are designing a grocery delivery business. Via the internet, your company will offer staples and frozen foods in a large metropolitan area and then deliver them within a customer-defined window of time. You plan to partner with two major food stores in the area. What should your competitive priorities be and what capabilities do you want to develop in your own core and support processes?

 

 

 

Is it possible for a project to have more than one critical path? Discuss the implications of such a situation with respect to each of the following aspects:

 

 

 

  1. Project risk
  2. Total available slack
  3. Resource dependencies
  4. Responsibilities of the project manager

 

Question 2: A flowchart helps us see all of the steps in a process, which in turn helps us improve the process. It also helps us identify and eliminate any redundant steps in a process. Using Word tools (SmartArt under the Insert tab), design a process flow chart for the grocery delivery business in Question 1 above. In the discussion element of your response, clearly define the steps within the process and provide a rationale for each step. Include all elements that you feel are necessary and appropriate to the process of a singular customer. The assumption is that the process is repeatable for every customer using the service. Think of the elements that you will be addressing or answering in the succeeding questions.

 

Question 3: For the grocery delivery business addressed in Question 1, the grocery chains that you are planning to partner with use differing inventory control models. Company A utilizes the Just-in-Time (JIT) inventory control model and Company B uses an Economic Order Quantity model. In reviewing your business plan, the bank loan officer has noticed this. As the loan officer is not overly familiar with either model, a request has been made of you to provide a description of each model and an explanation of why partnering with these companies would or would not create a conflict within your operations. Provide a detailed analysis of the situation in your business model.

 

 

 

Question 4: A Quality Assurance (QA) Program is essential to the success of any business.In establishing your grocery delivery business, what are some of the Quality Control (QC) processes that you envision employing? Why? Provide examples of potential metrics. Justify your choices.

 

 

 

Question 5: Efficiency is a critical element both in terms of individuals and machinery in any business. Describe some efficiency measures that you would implement in your grocery delivery business. What are the analysis tools that you would utilize to determine the effectiveness of these efficiency measures?

 

 

 

Problem 1

 

Tried and True Clothing has opened four new stores in college towns across the state. Data on monthly sales volume and labor hours are given below. Which store location has the highest labor productivity?

 

Store Annandale Blacksburg Charlottesville Danville
Sales volume $40,000 $12,000 $60,000 $25,000
Labor hours     250      60     500     200

 

 

 

Problem 2

 

Construct a Gantt chart for the project described by the following set of activities, and indicate the project completion time:

 

Activity Activity Predecessor Time (Weeks)
1 — 5
2 — 4
3 1 3
4 2 6

 

 

 

 

 

Problem 3

 

Backwoods American, Inc., produces expensive water-repellent, down-lined parkas. The company implemented a total quality-management program in 2005. Following are quality-related accounting data that have been accumulated for the five-year period after the program’s start. Please calculate failure costs as a percentage of total quality cost for each year in which the data is provided. Is there a trend.

 

  Year
  2006 2007 2008 2009 2010
Quality Costs (000s)          
Prevention $3.2 10.7 28.3 42.6 50.0
Appraisal 26.3 29.2 30.6 24.1 19.6
Internal failure 39.1 51.3 48.4 35.9 32.1
External failure 118.6 110.5 105.2 91.3 65.2
Accounting Measures (000s)          
Sales $2,700.6 2,690.1 2,705.3 2,310.2 2,880.7
Manufacturing cost 420.9 423.4 424.7 436.1 435.5

 

 

 

Problem 4

 

AV City stocks and sells a particular brand of laptop. It costs the firm $625 each time it places an order with the manufacturer for the laptops. The cost of carrying one laptop in inventory for a year is $130. The store manager estimates that total annual demand for the laptops will be 1500 units, with a constant demand rate throughout the year. Orders are received within minutes after placement from a local warehouse maintained by the manufacturer. The store policy is never to have stockouts of the laptops. The store is open for business every day of the year except Christmas Day. Determine the following:

 

 

 

a. Optimal order quantity per order

 

b. Minimum total annual inventory costs

 

c. The number of orders per year

 

d. The time between orders (in working days)

