Solution to the OM – 1 Practice Problems

Problem 1:

Number of batches baked in one hour = 60/12 = 5 batches per hour

To produce 4000 breads per hour, each batch should be 4000/5 = 800 breads large.

Problem 2:

Resources
1 2 3 4 5
Product A (activity time in min.) 5 3 15 0 6
Product B (activity time in min.) 5 4 0 3 6
Product C (activity time in min.) 5 5 0 3 6
Total work minutes required to get
Product A, 40 units/day, Product B,
5*40+5*50+5*60=750 620 600 330 900
50 units/day, and Product C, 60
units/day
Number of workers 2 2 1 1 2
Available work minutes in a day 960 960 480 480 960
Implied utilization (%) 78.125 64.58333 125 68.75 93.75

The resource 3 has the maximum implied utilization, thus it is the bottleneck.

Since resource 3 is the bottleneck, it determines the flow rate of the products. Only product A uses
resource 3 and the number of units of Product A produced in a day is 60/15 * 8 = 32. For the
required product mix (ratio=4:5:6), we get 32:40:48.

Problem 3:

Resources
Number of cases for
Admin support Senior Junior
each group per
person accountant accountant
month
Time requirement (in min.) for
7.5 7.5*(20+50)=525 375 900
Group 1 per month
Time requirement (in min.) for
2.5 2.5*(40+80)=300 375 750
Group 2 per month
Time requirement (in min.) for
25 25*(20+30)=1250 125 2000
Group 3 per month
Time requirement (in min.) for
15 15*(40+60)=1500 450 3000
Group 4 per month
Total time (in min.)
requirement from each 3575 1325 6650
resource per month
Available time (in min.) with
9600 9600 9600
each resource per month
Implied utilization 0.372 0.138 0.693
(a) Junior accountant is the bottleneck person due to the highest implied utilization (0.693).

(b) The implied utilization of the Senior accountant= 0.138, Administrative support = 0.372, and
Junior accountant = 0.693.

(c) Reducing the writing time by 50% will not impact the process capacity of VF. Because the
new word processing system will not impact the total work time requirement from the Junior
accountant who is the bottleneck.

Problem 4:

We have the following information available from the question:

Level Inventory (number of Flow Time (time spent at that
consultants at that level) level)
Associate 200 4 years
Manager 60 6 years
Partner 20 10 years

a. We can use Little’s law to find the flow rate for associate consultants:
Average Inventory (I) = Flow Rate (R) * Average Flow Time (T)
 200 associates = Flow Rate * 4 years;
 Flow rate = 50 associates per year, which need to be recruited to keep the firm in its current
size.
b. We can perform a similar analysis at the manager level,
Average Inventory (I) = Flow Rate (R) * Average Flow Time (T)
 60 managers = Flow Rate * 6 years;
 Flow rate = 10 managers per year
In order to have 10 managers as a flow rate, we need to promote 10 associates to manager level
(considering the firm is not recruiting at the higher ranks from the outside). Hence, every year,
we dismiss 40 associates and promote 10 associates to the manager level. Thus, odd in favor is
10/40 = 1/4.
c. Now, consider the partner level.
 Average Inventory (I) = Flow Rate (R) * Average Flow Time (T)
 20 partners = Flow Rate * 10 years;
 Flow rate = 2 partners per year
Thus, out of 10 manager cases we evaluate every year, 8 are dismissed and 2 are promoted as
partner. From part (b), we know that out of 50 associates, 40 are dismissed and 10 are promoted
as manager. Therefore, out of 50 new hires as associates, only 2 reach to the partner level and
48 dismissed either as an associate or as a manager. And, hence the odds in favour of becoming
a partner as opposed to being dismissed for a fresher = 2/48 = 1/24

Problem 5: (One Possible Approach)

We can solve the problem using the following approach. One may have a different approach as well.

