Washburn University School of Business

Spring 2006 BU 347: Production / Operations Management

Instructor: Bill Roach Student Name ____________________________
Exam 2A

Fill Ins
Fill in the appropriate terms for the definitions given below.

1. ______________________________ any instance when a process fails to satisfy its

customer.
2. ______________________________ a philosophy that stresses three principles for
achieving high levels of process performance and quality: customer satisfaction, employee
involvement, and continuous improvement in performance .
3. _______________________________ the purely random, unidentifiable sources of
variation that are unavoidable with the current process .
4. ________________________________ a chart used to monitor process variability.
5. ___________________________________ the degree to which equipment, space, or
labor is currently being used.
6. _________________________________ the amount of reserve capacity that a
process has to handle sudden increases in demand or temporary losses of production
capacity; it measures the amount by which the average utilization (in terms of total
capacity) falls below 100 percent
7. _________________________________ the time required to change a machine from
making one service or product to making another
8. _________________________________ the difference between the flows of funds into
and out of an organization over a period of time, including revenues, costs, and changes in
assets and liabilities
9. ________________________________ a statement of all work that has to be
completed
10. ________________________________ a network planning method developed in the
1950s as a means of scheduling maintenance shutdowns at chemical-processing plants
11. ________________________________ the sequence of activities between a project's
start and finish that takes the longest time to complete
12. ________________________________ the maximum length of time that an activity
can be delayed without delaying the entire project
13. ________________________________ the design of a firm's customer relationship,
order fulfillment, and supplier relationship process and the synchronization of these
processes with the key processes of its suppliers and customers in order to match the flow
of services, ;materials, and information
14. ________________________________ the items in manufacturing plants,
warehouses, and retail outlets that are sold to the firm's customers
15. ________________________________ the phenomenon in supply chains whereby
ordering patterns experience increasing variance as you proceed upstream in the chain
16. ________________________________ the awarding of a contract for a service or item
to only one supplier
17. ________________________________ the description of businesses' deployment of
facilities and operations around the world
18. ________________________________ solution guidelines, or rules of thumb, that find
feasible-but not necessarily the best- solutions to problems
 19. ________________________________ a situation whereby several competing firms
clustered in one location attract more customers than the total number who would shop at
the same stores at scattered locations
20. ________________________________ a factor that considers the availability of good
schools, recreational facilities, cultural events, and an attractive lifestyle

Word Bank

Activity, Assignable Causes of Variation, Attributes, Bullwhip Effect, Capacity Cushion,

Cash Flow, Common Causes of Variation, Critical Mass, Critical Path, Critical Path
Method (CPM), Defect, Distribution, Earliest Finish Time (EF), Finished Goods (FG),
Globalization, Heuristics, P-Chart, Prevention Costs, Quality Circles, Quality of Life, R-
Chart, Setup Time, Slack, Sole Sourcing, Statistical Process Control (SPC), Supply Chain
Management, Total Quality Management (TQM), Utilization, Work Breakdown
Structure
Process Analysis

Inputs
Solver - Process Charts
Enter data in yellow shaded areas.

Process: Pr 5-11 Making One Ice Cream Cone Summary

Subject: Server at the Counter
Time
Number of Distance
Beginning: Walk to the cone storage area Activity
Steps
(min
(ft)
)

Ending: Give cone to server or customer 6 1.70

Operation

6 0.80 31
Transport

Inspect 1 0.25

1 0.50
Delay

Store -- --

Step Time Distance

No. (min) (ft)
INSP Step Description
OP TRAN DELAY STORE
1 0.20 5.0   x       Walk to cone storage area
2 0.05   x         Remove empty cone
3 0.10 5.0   x       Walk to counter
4 0.05   x         Place cone in holder
5 0.20 8.0   x       Walk to the sink area
6 0.50         x   Ask dishwasher to wash scoop
7 0.15 8.0   x       Walk to counter with clean scoop
8 0.05   x         Pick up empty cone
9 0.10 2.5   x       Walk to flavor ordered
10 0.75   x         Scoop ice cream from container
11 0.75   x         Place ice cream in cone
12 0.25       x     Check for stability
13 0.05 2.5   x       Walk to order placement area
14 0.05   x         Give server or customer the cone
15                
16                
a) Show how the total distance traveled is calculated.

b) How much time would be eliminated by placing the ice cream scoop in a bucket
of water? Hint: The attendant would not have to perform any of the steps
involved in washing the scoop.

c) Which steps involve a delay?

d) How would this chart change if the ice cream shop went to softserve, that is, no
scoops and fewer variaties of ice cream?
 e) Statistical Process Control
The Watson Electric Company produces incandescent light bulbs. The following data on
the number of lumens for 40-watt light bulbs were collected when the process was in
control.
Statistical Process Control
Observation
Sample 1 2 3 4 xbar range
1 604 612 588 600 601 24
2 597 601 607 603 602 10
3 581 570 585 592 582 22
4 620 605 595 588 602 32
5 590 614 608 604 604 24
xbarbar 598.2
rbar 22.4

Sample
Size A2 D3 D4
2 1.880 0 3.267
4 0.729 0 2.282
5 0.577 0 2.115
10 0.308 0.223 1.777

UCLxbar 614.5
LCLxbar 581.9
UCLr 51.1
LCLr 0

Explain the circled calculations. Your explanation should include both formulas and
numbers.

