CaliforniaStatePolytechnicUniversity,Pomona

CollegeofBusinessAdministration

OPERATIONSMANAGEMENT(TOM301)
*HOMEWORK1*

Instructor:ThangNguyen
Section:TOM30102(33110)
Part1 Format:anonlinetestof25multiplechoicequestions(2pointsforeachquestion)

Due:04/19/2016@7:00AMonBlackboard
Part2 Format:5problemsolvingquestions,writings&printoutsononesidedletterpapers

Due:04/21/2016@10:00AMinclass
Score:0100points(50pointsforPart1;50pointsforPart2)
Textbooks:

OM5Collier&Evans,OperationsManagement,Fifthedition(Cengage,2014)

SUPCachon&Terwiesch,MatchingSupplywithDemand:AnIntroductiontoOperations
Management,ThirdEdition(McGrawHill,2012)

PART1(50points)
1)Thisisanonlinetestof25multiplechoicequestions(Questions125).Thelinktothetestis
inBlackboard>TOM301.02>Assignments>Homework1.
2)Beforetakingthetest,youneedtoreadthefollowingmaterials(slides&OM5chapters):
Module01IntroductiontoOperationsManagement(OM5C01)
Module02OverviewofValueChains(OM5C02)
Module03TheProcessViewoftheOrganization(OM5C07)
Module04CapacityManagement(OM5C10)
3)Afterstartingthetest,youcansaveandresumeitlater.Beforetheabovedeadline,youneed
tohit"SaveandSubmit"foryourtesttobeeligible.Thistestcanonlybetakenonce!

PART2(50points)
1)Part2has5problemsolvingquestions(Questions2630).Itisacombinationofyourwritten
workandprintouts.Part2shouldbeginwiththefollowinginformation:
*Studentname:
*StudentIDnumber:
*Course:OperationManagement(TOM301)
*Section:TOM30102(33110)
*Document:Homework1Part2
2)Youneedtogiveequations,calculations,results,statements,andExcelprintoutsifasked.
3)Pleasestapleallloosepapersintoonepackage.
4)Numbersinsquarebracketsspecifycreditpoints.
5)YoumaywanttocheckyourmanualcalculationsagainstExcelresults.
6)Thispartislargelybasedonthesupplementalmaterials(slides&SUPchapters):
Module03TheProcessViewoftheOrganization(SUPC02)
Module04CapacityManagement(SUPC03)
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QUESTION26(10points)ProducingorOutsourcing
Abankisconsideringtwoalternativesforhandlingaprojectednumberof5,000,000service
callsintotalforthenext5years.IfthebanksetsupitsownservicecallcenterintheU.S.,the
fixedcostisestimatedtobe$2,000,000,whichwillbeincurredinthefirstyear;andthevariable
costiscalculatedtobe20centspercall.Ifthecallserviceisoutsourcedtoaforeigncompany,
theunitchargewouldbe50centspercall.
(a)[2]Whatisthebreakevennumberofservicecalls?
(b)[2]Drawadiagramrepresentingtheinhouseandoutsourcingtotalcostswhicharefunctions
ofthenumberofservicecalls.
(c)[3]Wouldthebanksetupitsownservicecallcenteroroutsourceservicecallhandlings?
Explainwhythebankwoulddothat.
(d)[3]Iftheprojectednumberofservicecallsis10,000,000forthenext5years,wouldthebank
changeitsdecisioninpart(c)?Ifyes,explain.

QUESTION27(10points)MultipleStagesandLittle'sLaw
Anonlineuniversityhasastablestudentpopulationof20,000overtheyears.Theuniversity
offersmodularcoursesandcurriculasuchthatalltracksofmajorsandconcentrationshavethe
followingsequentialstageswiththeircorrespondingdesigneddurations:

Stage1Generaleducationcourses(6months)

Stage2Foundationcourses(9months)

Stage3Majorcourses(18months)

Stage4Concentrationcourses(15months)
Newstudentscanenrollatanytimeduringtheyear,giventhattheymeetsomeentrance
requirements.Afterenrolling,studentscanchoosetheirtracksandstarttakingonlinecourses.
Studentscanchoosetodropoutatanytimeastheywish.Allofthismeansthateachstudent
canhavehisorherownstartandenddates.
Statisticsshowthat,onaverage,studentsspendtimeonthefourstagesasmuchasthe

designeddurations.Inaddition,atanypointintime,theaveragenumberofstudentsinthefirst
stageis2,650;inthesecondstage3,852;inthethirdstage7,383;andinthefourthstage6,115.
Inthefourthstage,thirtystudentsdropoutonaverage;andtheremainingstudentsgraduate.