Process flow diagram:

Slicing Sawing

Final
Rounding Polishing
Inspection Inspection

Process time for a diamond (mins)

Final
Inspection Slicing Sawing Rounding Polishing
Inspection
Diamond
I (Single Crystal 30 - - 20 40 25
Stone)
Double Crystals
II 30 40 60
Stone
Diamond
III 15 20 30 20 40 25
(Double Crystals)

For example, given that the demand is 10 stones per hour, you will have 8 of single crystals and 2 of
double crystals as the input to the inspection. Subsequently, you will have 8 single crystal diamonds
and 4 double crystal diamonds (each double crystal stone gives two diamonds). The total number of
diamonds is 12 per hour. So, the ratio of number of single crystal diamonds to double crystal
diamonds is 2:1.

a. Rated Cycle Time:

Assume that the demand is 12 diamonds per hour. So, the number of single crystal stones is
8 per hour and, the number of double crystal stones is 2 per hour. So, the total number of
stones is 10 per hour.
Now, let us find the implied utilization for each process as follows:
 Inspection: Process capacity 2 stones/hr
Demand = 10 stones/hour

Utilization = =500%

Slicing (Double Crystals): Process capacity =1.5 stones/hr

Demand = 2 stones/hour

Utilization = =133.33%

Sawing (Double Crystals): Process capacity =1 stones/hr

Demand = 2 stones/hour

Utilization = =100%

Rounding: Process capacity = 3 diamonds/hr

Demand = 12 diamonds/hour

Utilization = = 400%

Polishing: Process capacity = 1.5 diamonds/hr

Demand = 12 diamonds/hour

Utilization = = 800%

Final Inspection: Process capacity = 2.4 diamonds/hr

Demand = 12 diamonds/hour

Utilization = =500%

Final
Inspection Slicing Sawing Rounding Polishing
Inspection

Utilization 500% 133.33% 100% 400% 800% 500%

The process with maximum implied utilization is “Polishing.” So, it is the bottleneck activity. So, the
rated cycle time is same as the processing time of bottleneck activity which is 40 minutes.

b. Average labor content per diamond:

For example, given that the demand is 10 stones per hour, you will have 8 of single crystal
stones and 2 of double crystal stones. Consequently, you will have 8 single crystal diamonds
and 4 double crystal diamonds. The total number of diamonds is 12 per hour. So, the ratio of
number of single crystal diamonds to double crystal diamonds is 2:1.
 Process time (mins)
Average
Final
Inspection Slicing Sawing Rounding Polishing
Inspection
Flow
Time
Diamond
a (Single crystal 30 0 0 20 40 25 115
stone)
b1 Double Stone 30 40 60
Diamond
b2 (Double crystal 15 20 30 20 40 25 150
stone)

Average labor content = 126.67 mins

c. Technology:

Use the demand assumptions mentioned in part a.

Polishing now takes 20 mins per diamond.

Polishing: Process capacity = 3 diamonds/hr

Let us first find the capacity of the downstream process. Here final inspection has the lowest
capacity = (60/25) = 2.4 diamonds/hr

Slicing Sawing

Downstream diamond process

Final
Polishing
Inspection Rounding Inspection

Now let us analyse the first inspection process with respect to single and double crystals.

The time between two double crystal stones that are released from inspection = 30/0.2 =
150 mins

The time between two single crystal stones that are released from inspection = 30/0.8 = 37.5
mins

So the capacity of the upstream process = 60/37.5 + 60/150 = 2.4 diamonds/hr

Hence, the process capacity in 8 hrs = 2.4*8 = 19.2 diamonds

 d. New Rated Cycle Time: (polishing is back to 40 minutes and 20% re-polishing and re-
inspection)

Assume that demand is 12 diamond per hour. And, 20% of the diamonds (2.4 diamonds)
goes through re-polishing and re-final inspection for once.
Average polishing process time = mins
Average final inspection process time = mins

Polishing: Process capacity = 1.25 diamonds/hr

Utilization = =960%

Final Inspection: Process capacity = 2 diamonds/hr

Utilization = =600%

Final
Inspection Slicing Sawing Rounding Polishing
Inspection

Utilization 500% 133.33% 100% 400% 960% 600%

The process with maximum implied utilization is “Polishing” which is the bottleneck. So, the rated
cycle time is processing time of bottleneck activity which is 48 minutes.