1. As the operations manager of a metal fabrication plant, you have been tasked with evaluating two robots that are expected to improve the flow of work. The first robot will cause a 5% increase in the factory’s budget, but is estimated to increase the rate of production by 7%. The second robot will cause a 10% increase in the factory’s budget, but is estimated to increase the rate of production by 13%. Calculate the productivity increase for the purchase of each robot, and provide a recommendation on which one to purchase. Briefly explain your reason(s) for the recommendation. (Round calculations to 4 decimals, i.e. 0.6789 or 67.89%)
2. An American company is considering relocating their Wisconsin facility to South Korea. The current exchange rate is 1 U.S. dollar (USD) to 1100 South Korean Won (KRW). The current wage rate in South Korea is 8000 KRW per hour, and the U.S. wage rate is $15/hour. If the U.S. facility is known to be three times as productive as the South Korean facility.
a. What is the “relative” wage rate (in dollars, rounded to the nearest cent) of operating in South Korea, before taking productivity differences into account?
b. What is the “relative” wage rate (in dollars, rounded to the nearest cent) of operating in South Korea, after taking productivity differences into account?
c. Suppose that the top management has decided to move the facility to South Korea, irrespective of the above calculations (due to assurances that the South Koreans would increase their productivity). If South Korea’s current productivity is 100 units per hour, to which value should it increase at minimum, so that moving the facility is a worthy decision? (Hint – Find productivity is required by the South Koreans to ensure that the relative wage rate is equal to $15/hr)
3. Consider an electric appliance with two components in series (component A and component B). Component A has a reliability of 85%, while component B has a reliability of 96%. It is known that if the part fails, it will cost the company $2000.
a. What is the system reliability and the expected failure cost per part?
b. You have been tasked with reducing the expected failure cost per part, and three improvement options are available. Find the system reliability and total (improvement plus failure) cost per part for each of the three options, and then suggest which of the three (if any) improvements you would recommend.
i. Option 1: Add an 80% reliable backup for Component A. The backup costs $50 per part.
ii. Option 2: Add a 90% reliable backup for Component B. The backup costs $50 per part.
iii. Option 3: Add backups for both Component A and Component B. Backups have the same reliabilities and costs, as in options 1 & 2.