Theretentionrateateachstageistheproportionofstudentswhofinishthestageand
moveontothenextoneorgraduate.Theretentionratesdonotonlyaffectrevenuesbutalso
theuniversity'srankings.Theuniversity'spresidentobservestheretentionratescloselyand
takesactionsiftherearesignsofdecliningretentionrates.
(a)[2]Drawaprocessflowdiagramshowinghowstudentsmovethroughdifferentstages.Make
suretohaveprocessboundariesinthediagram.Becauseeverythingcanbedoneonline,thereis
nowaitingtimebetweenstages.
(b)[2]Whatistheaveragenumberofnewenrollmentseveryyear?
(c)[1]WhatistheretentionrateofStage1?(%,2decimals)
(d)[1]WhatistheretentionrateofStage2?(%,2decimals)
(e)[1]WhatistheretentionrateofStage3?(%,2decimals)
(f)[1]WhatistheretentionrateofStage4?(%,2decimals)
(g)[2]Whatistheproportionofnewlyenrolledstudentswhowouldgraduate?(%,2decimals)

QUESTION28(10points)InventoryTurnsandInventoryCosts
WeareinterestedincomparingTheHomeDepot,Inc.andLowe'sCompanies,Inc.,thetwo
giantretailersinhomeimprovementandconstructionproductsandservices,intermsoftheir
inventoryturnsandinventorycosts.
(a)[2]Youneedtofindofficialcorporatedatafor2015tofillinthefirstpartofthetablebelow.
Specifically,youneedtolocateannualreportsand10Kfillingsfor2015asfollows:
TheHomeDepot,Inc.:http://corporate.homedepot.com/
Lowe'sCompanies,Inc.:http://www.lowes.com/andfind"InvestorRelations"
Assumethattheaverageannualinventoryholdingcostrateis25%forbothcompanies;there
are365daysofoperationsayear;andpriceandinventoryturnsareindependent.Notethatyou
cancalculategrossprofitsandgrossprofitmarginsfromrelevantdata.Forthefollowingparts,
showequationsandcalculations,andfillthefinalresultsinthetable.
Part1Indicatorsin2015
HomeDepot
Lowe's
Endoffiscalyear(date)

Netsales(millionsof$)

Grossprofit(millionsof$)

COGS(millionsof$)

MerchandiseInventory(millionsof$)

Grossprofitmargin(%,2decimals)

Annualinventorycost(%,2decimals)

Part2InventoryTurns
HomeDepot
Lowe's
Inventorystay(days,2decimals)

Inventoryturns(turnsperyear,2decimals)

Part3InventoryCosts
HomeDepot
Lowe's
Acordlessdrill($)
100.00
100.00
Perunitinventorycostrate(%,2decimals)

Perunitinventorycost($)

Perunitinventorycostdifference(LowesHomeDepot,$)
Perunitgrossprofit($)

PerunitgrossprofitminusPerunitholdingcost($)

(b)[2]Whatistheaveragenumberofdaysthataproducttypicallystaysinthetwocompanies'
inventoriesuntilbeingsold?(2decimals)
(c)[1]Whataretheinventoryturnsayearatthesetworetailers?(2decimals)
(d)[1]Whataretheperunitinventorycostratesatthetwocompanies?(%,2decimals)
(e)[2]Regardingequivalentcordlessdrillswiththesameunitcostof$100,whichretailerhasthe
lowerperunitinventorycostandbyhowmuch?(Dollaramounts)
(f)[2]Findtheaveragegrossprofitonaninventorymerchandiseinvestmentof$100.Usingyour
resultinpart(e),findtheaveragegrossprofitnetofinventoryholdingcostof$100.Regarding
thelatter(net)indicator,whichcompanyhasthehighervalue?