Construct the r-chart and explain whether the process is in control.

Theory of Constraints
Tuff Rider, Inc. manufactures touring bikes and mountain bikes in a variety of frame
sizes, colors, and component combinations. Identical bicycles are produced in lots of
100. The projected demand, lot size, and time standards are shown in the following table.

Item Touring Mountain

Demand Forecast 5,000 units / year 10,000 units / year
Lot Size 100 units 100 units
Standard Processing Time ¼ hour / unit ½ hour / unit
Standard Setup Time 2 hour / lot 3 hour / lot

The shop currently works eight hours a day, five days a week, 50 weeks per year. It
has 5 workstations, each producing one bicycle in the time shown in the table. The
shop maintains a 15 percent capacity cushion. Explain how the circled figures in the
capacity analysis below were calculated.

Solver - Capacity Requirements

Enter data in yellow shaded areas.

Shifts/Day 1 Components 2
Hours/Shift 8
Days/Week 5 More Components
Weeks/Year 50 Fewer Components
Cushion (as %) 15%
Current capacity 5

Processing Setup Lot Size Demand Forecasts

Components (hr/unit) (hr/lot) (units/lot) Pessimistic Expected Optimistic
Touring Bikes 0.25 2.0 100   5,000  
Mountain Bikes 0.50 3.0 100   10,000  

Productive hours from

one capacity unit for a year 1,700

Pessimistic Expected Optimistic

Process Setup Process Setup Process Setup
Touring Bikes 0 0.0 1,250 100.0 0 0.0
Mountain Bikes 0 0.0 5,000 300.0 0 0.0
0 0.0 6,250 400.0 0 0.0
Total hours required 0.0 6,650.0 0.0

Total capacity requirements (M) 0.00 3.91 0.00

Rounded 0 4 0
Supply Chain Management
A firm’s cost of goods sold last year was $3,410,000, and the firm operates 52 weeks per
year. It carries seven items in inventory, three raw materials, two work-in-process items
and two finished good items. The following table last year’s average inventory level for
each item, along with its value.

Cost of Goods Sold $3,410,000

Weeks of Operation 52

Item Average
Number Level Unit Value Total Value
Raw Materials 1 15,000 $3.00 $45,000
  2 2,500 $5.00 $12,500
  3 3,000 $1.00 $3,000
        $0
        $0
Work in Progress 4 5,000 $14.00 $70,000
  5 4,000 $18.00 $72,000
        $0
        $0
        $0
Finished Goods 6 2,000 $48.00 $96,000
  7 1,000 $62.00 $62,000
        $0
        $0
        $0
Total $360,500

Average Weekly Sales at Cost $65,577

Weeks of Supply 5.5

Inventory Turnover 9.5

Show how the circled figures are calculated and explain their meaning if appropriate.
Location Decisions
Fall Line, Inc. is a Great Falls, Montana manufacturer of a variety of downhill skis. Fall
Line is considering four locations for a new plant: Aspen, Colorado; Medicine Lodge
Kansas; Broken Bow, Nebraska; and Wounded Knee, South Dakota. Annual fixed
costs and variable cost per pair of skis are show in the following table.
Explain how the circled figures are calculated and their meaning if appropriate.

Annual Variable
Location Fixed Costs Cost / Pair
$
Aspen 8,000,000 250
$
Medicine Lodge 2,400,000 130
$
Broken Bow 3,400,000 90
$
Wounded Knee 4,500,000 65

Costs
Medicine Broken Wounded
Volume Aspen Lodge Bow Knee
- 8,000,000 2,400,000 3,400,000 4,500,000

5,000 9,250,000 3,050,000 3,850,000 4,825,000

10,000 10,500,000 3,700,000 4,300,000 5,150,000

15,000 11,750,000 4,350,000 4,750,000 5,475,000

20,000 13,000,000 5,000,000 5,200,000 5,800,000

25,000 14,250,000 5,650,000 5,650,000 6,125,000

30,000 15,500,000 6,300,000 6,100,000 6,450,000

35,000 16,750,000 6,950,000 6,550,000 6,775,000

40,000 18,000,000 7,600,000 7,000,000 7,100,000

45,000 19,250,000 8,250,000 7,450,000 7,425,000

50,000 20,500,000 8,900,000 7,900,000 7,750,000

Medicine Lodge - Broken Bow Breakeven 25,000

Wounded Knee - Broken Bow Breakeven 44,000

See graph on next page.

 Crossover Anallysis

25,000,000

20,000,000

15,000,000 Aspen
Medicine Lodge
Cost

Broken Bow
10,000,000 Wounded Knee

5,000,000

0
10,000
20,000
30,000
40,000
50,000
-

Volume