[BUS002] Operations Management

Individual Report (80%)

In this report, you are required to answer ALL FIVE QUESTIONS. Your answers are to

be presented in a single report format, and in answering these questions, please • state and explain all assumptions, on which your answers are based; • support any answers with the appropriate calculations to arrive at the answer.

While each individual answer might have a different word count from the others,

the overall word count should not exceed 2,000 (+ or – 10%) words excluding

calculations (numbers and equations, etc.).

Q1. (20%) A production operation is making 150 units of a product by engaging five workers for 300 hours. However, 40 percent of the units appear to have various quality problems, and the company decides to sell them as seconds at a price of £50 each when a normal unit is sold for £150. To improve the situation, several initiatives are proposed, including a scheme where, for every improvement, 50 percent will be given to workers and the other 50 percent will be held by the company. This results in a

significant drop in defects as now only 10 units are faulty out of an output of 130 units. a) Compare the productivity after Bonus with the initial productivity. (10%) b) Determine the appropriate bonus per hour for the workers under the bonus scheme if the cost per piece is £70 both before and after the scheme. (10%)

[BUS002] Operations Management Dr Eun-Seok Kim

Q2. (20%) As the Cottrell Bicycle Co. of St. Louis completes plans for its new assembly line, it identifies 25 different tasks in the production process. VP of Operations Jonathan Cottrell now faces the job of balancing the line. He lists precedences and provides time estimates for each step based on work-sampling techniques. His goal is to produce 1,000 bicycles per standard 40-hour workweek.

Task Time (sec)

Immediate Predecessors

Task Time (sec)

Immediate Predecessors K3 60 – E3 109 F3 K4 24 K3 D6 53 F4 K9 27 K3 D7 72 F9, E2, E3 J1 66 K3 D8 78 E3, D6 J2 22 K3 D9 37 D6 J3 3 – C1 78 F7 G4 79 K4, K9 B3 72 D7, D8, D9, C1 G5 29 K9, J1 B5 108 C1 F3 32 J2 B7 18 B3 F4 92 J2 A1 52 B5 F7 21 J3 A2 72 B5 F9 126 G4 A3 114 B7, A1, A2 E2 18 G5, F3

a) Balance this operation using shortest operation time rule and compute the ef

ficiency of the line. (10%) b) Discuss how this balance could be improved. Is it possible to improve this balance to 100%? (10%)

[BUS002] Operations Management Dr Eun-Seok Kim

Q3. (20%) Thomas Smith is the purchasing manager for the headquarters of a large insurance company chain with a central inventory operation. Thomas’s fastest-moving inventory item has a daily demand of 24 units. The cost of each unit is £100, and the inventory carrying cost is £10 per unit per year. The average ordering cost is £30 per order. It takes about 5 days for an order to arrive, and there are 250 working days per year. a) To minimize the cost, how many units should be ordered each time an order is placed? What is the total annual inventory cost, including the cost of the units?

(10%) b) Even if there is substantial uncertainty in the parameters in the EOQ-model, it is still quite a useful model. Discuss why. (10%)

Q4. (20%) Emery Pharmaceutical uses an unstable chemical compound that must be kept in an environment where both temperature and humidity can be controlled. Emery uses 200 pounds per month of the chemical, estimates the holding cost to be £3.33 (because of spoilage), and estimates order costs to be £10 per order. The cost schedules of four suppliers are as follows:

Vendor 1 Vendor 2 Quantity Price/LB (£) Quantity Price/LB (£) 1-49 35.00 1-74 34.75 50-74 34.75 75-149 34.00 75-149 33.55 150-299 32.80 150-299 32.35 300-499 31.60 300-499 31.15 500+ 30.50 500+ 30.75 Vendor 3 Vendor 4 Quantity Price/LB (£) Quantity Price/LB (£) 1-99 34.50 1-199 34.25 100-199 33.75 200-399 33.00 200-399 32.50 400+ 31.00 400+ 31.10

a) What quantity should be ordered, and which supplier should be used? (10%) b) Discuss factor(s) should be considered besides total cost. (10%)

[BUS002] Operations Management Dr Eun-Seok Kim

Q5. (20%) A process considered to be in control measures an ingredient in ounces. A quality inspector took 10 samples, each with 5 observations as follows:

Samples

Observations 1 2 3 4 5 1 10 9 10 9 12 2 9 9 11 11 10 3 13 9 10 10 9 4 10 10 11 10 10 5 12 10 9 11 10 6 10 10 8 12 9 7 10 11 10 8 9 8 13 10 8 10 8 9 8 8 12 12 9 10 10 12 9 8 12

a) Using this information, obtain three-sigma (i.e., z=3) control limits for a mean control chart and control limits for a range chart, respectively. It is known from previous experience that the standard deviation of the process is 1.36. (10%) b) Discuss whether the process is in control or not. (10%)