Process Analysis

1. McDonald’s, the world’s largest chain of hamburger fast food restaurants, is known for its
quick and inexpensive meals. An article in New York Times recently noted, “roughly two-thirds
of its customers order at a drive-through counter”. Recently, McDonald’s has witnessed
decline in same-store sales for five consecutive quarters. At the same time, it has been
noticed that drive-through customers’ waiting time has increased. To turn around declining
sales the following initiatives have been proposed. Which of the below initiatives is best
aligned with McDonald’s strategy?

A. Introducing gourmet style food items which are prepared fresh in store.
B. Expanding the current menu to offer a larger variety of inexpensive food items.
C. Allow it outlets to offer table service at a premium price to willing customers.
D. Offer a single menu instead of multiple menus over the day.

Solution: As stated above, the value proposition offered by McDonald's to its customers is
low price and quick delivery. Any change that reduces McDonald's capability to offer this
value proposition is not aligned with its strategy. First choice improves quality but may hurt
responsiveness and low cost nature of McDonald's operations. Choices 2 and 3 also have
similar implications. The last choice reduces variation in menu during the day, which may
make McDonald's even better in responsiveness and low cost.

2. When a homeowner wants to sell his or her home, the property is typically posted on a
regional listing service. In a particular region, 50% of the new properties added to the listing
service in an average week are “houses”. The remaining 50% of new listings added are
“condominiums”. The average house listed on the service stays there for 4.5weeks, before it is
either sold or the listing taken out for other reasons. The average condominium stays listed for
9 weeks. What percent of active property listings on the service (i.e., properties posted on the
listing service but not yet removed) are houses?

A. 33.33
B. 50.25
C. 40.75
D. 31.25

Solution: Looking at the process of posting new properties on the listing service, we can
identify two different flow units: houses and condominiums. Let R be the total flow rate of
the overall listing process, that is the number of properties posted per week. Then, Rh, the
flow rate of the houses is equal 0:5R, while the flow rate of condominiums, Rc = 0.5R. From
the problem, we know Th = 4:5 weeks, while Tc = 9 weeks. Using Little's law on each of
these flow units, we have Ih = Rh*Th = 0.5R* 4.5 = 2.25R and Ic = Rc * Tc = 0.5R*9 = 4.5R.
The total number of active property listings, I = Ih + Ic = 2.25R + 4.5R = 6.75R, and the
proportion of active property listings that are houses is equal to Ih=I = 2.25R/6.75R = 1/3, or
33.33%.
 Q3 – Q4. Mt. Kinley is a strategy consulting firm that divides its consultants into three
classes: associates, managers, and partners. The firm has been stable in size for the last 20
years with about 200 associates, 60 managers, and 20 partners on average.
The work environment at Mt.Kinley is quite competitive with an “up or out” culture. After
four years, an associate either becomes a manager or is asked to leave the firm. Similarly,
after six years, a manager either becomes a partner or leaves the firm. Partners stay with
the firm for another 10 years on average before leaving to pursue other “life goals”. The
firm recruits MBAs from top B-schools as associates. No hires are made at the manager or
partner level.
3. How many new MBA graduates does Mt. Kinley have to hire every year?
A. 200 graduates per year
B. 100 graduates per year
C. 50 graduates per year
D. 10 graduates per year

Solution: This is an application of Little’s law to the associate process. The first step is to
figure out what is inventory (I), throughput rate (R) and flow time (T)for this process. We are
told that the flow time is T= 4 years, and the inventory of associates is I= 200. Hence, by
Little’s law, to maintain this inventory we need that the number of graduates hired every
year (the throughput R) is given by R=I/T= 200/4 = 50.