QUESTION29(10points)ProcessAnalysiswithOneFlowUnitType
Aprocesswithoneflowunittypehasfourresourcesasinthetablebelow.
(a)[1]Whatisthebottleneck?
(b)[1]Whatistheprocesscapacity?
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Forparts(c)(e),assumeinput=16units/houranddemand=18units/hour.
(c)[1]Determinewhatconstrained.Findtheflowrate.
(d)[1]Findutilizationforallresourcesandtheprocess.Drawtheutilizationprofile.
(e)[1]Findimpliedutilizationforallresources.Drawtheimpliedutilizationprofile.
Forparts(f)(h),assumeInput=25units/houranddemand=24units/hour.
(f)[1]Determinewhatconstrained.Findtheflowrate.
(g)[1]Findutilizationforallresourcesandtheprocess.Drawtheutilizationprofile.
(h)[1]Findimpliedutilizationforallresources.Drawtheimpliedutilizationprofile.
(i)[2]Implementparts(a)(h)inExcel.Giveaprintout.Youcanusethefollowingformat:
Resource&Process
1
2
3
4
Process
Processingtime(minutes/unit)
5
8
12
15

Numberofworkers
2
3
4
6

Capacity(units/hour)

Input=16units/hour&demand=18units/hour
Input(units/hour)
16

Demand(units/hour)
18
18
18
18
18
Flowrate(units/hour)

Utilization(%,2decimals)

Impliedutilization(%,2decimals)

Input=21units/hour&demand=24units/hour
Input(units/hour)
21

Demand(units/hour)
24
24
24
24
24
Flowrate(units/hour)

Utilization(%,2decimals)

Impliedutilization(%,2decimals)

QUESTION30(10points)ProcessAnalysiswithMultipleFlowUnitTypes
Aprocessiscomposedof5resourcesworkingonproductsA,B,andCforeighthoursaday.The
tablebelowsummarizesthesituation.Onthesupplyside,weknowhowmanyworkersarein
chargeofeachresource,andprocessingtime,minutesperunit,foreachproductateach
resource.Zeroprocessingtimemeansthecorrespondingproductdoesnotgothroughthe
correspondingresource.Onthedemandside,weknowdemandsforproductsA,B,andCper
day,andthefixedproductmixofA:B:C=4:5:3.Assumethatinputsarealwayssufficient.
(a)[2]Drawaprocessflowdiagramoftheprocess,assumingthattherearebuffersinbetween
resources.Makesuretohaveprocessboundaries.
Chooseaminuteofworkasthecommonflowunitforallproductsandresources.Inthe
followingparts,explainhowyouwouldproceed,implementyourcalculationsinExcel,andfill
thefinalresultsinthetable.
(b)[1]Findtwomeasuresofcapacityforeachresourceasinthetable.
(c)[1]Findtotalworkloadoneachresource.
(d)[1]Findimpliedutilizationofallresources.Drawtheimpliedutilizationprofile.
(e)[1]Findthebottleneckandthedemandacceptanceratio(1/IUofthebottleneck).
(f)[1]Basedonthedemandacceptanceratio,findtheeffectiveflowratesofA,B,andC.Explain.
(g)[1]FindtotaleffectiveworkloadandeffectiveIUoneachresource.
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(h)[1]Findutilizationofallresources.Drawtheutilizationprofile.
(i)[1]Processanalysisisfordesigningandimprovingbusinessprocesses!Bylookingatthe
impliedutilizationandutilizationprofiles,proposeonewaytoreallocateworkersamong
resources,whichcanincreasetheflowratesofproductsA,B,andC.Youshouldtryreallocating
workersinyourExcelimplementation.
Resource&Process
1
2
3
4
5
Numberofworkers
3
4
2
3
5
ProcessingtimeforA(minutes/unit)
4
10
0
0
10
ProcessingtimeforB(minutes/unit)
5
4
6
0
9.4
ProcessingtimeforC(minutes/unit)
4
5
0
8
11
Capacity
Capacity(minutes/hour)

Capacity(minutes/day)(8hours/day)

Demand,Workload,&ImpliedUtilization
DemandforA(units/day)
120
120
0
0
120
DemandforB(units/day)
150
150
150
0
150
DemandforC(units/day)
90
90
0
90
90
WorkloadonA(minutes/day)

WorkloadonB(minutes/day)

WorkloadonC(minutes/day)

Totalworkload(minutes/day)

Impliedutilization(%,2decimals)

FlowRate&Utilization
FlowrateofA(units/day)

FlowrateofB(units/day)

FlowrateofC(units/day)

EffectiveworkloadonA(minutes/day)

EffectiveworkloadonB(minutes/day)

EffectiveworkloadonC(minutes/day)

Totaleffectiveworkload(minutes/day)

EffectiveIU(%,2decimals)

Utilization(%,2decimals)