Operations Management Systems

Answers for Tutorial Questions

Module 6 - Module 9

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 Questions for Module 6
6-1 Briefly explain the purpose of each of these control charts
(a) Mean chart
(b) Range Chart
(c) p-chart
(d) c-chart

ANSWER: Mean chart—A control chart used to monitor process variables by focusing on the central
tendency of a process.
Range control charts are used to monitor process variables, focusing on the dispersion of a
process.
p-chart—is a control chart for attributes, used to monitor the proportion of defectives in a
process.
c-chart—is a control chart for attributes, used to monitor the number of defects per unit.

6-2. Why is it usually desirable to use both a median run test and an up/down run test on the same
data?

ANSWER: It is usually desirable to use both an up/down and a median run test on a given set of data
because the tests are sensitive to different things. For example, one test can be more
sensitive to trend and the other to bias.
6-3. Classify each of the following as either a Type I error or a Type II error:
(a) Putting an innocent person in jail (Type I)
(b) Releasing a guilty person from jail (Type II)
(c) Eating (or not eating) a cookie that fell on the floor. (Type II)
(d) Not eating a clean cookie (Type I)
(e) Not seeing a doctor as soon as possible after ingesting poison (Type II)
6-4. An automatic filling machine is used to fill 1-liter bottles of cola. The machine's output is
approximately normal with a mean of 1.0 liter and a standard deviation of .01 liter. Output is monitored
using means of samples of 25 observations.
(a) Determine upper and lower control limits that will include roughly 97 percent of the sample
means when the process is in control.
(b) Given these sample means: 1.005, 1.001, .998, 1.002, .995, and .999, is the process in control?
ANSWER: for 97%, z=2.17 (see Appendix B table A-look for z value for 0.97/2=0.485)
UCLx  x  z / n  1.0  2.17(0.01)/( 25)  1.0043
LCLx  x  z / n  1.0  2.17(0.01)/( 25)  0.9957
(b) 1.005 and 0.995 are outside of control limits. So the process is not in-control.
6-5. After a number of complaints about its directory assistance, a telephone company examined
samples of calls to determine the frequency of wrong numbers given to callers. Each sample
consisted of 100 calls. Determine 95 percent limits. Is the process stable (i.e., in control)? Explain.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
No. of errors 5 3 5 7 4 6 8 4 5 9 3 4 5 6 6 7
Answer: The total number of error is 87.

p  .054
87
16(100)

p(1  p)
control limit  p  z  .054  1.96  .054  .0443
.054(.946)
n 100
UCL=0.0983, LCL=0.0097.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
No. of errors 5 3 5 7 4 6 8 4 5 9 3 4 5 6 6 7
Complaint
rate 0.05 0.03 0.09
All samples are under the control limits. So the process is stable.

6-6. Given the following data for the number of defects per spool of cable, using three-sigma limits,
is the process in control?

1 2 3 4 5 6 7 8 9 10 11 12 13 14
No. of defects 2 3 1 0 1 3 2 0 2 1 3 1 2 0

Answer: c   1.5
21
14

control limit  c  3 c  1.5  3.67

UCL is 5.17, LCL becomes 0. All values are within the limits. So the process is in-control.
6-7. The time needed for checking in at a hotel is to be investigated. Historically, the process has had
a standard deviation equal to .146. The means of 39 samples of n = 14 are

Sample Mean Sample Mean Sample Mean Sample Mean

1 3.86 11 3.88 21 3.84 31 3.88
2 3.90 12 3.86 22 3.82 32 3.76
3 3.83 13 3.88 23 3.89 33 3.83
4 3.81 14 3.81 24 3.86 34 3.77
5 3.84 15 3.83 25 3.88 35 3.86
6 3.83 16 3.86 26 3.90 36 3.80
7 3.87 17 3.82 27 3.81 37 3.84
8 3.88 18 3.86 28 3.86 38 3.79
9 3.84 19 3.84 29 3.98 39 3.85
10 3.80 20 3.87 30 3.96
(a) Construct an �̅ -chart for this process with three-sigma limits. Is the process in control?
(b) Analyse the data using a median run test and an up/down run test. What can you conclude?

