BUAD 311 Practice Problem Set 1 Solution PDF

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USC Marshall School of Business BUAD 311 Operations Management

Practice Problem Set #1

Practice Problem Set #1: Process Analysis and Capacity Management Solutions 1. Dello is a world-class PC company. Ideally, Dello’s customer service department wants to handle all the customer phone calls. During peak hours, however, Dello receives so many customer calls that they ask an outsourcing company, Telemate, to help handle incoming calls. Dello’s switchboard system is programmed in the following way. A customer calls Dello at its 1-800 number. If there are 14 or less callers in the system waiting to speak with one of the customer service representatives, then the call stays within Dello’s system and the customer inquiry will be answered by a Dello customer service representative. If, on the other hand, there are 15 or more calls waiting within Dello’s system, then the incoming call is forwarded to Telemate, and the call will be answered by a Telemate agent. Draw a process flow diagram for Dello’s customer service call handling process.

Call arrives

15 or more callers waiting?

No

Yes Telemate agent handles call

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Callers on hold for Dello agent

Dello agent handles call

USC Marshall School of Business BUAD 311 Operations Management

Practice Problem Set #1

2. Getaway is a computer company known for mass customization. Its secret is to always maintain an inventory of base models, and to offer its customers add-on options. The process is as follows. The first step is receiving the order. After receiving an order, the order is checked for add-ons. If needed, add-ons are added to the base model. (Note that base models are held in inventory). Then the computer is packed, and finally shipped. Draw a process flow diagram for the above process. Customer places order

Base models

No Need add-on or not

Pack

Ship

Yes Add add-ons Note: You can also include triangles for add-on parts inventory and work-in-process between packing and shipping.

3. At Spotted Cow Coffee Shop, one cashier can take 30 orders per hour and one skilled worker can prepare 20 orders per hour. Assume that the cashier and the worker are not cross-trained. a. Suppose that there are only one cashier and one worker. What is the capacity of Spotted Cow? Which resource is the bottleneck? Explain. The worker is the bottleneck as she gets done the smallest amount of job in an hour. The capacity of Spotted Cow is 20 orders per hour, which is decided by the bottleneck.

b. Suppose that Spotted Cow hires one more skilled worker who can also prepare 20 orders per hour. What is the capacity of Spotted Cow? Which resource is the bottleneck? Explain. The two skilled workers can prepare in 40 orders per hour. The cashier is the bottleneck now as she can take at most 30 orders per hour. The capacity of Spotted Cow is 30 orders per hour, which is decided by the bottleneck.

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USC Marshall School of Business BUAD 311 Operations Management

Practice Problem Set #1

4. Eastern Coffee follows the flow chart below to serve its customers. Note that some triangles may be omitted intentionally. It takes a worker two minutes to take order and receive payment, two minutes to prepare coffee, and three minutes to clean the equipment.

Take order and receive payment

Prepare coffee

Clean equipment

Eastern Coffee has two workers: worker A takes order and prepares coffee, while worker B handles the cleaning. a. On average, 10 customers per hour show up and order coffee. What is the utilization rate of worker A? What is the utilization rate of worker B? Capacity of worker A: (60 minutes/hour) / (1 customer/(2+2 minutes)) = 15 customers/hour Capacity of worker B: 60/3 = 20 customers/hour Utilization of A: 10/15 = 0.666 or 66.6% Utilization of B: 10/20 = 0.5 or 50% b. How many customers can Eastern Coffee serve per hour? From part a, the capacity of Eastern Coffee is 15 customers/hour, as identified by the bottleneck (worker A).

