Assignment
Directions:
1. This is an individual assignment, please do not discuss or correspond with others prior to the due date and time for the exam.
2. Show your work for part I, either hand written and scanned or typed up. (You may use a spreadsheet to verify your answers, but I don't want the answers in a spreadsheet - I want to see the calculations as they would unfold when done by hand.)
3. Answer parts II and III in essay format (Introduction, Body, Conclusion) using a word processor. (If you have hand drawn figures, scan them and insert them into your document.)
4. If you wish, complete the extra credit question. As requested with part I, show all of your work.
5. Turn in one document with all of your answers.
I. A small steel fabricator uses (among other supplies) plates of steel to manufacture prototypes for various small toy companies (think Tonka) and a wide variety of other items. All production planning is handled on a make to order basis - finished goods inventory is not held. The steel may be purchased in 12"x12" sheets that weigh 0.9792 pounds and have a cutting tolerance (along each side) of ± 0.25". Each such sheet of steel costs $8.00. The cost to order steel sheets is estimated to be $100 per order. The manufacturer works 50 weeks a year and the lead time for an order is 1 week. The annual cost to hold a square foot of steel is estimated to be 20% of the price. Annual demand for the steel is the equivalent of 5,000 12"x12" sheets. Assume a lead time service level of 75% is acceptable and the standard deviation of weekly demand is 50 sheets. (For parts a - c assume a fixed quantity model is used.)
a. What is the optimal order quantity?
b. What is the appropriate re-order point?
c. How long (in weeks) is the average order cycle?
d. If a fixed interval of ten weeks is used, what would be the stocking level and safety stock for a 75% service level.
II. Do not answer both A and B. Answer either option A or B.
A. Assume that you work in a supplier development role for a major clothing designer (such as one that recently made a big PR mistake by sourcing, from Chinese suppliers, clothing to be worn by US Olympic athletes in London). The company has decided that, regardless of past sourcing practices, there is a need for a company owned facility that will make prototypes of new designs in small volumes and be sufficiently scalable to make "uniforms" for the US Olympic teams in the US. You have been asked to establish this new facility. Describe your likely decisions in regard to:
a) Structural decisions (process choices, location, layout, capacity).
b) Infrastructural decisions (master scheduling approach, material planning, detailed scheduling and control, quality control, workforce management and supervision.)
Hint: Start with a clear statement regarding the Order Winning Criteria and Order Qualifying Criteria for this facility and based on this ensure that your decisions reflect consistency as would be expected from a well implemented and integrated operations strategy.
B. Using the terms quality, timeliness, low cost, and flexibility describe the competitive priorities (as you perceive them from public information and/or your personal impressions) of Rolex and Timex. How do you suspect operations management differs in the two firms' watchmaking businesses? Be sure to include both structural and infrastructural considerations in your answer.
III. Assume this is your first day as manager of a small - primarily custom - cabinet-making business. In your previous job, at a large auto assembly facility, the JIT system was used. Now, you arrive at your new job to discover that your predecessor erased all the computer files, account histories, records, manuals and other operating information relating to the business. All that remains is the machines, the employees, and your anxious customers. Prepare a recovery plan in which you:
a) Indicate why this is an infrastructural problem and not a structural problem.
b) Compare and contrast the planning and control systems used in simple and complex manufacturing environments. Use figures to illustrate the concepts and use all of the following terms in your essay: make to order, make to stock, push scheduling, Material Requirements Planning, batch process, local priority rules, pull scheduling, repetitive process, Kanban, job shop.
c) Describe the new system you plan to install and indicate why you have made this choice.
IV.
1) The sheet steel described in Part I (above) may also be purchased in 12"x24" sheets that weigh 1.9584 pounds and have a cutting tolerance (along the each side) of ± 0.25". These larger sheets cost $15.00. The company's equipment is no more effective and no less effective when using the larger sheets rather than the 12"x12" sheets. However, to reduce setups, if 12"x24" sheets are purchased they are routed to a secondary supplier where they are cut down to the 12"x12" size at a cost of $0.50 per cut. The secondary supplier has a minimum order of 1250 cuts. This approach, with an intermediate supplier, increases the lead time to two weeks. Assuming a fixed quantity model is used:
a. Does this second option result in a new optimal order quantity (or would you stick with the quantity from Part I)?
b. What is the new re-order point.
c. How much extra safety stock is required with this second supply approach?
2) A control study of the cutting operation of the intermediate supplier (described in part IV question 1, above) has demonstrated that it provides sheets with an average length of 11.87" and a standard deviation of .05". By contrast, sheets purchased from the original supplier (described in part I above) are found to average 11.970" with a standard deviation of 0.06". Sheets that do not meet specifications are sold as scrap for an average price of $0.05 per pound.
a. Determine Cp and Cpk for the original supplier (purchasing 12"x12").
b. Determine Cp and Cpk for the second supply approach (with the intermediate step).
c. How many 12"x12" sheets of steel would be lost to scrap with each approach to supply?
d. Including the recovered value from recycling, what would the loss due to defective sheets under each scenario?
e. Assume you have no ability to influence the practice of either supplier (i.e., this is simply transaction based and not relationship based). Which approach to purchasing would minimize total costs of inventory (including quality losses)?
f. Which supplier would you prefer? Why?