BUSMBA 550: Operations and Supply Chain Management 125 Points Please provide a response to each of the following questions. Please submit solutions as a pdf, Word file or Excel spreadsheets. In all cases, make sure your answers are nicely displayed and easy for the instructor to locate. Your solutions are due by 11:59 PM on Sunday. PROBLEM 1 (25 Points) DataNet is an Internet service where clients can find information and purchase various items such as airline tickets, stereo equipment, and just about any other consumer product. DataNet has been in operation for four years. Data on monthly calls for service for the time that the company has been in business are in an Excel data file called DataNet. (Download the DataNet file.) In order to have appropriate staffing levels each month, the company wishes to generate a onemonth ahead forecast. Note: Make sure you compute your forecast error terms (MAD, MSE, MAPE) based on periods 4-48. a. Develop a 3-period Moving Average model and provide the forecast for month 49. b. Compute the MAD, MSE, and MAPE for the model developed in part a. c. Develop a linear trend model and provide the forecast for month 49 d. Compute the MAD, MSE, and MAPE for the model developed in part c. e. Determine the optimal smoothing constant for a single exponential smoothing model such that the MAD value is minimized. Discuss this result. What does it actually mean? f. Based on the model developed in part e., indicate what the month 49 forecast value is. g. Compute the MAD, MSE, and MAPE for the model developed in parts e and f. h. Based on the responses to parts a. – g., what forecast would you recommend that DataNet use for period 49? PROBLEM 2 (25 Points) Power Toys, Inc. produces a small remote-controlled toy truck on a worker-paced line consisting of nine work stations with a single worker at each station. Stations and processing times are summarized in the following table: Station Task Processing Time (seconds) 1 2 3 4 5 6 7 8 9 a. b. c. d. e. f. Mount battery units Insert remote control receiver Insert chip Mount front axle Mount back axle Install electric motor Connect motor to battery unit Connect motor to rear axle Mount plastic body 75 85 90 65 70 55 80 65 80 How much time is required to produce a single toy truck? What is the bottleneck in this process? What is the steady state capacity, in toy trucks per hour, of the assembly line? What is the utilization of the worker at work station 2? How long would it take to produce 100 trucks starting with an empty system? The following table shows the projected costs associated with reducing the processing time at each work station in 5 second increments. The theoretical limits on time reduction at each workstation is 20 seconds less than the current processing time (For example, Mount Battery Units could be reduced from 75 seconds to 55 seconds. To make that full reduction, the cost would be $1,600.) Suppose you have $4,500 to invest in improving the throughput of the process. Show the sequence of steps you would take to allocate these funds and at each step show the number of trucks per hour that will be able to be produced. What would your total investment be? g. Station 1 2 3 4 5 6 7 8 9 Task Mount battery units Insert remote control receiver Insert chip Mount front axle Mount back axle Install electric motor Connect motor to battery unit Connect motor to rear axle Mount plastic body 5 Second Reduction Cost $400 $300 $500 $900 $200 $100 $400 $500 $300 PROBLEM 3 (25 Points) OpMan Inc. offers executive training courses on a number of operations management topics. It is presently bidding on a three-year contract for a training course on supply chain management. Training will be provided bimonthly (i.e., twice each month) for the duration of the contract. Currently, OpMan does not have internal expertise in this area. In order to provide the training, should it win the contract, OpMan is considering (1) hiring a full-time person to do the training or (2) contracting out to an independent consultant. A full-time person will cost OpMan $80,000 for the first year, with a 10% annual adjustment for inflation and salary increases. An outside consultant, on the other hand, will charge $5,000 for a one-time preparation fee and $2,000 each time the training is given. a. Based solely on cost argument, which option should OpMan choose? Please show your work. b. What non-cost factors should be considered? Identify at least two such factors PROBLEM 4 (25 Points) Grandfoods, Inc., makes energy supplement bars for use by athletes and others who need an energy boost. One of the critical quality characteristics is the weight of the bars. Too much weight implies that too many liquids have been added to the mix and the bar will be too chewy. If the bars are light, the implication is that the bars are too dry. To monitor the weights, the production manager wishes to use process control charts. Data for 30 subgroups of size 4 bars are contained in the Excel file Grandfoods under the Tab called “Main Data”. Note that a subgroup is selected every 15 minutes as bars come off the manufacturing line. a. Use these data to construct the appropriate process control chart(s). Make sure you clearly label the important information on each chart b. Discuss what each chart is used for. c. Examine the control charts and indicate which, if any, of the out-of-control signals are present. Is the process currently in control? d. Referring to the process control charts developed in part a., data for periods 31 to 40 are contained in the file Grandfoods under the Tab called “New Data”. Based on these data, what would you conclude about the energy bar process? PROBLEM 5 (25 Points) Southwest Airlines was one of the early “low cost” airlines in the industry. Over the years, Southwest has attempted to hold fares down by controlling their costs. To do this, they have done a number of things such as purchasing fuel on the futures market to lock in prices when they thought prices would rise. They also fly just one model plane – Boeing 737 which reduces their maintenance costs because they can standardize on parts and mechanic training. Related to spare parts, the company strives to keep their inventory costs as low as possible. For example, consider tires for their airplanes which according to historical data the company needs 40,000 a year. Because of the tire quality requirements, these tires are expensive costing SW in the range of $2,250 each. Southwest uses a 30 percent carrying cost factor for parts inventory. When SW places an order, they go out to the tire producers with a “reverse auction” where they specify the tire characteristics, number of tires desired, and delivery timing requirements. Tire companies then submit bids to try to win the business. SW supply chain managers like this process for getting tires but it is expensive costing the company about $80,000 each time it goes through this process to place an order. a. Assuming that the lowest bid for tires will be $2,250, what is the number of tires that Southwest should order each time it places an order? b. Referring to your answer in part a., how many orders per year will the company need to make per year if the demand for tires remains at 40,000? c. Referring to parts a. and b., what is the total inventory cost (i.e., setup cost + holding cost) for the inventory plan you have calculated? d. Assuming that demand for tires is steady throughout the 365 day year, and if lead time on getting tires is 11 days, at what inventory level should SW place an order? e. Suppose Southwest could find a quality tire supplier who would deliver tires at $2,300 each in a Just-in-Time manner so that they deliver the exact number of tires needed each day so that SW would not need to carry any inventory. If this could happen, SW believes it’s cost of receiving the tires each day would be $1,000. Would this be an option SW should consider? Discuss both the financial and non-financial aspects of this.
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