4. What % of MBA graduates hired by Mt. Kinley get promoted to be a Partner?

A. 100% B. 20% C. 10% D. 4%

Solution: The input to the partner process is managers, and the input to the manager
process is associates. However, not all MBA graduates hired as associates get promoted and
not all associates get promoted. The fraction of MBA graduates who get promoted to be a
manager is the ratio of the flow rates of the manager and associate process. As the process
is stable, the input rate to the manager process is equal to the flow rate of the manager
process. For the manager process, we are told that the inventory I= 60managers and flow
time T= 6 years. Applying Little’s law to the manager process, the number off associates
promoted to be managers each year (the flow rate R) is given by R=I/T= 60/6 = 10. Similarly,
applying Little’s Law to the partner process, we have R=I/T= 20/10 = 2 per year for the
partner process. From the previous question, we know that 50 MBA graduates are hired
each year as associates Thus, the % of MBA graduates who get promoted to become partner
is equal to2/50 = 0.04, or 4%.
5. Since becoming the CEO, you have noticed that your mailbox is perennially full. On average,
about half of the emails in your inbox are “unimportant” emails (those from
professional industry associations, company-wide emails etc.) that are copied to you but
don’t need your response. The rest are “important” and need your personal response. You
believe in clutter free inbox, so you process every email that comes, either by simply
moving it to a separate folder or by responding to it and then moving it to a separate folder.
Naturally you prioritize processing “important” emails and as a result the time spent by
“unimportant” emails in your inbox is four times that spent by “important” emails. If you
receive 15 total emails every hour on average, how many of these are “important”?
A. 3 B. 5 C. 12 D. Cannot be determined

Solution: Let ri be the flow rate of important emails and ru of unimportant emails. Let t be
the flow time of important emails so that 4t is the flow time for unimportant emails. We
know that ri∗t= 60 andru∗4t= 60. Therefore, ri= 4∗ru. But ri+ru = 15. So ri = 12.

6. Consider the Rent-A-Dress (RAD) case. Assume the current state of affairs continues as the
company is still flush with VC money. Based on the analysis, we saw that the firm needs an
average of 4,400 dresses to support the current demand of 100 rentals /day (with
customers renting for 10 days on average). Given that fashion trends change, each dress is
useful for about 125 days. A question that came during the discussion was about purchase
of new dresses by RAD. What is average number of new dresses that RAD purchases each
day? (If none of the choices match your exact answer, pick the closest value.)
A. 35 dresses / day B. 200 dresses / day C. 22 dresses / day D. 4,400 dresses / day

Solution: If we look at RAD as a process with new dresses as the input and dis-carded
dresses as the output, then I= 4,400 and T= 125days. Using Little’s law, we get R=I/T=
4400/125 = 35.2 dresses / day.

7. After going through tough times, Rent-A-Dress has successfully pivoted its business model
and has scaled up to a demand of 150 rentals per day. They only serve the 10-day rental
segment and continue sending two dresses per rental to provide flexibility to their
customers. They have improved their internal processes so that it only takes 5 days to
complete ALL steps needed for a returned dress to be with a new customer again. They have
also made changes to the dresses they procure and the cleaning process so that the dresses
now have a useful life of 150days. What is the average number of new dresses that RAD
needs to purchase each month? (If none of the choices match your exact answer, pick the
closest value.)
A. 9000 B. 900 C. 300 D. 30
 Solution: First, consider RAD process consisting of “customer” step and “internal” step.
Applying Little’s Law to each of these customer= 10∗(150∗2) = 3000 and internal=5∗(150∗2)
= 1500. Thus total inventory of dresses is I total= 4500. Now, if we consider RAD as a
process with new dresses as the input and discarded dresses as the output, then we
have I= 4500 and T= 150 days for this process. Using Little’s Law, we get R=I/T=
4500/150 = 30 dresses / day. Assuming a month of approximately 30 days, this translates to
900 dresses per month.

8. The management at BuyRite grocery stores wishes to estimate the amount of time that
customers are spending on average, inside the stores including in the checkout line. The
most obvious approach for determining this information is to simply record when a
customer enters and exits the store. However, it is difficult to track the entering and
exiting times of specific customers. We will look at an alternative method. Over the past
two weeks, the following data have been collected at BuyRite’s newest store during busy
hours (this BuyRite is rather large and typically has 7 open checkout lanes):
Results of Data Collection

Avg. rate of customers entering store 305/hr

Avg. # of customers in store 146

% of customers who do not make purchase 5%

Avg. # of customers in checkout lanes 24

As their consultant, you have been asked by BuyRite’s management to address the following
questions:
a) How much time does the average customer spend in the store?

Solution
For the store process,
I = Avg. # of customers in store = 146.
R = Avg. throughput rate of customers = 305 /hr
T= Avg. time a customer spends in store.
Solving for T, we get:
T = I/R = 146/305/hr = 0.479hrs = 28.7 min

b) How much of that total time is spent waiting, on average, to check out?
 Solution: For the checkout process,
I = Avg. # of customers in checkout lanes = 24,
R = Avg. rate of customers entering lanes = 0.95 x (305/hr) = 290/hr
T = Avg. time customer spends in checkout lane
Solving for T, T= I/R = 24/290/h r= 0.0828hrs = 4.97 min

c) What effect might increasing the number of open lanes from 7 to 8 have on each of the
four measures collected? Provide qualitative answers.