Western Coffee has the same process, and each activity takes the same amount of time as that of Eastern Coffee. Western Coffee also has two workers: worker C only takes order and payment, while worker D handles coffee preparation and cleaning. c. How many customers can Western Coffee serve per hour? Capacity of worker C: 60/2 = 30 customers/hour Capacity of worker D: 60/(2+3) = 12 customers/hour Capacity of Western Coffee is 12 customers/hour d. The manager of Western Coffee notices that cleaning is not a critical activity in the sense that it can be delayed and be finished when there are fewer customers. Therefore, during the peak hour, workers can focus on serving customers and temporarily ignore the cleaning activity. Then how many customers can Western Coffee serve during the peak hour? Capacity of worker D during the peak hour: 60/2 = 30 customers/hour Capacity of Western Coffee is 30 customers/hour

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USC Marshall School of Business BUAD 311 Operations Management

Practice Problem Set #1

5. A small medical center would like to determine the capacity requirements for next month. Currently there are 11 doctors working 8 hours a day and 5 days a week. They provide care for three types of patients: patients coming for regular check-ups (type A), patients with minor problems (type B), and patients with serious problems (type C). The management predicts the number of patients for the next four weeks as follows:

Type A Type B Type C

Week # 1 250 150 200

Weekly numbers of patients Week # 2 Week # 3 50 100 300 150 150 250

Week # 4 500 300 150

All the doctors can provide care for all types of patients. Type A patients require 15 minutes of care, type B patients require 30 minutes of care, and type C patients require 60 minutes of care.

a. What are the expected average utilization rates of the doctors for each of the next four weeks? Total available doctor time per week = 11 doctors x 8 hours/day x 5 days/week = 440 hours/week

Type A Type B Type C Total Utilizations

Week # 1 62.5 hours 75 hours 200 hours 337.5 hours 76.7%

Number of hours needed Week # 2 Week # 3 12.5 hours 25 hours 150 hours 75 hours 150 hours 250 hours 312.5 hours 350 hours 71.0% 79.5%

b. Does this medical center have enough capacity? Yes. Utilization rates are all below 100% in each of the four weeks.

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Week # 4 125 hours 150 hours 150 hours 425 hours 96.6%

USC Marshall School of Business BUAD 311 Operations Management

Practice Problem Set #1

6. A clothing company produces 5 types of shirts (A, B, C, D, and E). The final manufacturing steps in the shirt production process are to (a) attach a care label to every shirt and (b) brand the company’s name on every shirt. The company has one machine for attaching care labels and one machine for branding. For any shirt type, branding requires 8 minutes of processing on the machine. Due to differences between shirt designs, attaching care labels requires the following shirt-dependent processing times (in minutes): Shirt Type A B C D E

Processing Time 4 10 5 6 8

The demand per day for the different shirt types is: Shirt Type A B C D E

Demand 20 5 25 10 15

Assume each machine is available to work 8 hours per day. Does the company have enough capacity to satisfy its demand? Explain your answer.

The demand for the branding machine per day is: (20 + 5 + 25+ 10 + 15) * 8 minutes = 600 minutes, or 600/60 = 10 hours. There is not enough capacity on the branding machine to satisfy demand because it works only 8 hours per day. The demand for the label attaching machine per day is: 20 * 4 + 5 * 10 + 25 * 5 + 10 * 6 + 15 * 8 = 435 minutes, or 435/60 = 7.25 hours. There is enough capacity on the label attaching machine to satisfy demand. The company does not have enough capacity to satisfy its demand. The branding machine is the bottleneck.

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USC Marshall School of Business BUAD 311 Operations Management

Practice Problem Set #1

7. Campus Credit Union has 5 representatives, 2 of them specialized in business customers and 3 of them specialized in personal customers. On average, each business customer takes 15 minutes, and each personal customer takes 12 minutes to finish the service. During the 4-5pm rush hour, 10 business customers and 10 personal customers show up. a. Does Campus Credit Union have enough capacity during the rush hour? Each hour, a representative can serve 60/15=4 business customers. Because there are two representatives specialized in business customers, 4x2=8 business customers can be served per hour. Because 10 business customers will show up during the rush hour, Campus Credit Union doesn’t have enough capacity.

b. If Campus Credit Union cross-trains the representatives so that all of them can handle both the business and personal customers, will it have enough capacity during the rush hour? To serve all the customers, 15*10+12*10=270 minutes are needed. If Campus Credit Union cross-trains all representatives, 5*60=300 minutes are available. It will have enough capacity.

c. Campus Credit Union is unable to cross-train all representatives, but can cross-train one of the representatives originally specialized in business customers. Should Campus Credit Union pursue this opportunity? No. Because the bottleneck is the business customer service, cross-training a representative originally specialized in business customer will not increase the maximum capacity for the business customer service.

d. Campus Credit Union is unable to cross-train all representatives, but can cross-train one of the representatives originally specialized in personal customers. Should Campus Credit Union pursue this opportunity? Yes. To serve 10 personal customers, it needs 12*10 = 120 minutes, or equivalently 120/60 = 2 representatives. Because there are three representatives specialized in personal customers, one of them can be switched to serve business customers. Then, we can serve 4*3 = 12 business customers per hour. Campus Credit Union will have enough capacity for all the customers.

