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55844 ‫ניהול התפעול למוסמך‬
2 ‫תרגיל‬
Part I - Queueing
Food service. For the questions below, assume throughout that the coefficient of variation in the
interarrival time is one, as is the coefficient of variation in the service time. The questions below
consider food service delivery, which consists of a front end (i.e., the order taking system) and a
back end (i.e., the kitchens). For simplicity, assume that the order taking function is very quick, so
that the service (and waiting) time is driven entirely by the kitchen functions.

1. An airport food service operation receives an average of 20 customers per hour, and it takes on
average 2 minutes to serve a customer. What is the average time a customer will wait in line?

2. An entrepreneur is considering setting up a new food service operation at the same airport. She
anticipates that 29 customers will arrive per hour on average (i.e., the average interarrival time is
2.07 minutes), and that it will take on average 2 minutes to serve a customer. Based on these
estimates, what would be the average time a customer would wait in line?

3. The entrepreneur has set up her new food service next door to the established operation
mentioned in question one. She is considering proposing to the owner of the existing food service
operation that the back-end service operations (i.e., the kitchens) of the two establishments be
combined (pooled) to serve both customers. Assume that the back-end service operation of each
facility can process customers that arrive to the front-end (i.e., the order taking system) of either
business equally well (i.e., the average service time of each facility continues to be 2 minutes).
Further, how customers arrive to the system would be unchanged by this change in the back-end
operations. What would be the average time a customer would wait in line in this pooled system?

PhoneForYou. PhoneForYou is a new service company that rents European mobile phones to
American visitors to Europe. The company currently has 80 phones available at Charles de Gaulle
airport in Paris. There are – on average – 25 customers per day requesting a phone. These requests
arrive uniformly throughout the 24 hours the store is open (note: this means customers arrive at a
faster rate than 1 customer per hour). The corresponding coefficient of variation is 1.

Customers keep their phones on average 72 hours. The standard deviation of this time is 100
hours.

Given that PhoneForYou currently does not have a competitor in France providing equally good
service, customers are willing to wait for the telephones. Yet, during the waiting period, customers
are provided a free calling card. Based on prior experience, PhoneForYou found that the company
incurred a cost of $1 per hour per waiting customer, independent of day or night. (Hint: In this
setting, what corresponds to a “server” (a term we used in our discussion of queueing models) is
not a customer service person, but a phone.)
(a) What is the average number of telephones the company has in its store?
(b) How long does a customer, on average, have to wait for the phone (round to the nearest hour)?
(c) What are the total monthly (30 days) expenses for telephone cards?
(d) Assume PhoneForYou could buy additional phones at $1000 per unit. What is the payback
period for one additional phone?

Part II – Inventory

1. Millennium Liquors. Millennium Liquors is a wholesaler of sparkling wines, including

the value-priced French Bete Noire 2005. Weekly demand is for 6 cases. Assume demand occurs
steadily over the 52 weeks of the year. Millennium purchases the wine directly from the winery in
France, and sells to retailers in the United States. Millennium’s annual cost of capital is 25%,
which also includes all other inventory-related costs. Below are data on the costs of shipping and
handling, as well as on the retail price. These costs include the usual ordering and handling costs,
plus the cost of refrigeration, which includes a fixed component (mainly depreciation of the
cooling equipment) and a variable component that depends on the number of cases in inventory.
 Price Millennium charges its retailer customers per case: $57
 Price the winery charges per case: $40
 Shipping cost from winery in France (for any size of shipment): $290
 Cost of labor to place and process an order: $10
 Cost of labor to pack a case for shipment when it is sold to a retailer: $2/case
 Fixed cost for refrigeration: $50/week
 Variable cost for refrigeration: $3.50/case/week

(a) What is the weekly holding cost for one case of wine?
(b) How many cases should Millennium Liquor purchase each time it orders?
(c) Given your answer in (b), how many times a year does Millennium order? What is the annual
cost associated with placing these orders?
(d) Given your answer in (b), how many dollars per year does Millennium spend to hold Bete Noir
in inventory (including the cost of capital)?

2. Beautiful Carpets Ltd. Assume that Beautiful Carpets Ltd has its own manufacturing
facility in which it produces carpets. The ordering cost, K=150$, is the cost of setting up the
production process to make the carpets. Moreover, the holding cost is h=0.75 $ per yard per year
and D=10,000 yards per year. The manufacturing facility operates the same days the store is open
(i.e. 311 days a year) and produces 150 yards of the carpet per day. Determine the optimal order
size, total inventory cost, the length of time to receive an order, the number of orders per year, and
the maximum inventory level.