Solution: The immediate effect of increasing the number of checkout lanes would be to
decrease the average time a customer spends waiting to checkout. By Little’s Law, this
implies a reduction in the average number of customers in the checkout lanes.
Thus, assuming the arrival rates don’t change, we would expect the average number of
customers in the store to decrease. However, the reduction in customer waiting may induce
more customers to visit the store, so the arrival rate may increase above its current 305/hr
level. Also, with shorter lanes at checkout, you might expect the 5% figure to be reduced
slightly, since fewer customers are likely to enter the store and then balk at the sight of long
checkout lines.

9. Northern Airlines regularly hires and trains new flight attendants. The airline requires a staff
of 1,000 trained attendants to maintain their flight services. Due to the nature of the job,
there is a high turnover of flight attendants with the average job tenure of a flight attendant
being two years. How many flight attendants on average does Northern Airline need to hire
and train every year to maintain their flight services?
A. 2000 attendants per year B. 1000 attendants per year C. 500 attendants per year D. 200
attendants per year

Solution: This is a simple application of Little’s law. The first step is to figure out what is
inventory (I), throughput rate (R) and flow time (T) here. We are told that the flow time is T
= 2 years, and that the required inventory is I = 1000. Hence, by Little’s law, to maintain this
inventory we need that the number of attendants hired and trained every year (the
throughput R) is given by R = I/T = 1000/2 = 500.

10. As a CEO, your mailbox is perennially full. On average you receive about 20 emails per hour,
of which 20% are “unimportant” (mails from industry associations, company-wide
announcements etc.). You believe in having a clutter free inbox and process every email that
comes, either by simply moving it to a separate folder or by responding to it and then moving
 it to a separate folder. Naturally, you prioritize processing “important” emails and as a result
the average time spent by “unimportant” emails in your inbox is longer. On average, there
are thrice as many “unimportant” emails in your inbox as “important” emails. If the average
time an important email spends in your inbox is 4 minutes, what is the average time spent by
“unimportant” emails in your inbox?
A. 4 minutes
B. 12 minutes
C. 16 minutes
D. 48 minutes

Solution: Let Ri be the flow rate of important emails and Ru of unimportant emails. Let Ti
and Tu be the time spent by important and unimportant emails in the inbox, respectively.
We know that Ru ∗Tu = 3× Ri x Ti. Therefore, Tu = 3 × (0.8 x 20/60) x 4/(0.2 x 20/60) = 48
minutes.

11. As part of your first consulting assignment after graduating from the Incredible School of
Business, you have helped Rent-A-Dress get its business model in shape. You have convinced
the CEO to stick to serving customers who need 10-day rentals and helped scale up demand
to 150 rentals / day. While the shipping time continues to be 1 day in either direction, Rent-
A-Dress has improved its internal processes and compared to earlier, a dress now spends
only 8 days on average in Rent-A-Dress’ internal process. Using big data analytics, Rent-A-
Dress has also managed to reduce the average number of dresses shipped per rental. If Rent-
A-Dress owns 3,600 dresses on average, what is the average number of dresses shipped per
rental? (If none of the choices match your exact answer, pick the closest value.)
A. 2 dresses / rental
B. 1.5 dresses / rental
C. 1.33 dresses / rental
D. 1.2 dresses / rental

Solution: Let x be the number of dresses per rental. The average flow time of a dress in the
process, T dress, is equal to 1+10+1+8 = 20 days, while the total inventory in the process is
equal to 3,600. Thus, the flow rate of dresses, R dress = I dress/T dress = 3600/20 = 180/day.
We know R dress = R rental ∗ x which gives x = R dress/R rental = 180/150 = 6/5 = 1.2
dresses/rental.

Q.12 – Q.13. You own a gourmet restaurant and are planning to open it following relaxation
of lockdown restrictions. To ensure the safety of your customers, you would like to limit the
occupancy to half its usual level. You expect that the customers will also cut down their time
in the restaurant for safety reasons from an average of 40 minutes to 30 minutes, which will
 reduce the average check size to 75% of the pre-pandemic check size because customers
order fewer items.
12. What is the impact on your revenue?
A. Revenue after reopening will be 75% of previous revenue.
B. Revenue after reopening will be 66.7% of previous revenue.
C. Revenue after reopening will be 50% of previous revenue.
D. Revenue will remain the same.