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USC Marshall School of Business BUAD 311 Operations Management

Practice Problem Set #1

8. (Spring 2016 Midterm 1 question) Trojan Gadgets (TG) makes two products—basic and funky. Molding Workshop A processes basic items only; there is 1 worker in Molding Workshop A, and the worker can process a basic item in 3 minutes. Molding Workshop B processes funky items only; there are 2 workers in Molding Workshop B, and each worker can process a funky item in 5 minutes. Assembly Workshop C has 3 workers and assembles basic items only; it takes 4 minutes for a worker to assemble a basic item. Assembly Workshop D has 4 workers and assembles funky items only; it takes 6 minutes for a worker to assemble a funky item. In the Packing Workshop, there is one packing machine that can pack an item in 1 minute, regardless of the type of the product. The demand for basic items is 20 items/hour and the demand for funky items is 20 items/hour.

a. What are the capacities (in items per hour) and implied utilization of each workshop? Molding Workshop A: Capacity = 1 item/((20/40)*3min) * (60min/1hr) = 40 items/ hour Demand = 40 items/hour -> Implied utilization = 40/40 = 100% Molding Workshop B: Capacity = 2 item/((20/40)*5min) * (60min/1hr) = 48 items/ hour Demand = 40 items/hour -> Implied utilization = 40/48 = 83.3% Assembly Workshop C: Capacity = 3 item/((20/40)*4min) * (60min/1hr) = 90 items/ hour Demand = 40 items/hour -> Implied utilization = 40/90 = 44.4% Assembly Workshop D: Capacity = 4 item/((20/40)*6min) * (60min/1hr) = 80 items/ hour Demand = 40 items/hour -> Implied utilization = 40/80 = 50% Packing: Capacity = 1 item/((40/40)*1min) * (60min/1hr) =60 items/ hour Demand = 40 items/hour ->Implied utilization = 40/60 = 66.7% b. Which workstation is the bottleneck? What is the capacity of Trojan Gadgets in items per hour? Workshop A is the bottleneck because it has the highest implied utilization. The capacity of Trojan Gadgets= B’neck Capacity/Its implied utilization rate = 40 items/hour 7

USC Marshall School of Business BUAD 311 Operations Management

Practice Problem Set #1

After learning the value of flexibility from an operations lecture, TG’s manager decides to cross- train the workers in Molding Workshop A and Molding Workshop B, so that they are capable of molding both basic and funky items. It still takes 3 minutes for a worker to process a basic item and 5 minutes for a worker to process a funky item. Below is the new process diagram of TG.

c. What are the capacity (in items per hour) and implied utilization of the Molding Workshop when the molding workers are cross-trained? Molding Workshop (when molding workers are cross-trained): Average processing time = 3*(20/40)+5*(20/40) = 4 minutes Capacity =3 workers* (1 item/4min) * (60min/1hr) = 45 items/ hour Demand = 40 items/hour Implied utilization = 40/45 = 88.9%

d. When assembly workers are cross-trained (but molding workers are not cross-trained), which workstation is the bottleneck? What is the capacity of Trojan Gadgets in items per hour? Improving the capacity of non-bottlenecks will not change the bottleneck and the capacity of the process. Hence the answer is same as that of part b.