 

 

 

Problem 5

 

The Great North Woods Clothing Company sells specialty outdoor clothing through its catalog. A quality problem that generates customer complaints occurs when a warehouse employee fills an order with the wrong items. The company has decided to implement a process control plan by inspecting the ordered items after they have been obtained from the warehouse and before they have been packaged. The company has taken 30 samples (during a 30-day period), each for 100 orders, and recorded the number of defective orders in each sample, as follows:

 

Sample Number of Defectives Sample Number of Defectives
 1 12 16  6
 2 14 17  3
 3 10 18  7
 4 16 19 10
 5 18 20 14
 6 19 21 18
 7 14 22 22
 8 20 23 26
 9 18 24 20
10 17 25 24
11  9 26 18
12 11 27 19
13 14 28 20
14 12 29 17
15  7 30 18

 

Construct a @uni:href-chart for the company that describes 99.74% (3σ) of the random variation in the process, and indicate if the process seems to be out of control at any time.

 

 

 

Problem 03-02.

 

The Road King Tire Company in Birmingham wants to monitor the quality of the tires it manufactures. Each day the company quality-control manager takes a sample of 100 tires, tests them, and determines the number of defective tires. The results of 20 samples have been recorded as follows:

 

 

 

Sample Number of Defectives Sample Number of Defectives
 1 14 11 18
 2 12 12 10
 3  9 13 19
 4 10 14 20
 5 11 15 17
 6  7 16 18
 7  8 17 18
 8 14 18 22
 9 16 19 24
10 17 20 23
 

 

Construct a @uni:href-chart for this process using @uni:hreflimits and describe the variation in the process.

 

 

 

Problem 03-06.

 

One of the stages in the process of making denim cloth at the Southern Mills Company is to spin cotton yarn onto spindles for subsequent use in the weaving process. Occasionally the yarn breaks during the spinning process, and an operator ties it back together. Some number of breaks is considered normal; however, too many breaks might mean that the yarn is of poor quality. In order to monitor this process, the quality-control manager randomly selects a spinning machine each hour and checks the number of breaks during a 15-minute period. Following is a summary of the observations for the past 20 hours:

 

 

 

Sample Number of Breaks Sample Number of Breaks
 1 3 11 3
 2 2 12 4
 3 4 13 6
 4 1 14 7
 5 5 15 8
 6 3 16 6
 7 2 17 5
 8 4 18 7
 9 0 19 8
10 2 20 6
 

 

Construct a @uni:href-chart using @uni:hreflimits for this process and indicate if the process was out of control at any time.

 

 

 

Problem 13-06.

 

The Ambrosia Bakery makes cakes for freezing and subsequent sale. The bakery, which operates five days a week, 52 weeks a year, can produce cakes at the rate of 116 cakes per day. The bakery sets up the cake-production operation and produces until a predetermined number has been produced. When not producing cakes, the bakery uses its personnel and facilities for producing other bakery items. The setup cost for a production run of cakes is $700. The cost of holding frozen cakes in storage is $9 per cake per year. The annual demand for frozen cakes, which is constant over time, is 6000 cakes. Determine the following:

 

 

 

a. Optimal production run quantity (Q)

 

b. Total annual inventory costs

 

c. Optimal number of production runs per year

 

d. Optimal cycle time (time between run starts)

 

e. Run length in working days.

 

 

 

Problem 13-20.

 

Southwood Furniture Company is a U.S.-based furniture manufacturer that offshored all of its actual manufacturing operations to China about a decade ago. It set up a distribution center in Hong Kong from which the company ships its items to the United States on container ships. The company learned early on that it could not rely on local Chinese freight forwarders to arrange for sufficient containers for the company’s shipments, so it contracted to purchase containers from a Taiwanese manufacturer and then sell them to shipping companies at the U.S. ports the containers are shipped to. Southwood needs 715 containers each year. It costs $1200 to hold a container at its distribution center, and it costs $6000 to receive an order for the containers. Determine the optimal order size, minimum total annual inventory cost, number of annual orders, and time between orders.