Solution: Let R old and R new denote the demand per day pre- and post-covid, respectively.
We know the time spent by customers pre- and post-covid, Told and Tnew are equal to 40
minutes and 30 minutes respectively. Now, Inew = Rnew ∗ Tnew = Iold/2 = Rold ∗ Told/2
which gives Rnew = (Rold/2) ∗ (40/30) = (2/3) ∗ Rold. Let pold and pnew denote the check
size per dine in customer pre- and post-covid. Then, revenuenew = pnew ∗ Rnew = (3/4) ∗
pold ∗ (2/3) ∗ Rold = (1/2) ∗ pold ∗ Rold = (1/2) ∗ revenueold.

13. You know your customers are loyal, but are also concerned about their safety. You are
wondering if you should offer a pick-up service for the customers who don’t want to dine in.
What should be the average check size of this customer segment so that you regain your
revenue from before the pandemic?
A. The pick up customer check size should be the same as the check size of pre-pandemic
dine in customers.
B. The pick up customer check size should be 3/2 the check size of pre pandemic dine in
customers.
C. The pick up customer check size should be twice the check size of pre-pandemic dine in
customers.
D. The pick up customer check size should be 1/2 the check size of pre-pandemic dine in
customers.

Solution: We need ppick ∗ Rpick = Rold ∗ pold/2 as half of the previous revenue needs to be
earned from the pick up customers and therefore ppick = (Rold ∗ pold)/(2 ∗ Rpick). We also
have Rpick = Rold − Rnew = 1/3 ∗ Rold. Upon substituting, we get ppick = (Rold ∗ pold)/(2 ∗
(Rold/3)) = (3/2) ∗ pold.

14. After graduating from the Inspirational School of Business, you decide to enter the arena of
public policy as Officer on Special Duty for the National Health Authority. Your first
assignment is to plan temporary hospital capacity in a small Union Territory (UT) to meet the
patient demand due to the ongoing pandemic. Under normal circumstances, there are 2000
hospital beds in the UT, of which 400 are in intensive care units (ICUs). Currently, 20% of the
 ICU beds are occupied on average, while the average occupancy rate for regular (non-ICU)
beds is 25%. It is estimated that there will be 200 COVID patients per day who will need
hospitalization because of the pandemic. Of these patients, 30% will need intensive care for
15 days, post which they spend 5 days in regular care (non-ICU) before being discharged. The
remaining 70% of the cases require regular hospitalization of 10 days. How many regular
beds would be needed in the temporary hospital on average?
A. 1700
B. 1300
C. 500
D. 400

Solution: Let us first estimate the demand for ICU and regular beds because of the
pandemic. The number of patients requiring intensive care is Ri = 0.3 ∗ 200 = 60/day while
those needing regular care Rr = 0.7 ∗ 200 = 140/day. Each ICU patient needs 5 days of
regular care after spending 15 days in the ICU. Thus, number of regular beds occupied by
patients post intensive care Ii = Ri ∗ 5 = 60/day ∗ 5 = 300. Other COVID patients need regular
care for 10 days. Thus, number of regular beds occupied by these patients is Ir = Rh ∗10 =
140 ∗ 10 = 1400. Thus, total number of regular beds required to treat COVID patients is
equal to 300 + 1400 = 1700. In the existing hospitals, there are 2000 − 400 = 1600 regular
beds, of which 25% are occupied on average. Thus, (average number of) regular beds
required in the temporary hospital = 1700 − 0.75 ∗ 1600 = 1700 − 1200 = 500.

15. A few years after graduating from ISB, you are planning to set up a new skincare products
retail business. You engage an ISB student team to do a competitive analysis of a Bath and
Body Works retail store. After observing the store for a few days, the team gives you the
following statistics.
• Average number of products bought by a customer = 1.5.
• Average price of a product = $ 20.
• Average number of customers in the store at any time = 12.
• Average time spent by a customer in the store = 36 minutes.
• The number of hours for which the store is open during the day = 8 hours.
Based on these data, estimate the amount of revenue that this Bath and Body Works store
makes every day.
A. $ 1,920 / day.
B. $ 3,200 / day.
C. $ 4,000 / day.
D. $ 4,800 / day.

Solution: This is a simple application of Little’s Law to the store. We have inventory I = 12
and flow time T = 36 min = 36/60 = 0.6 hr. Thus, the average rate at which customers are
entering (and leaving) the store is R = I/T = 12/0.6 = 20/hr. Each customer purchases 1.5
products on average and the revenue per customer is equal to $ 1.5 ∗ 20 = 30. Thus, total
revenue per day = R ∗ 8 ∗ 30 = 20 ∗ 8 ∗ 30 = $ 4,800/day