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USC Marshall School of Business BUAD 311 Operations Management

Practice Problem Set #1

9. (Spring 2017 Midterm 1 question) Los Angeles Credit Union (LACU) serves three types of the checking customers: e-checking customers who only utilize the online channel, the core-checking customers who rely on both the online channel and the branch services, and the premier checking customers who rely on the branch services only. The average time needed for each type of customers is summarized in the following table: Time needed (min) Via Online Chatting* At the Branch e-checking customer 15 0 core-checking customer 15 15 premier checking customer 0 40 * At the branch, a customer service representative (CSR) meets with the clients one-on-one, while in the online channel, a CSR chats with 3 different clients simultaneously. The customer support team consists of 5 CSRs: 2 of them are level 1 CSRs and 3 of them are level 2 CSRs. Currently, level 1 CSRs only serve the e-checking customers and level 2 CSRs only serve the core-checking and premier checking customers. Each working day, LACU gets 140 e-checking customers, 50 corechecking customers, and 10 premier checking customers. Each CSR works for 7 hours in each working day.

Process flow diagram:

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USC Marshall School of Business BUAD 311 Operations Management

Practice Problem Set #1

a. What are the levels of implied utilization of level 1 CSRs and level 2 CSRs? Does the customer support team have enough capacity to handle all the customers? Implied utilization rate for level 1 CSRs: Demand (in minutes per day) / capacity (in minutes per day) = (140 customers/day x (15minutes/3customers)) / (2 x 60min/hour x 7 hours/day) = 83.3% Implied utilization rate for level 2 CSRs: Demand (in minutes per day) / capacity (in minutes per day) = ((15min+(15min/3customers))x 50 cust/day +40min x 10 cust/day) / (3 x 60min/hour x 7 hours/day) = 111.1% No, we don’t have enough capacity because the implied utilization rate for level 2 CSRs is greater than 100%. Alternatively, Level 1 CSRs (2 persons): CT=(15/3)*(140/200)=3.5 mincap= (1/3.5)*60 mins/hr*7 hrs/day*2 workers = 240 /dayImp. Util= Demand/Capacity=(200/240) =83.33% Level 2 CSRs (3 persons): CT=[15+ (15/3)]*(50/100)+40*(10/100)=7 min cap=(1/7)*60*7*3 workers = 180 /dayImp. Util= Demand/Capacity=(200/180) =111.1% Bottleneck=Maximum[83.33% (level 1),111.1%(level 2)] Level 2 CSRs are the bottleneck LACU capacity=bottleneck capacity=180 customers per day.

b. The branch manager is considering promoting one level 1 CSR to level 2. Will the move create enough capacity for the customer support team? Implied utilization rate for level 1 CSRs: [140*(15/3)]/(1*60*7) = 166.7% Implied utilization rate for level 2 CSRs: ((15+(15/3))*50+40*10)/(4*60*7) = 83.3% No, the new customer support team will not be able to serve all the customers. c. Ignoring part b, the branch manager is considering paying the CSRs for overtime. How many overtime hours should the level 1 CSRs and level 2 CSRs work each day to handle all the customers? No overtime needed for level 1 CSRs since the implied utilization from part a) is < 100%. Time needed for level 2 CSRs is ((15+15/3)*50+40*10)-(3*60*7) = 140 minutes

d. Ignoring part b and c, the branch manager is now considering cross-training the CSRs. Will cross training provide enough capacity for the customer support team? Implied utilization rate for all CSRs (140*(15/3)+(15+(15/3))*50+40*10)/(5*60*7) = 100% Yes, it will create enough capacity. Alternatively 10

USC Marshall School of Business BUAD 311 Operations Management

Practice Problem Set #1

CSRs need, from part a, 840 + 1260 = 2100 minutes. CSRs have [5 CSRs] * [60 minutes] * [7 hours] = 2100 minutes Implied utilization rate for all CSRs: 2100/2100= 1 or 100%. Yes, we have enough capacity. (well barely)

e. The cross-training program is implemented and LACU starts to receive complaints from the premier checking customers because of deteriorated service quality. Is it possible to meet the demand by asking level 1 CSRs to help only with the core-checking customers? For full credit, explain your answer using specific numbers. From part c, level 1 CSRs needs to contribute 140 minutes (each day) to help meet the demand. The time needed for core-checking customers is (15+15/3)*50 = 1000 minutes, which is greater than 140 minutes. Therefore, it is possible to meet the demand by asking level 1 CSRs to help only with the core-checking customers.

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