Answer:

(a) Given n=14 and  = .146

x
 x  150.15  3.85
39 39

UCLx  x  3 / n  3.85  3(0.146)/( 14)  3.97

LCLx  x  3 / n  3.85  3(0.146)/( 14)  3.73

Sample 29 is outside the UCL, so the process is not in control. Because sample 29 lies outside the
control limits, the control chart limits should be recalculated without sample 29.

(b) The median value is found to be 3.85.

Sample Mean A/B U/D Sample Mean A/B U/D

1 3.86 A 21 3.84 B D
2 3.90 A U 22 3.82 B D
3 3.83 B D 23 3.89 A U
4 3.81 B D 24 3.86 A D
5 3.84 B U 25 3.88 A U
6 3.83 B D 26 3.90 A U
7 3.87 A U 27 3.81 B D
8 3.88 A U 28 3.86 A U
9 3.84 B D 29 3.98 A U
10 3.80 A D 30 3.96 A D
11 3.88 A U 31 3.88 A D
12 3.86 A D 32 3.76 B D
13 3.88 A U 33 3.83 B U
14 3.81 B D 34 3.77 B D
15 3.83 B U 35 3.86 A U
16 3.86 A U 36 3.80 B D
17 3.82 B D 37 3.84 B U
18 3.86 A U 38 3.79 B D
19 3.84 B D 39 3.85 B U
20 3.87 A U

There are 18A/B and 29U/D runs.

Z test for Median (A/B)

 N 1 39  1
E (r ) med   1   1  20.5 and  med    3.08
N 39

r  [( N / 2)  1] 18  [(39 / 2)  1]
2 2 4 4
   0.81
( N  1) / 4 (39  1) / 4
zmed

So There is no non-random variation in the data (z is less than 3.). The process is in-control.

Z test for U/D

2 N  1 2(39)  1 16 N  29 16(39)  29
E (r ) U/D    25.7and  U/D    2.57

r  [(2 N  1) / 3] 29  25.7
3 3 90 90
   1.28
(16 N  29) / 90
zU / D
2.57

So there is no non-random variation in the data (z is less than 3). The process is in-control.

6-8. A production process consists of a three-step operation. The scrap rate is 10 percent for the first
step and 6 percent for the other two steps.

(a) If the desired daily output is 450 units, how many units must be started to allow for loss due
to scrap? (answer: 566 units)
(b) If the scrap rate for each step could be cut in half, how many units would this save in terms
of the scrap allowance? (Answer: 62 units)
(c) If the scrap represents a cost of $10 per unit, how much is it costing the company per day for
the original scrap rate? (answer: $1,160)

Answer:
(a) Let x be the number of units started initially at Step 1. With a scrap rate of 10% in Step 1
the input to Step 2 is (1-0.1)x. The input to Step 3 is (1 – 0.06) (1 – 0.10)x. With a scrap
rate of 6% at Step 3 the number of good units after Step 3 = (1 – 0.06) (1 – 0.06) (1 –
0.10)x = (0.94)2(0.90)x. The required output is 450 units. So (0.94)2(0.90)x = 450 units x =
565.87 or 566 units
(b) (1 – 0.03) (1 – 0.03) (1 – 0.05)x = (0.97)2(0.95)x. Hence (0.97)2(0.95)x=450. So, x=503.44
or 504 units. 62 units savings (566-504=62)
(c) The scrap=566-450=116 units. 116x$10=$1160.

6-9. A process that produces computer chips has a mean of .04 defective chip and a standard
deviation of .003 chip. The allowable variation is from .03 to .05 defective.
(a) Compute the capability index for the process
(b) Is the process capable?
 Answer:

Cp     1.11 .
specification width .02 .02
processwidth 6(.003) .018
In order to be capable, the process capability ratio must be at least 1.33. In this instance, the
index is 1.11, so the process is not capable.

6-10. Each of the processes listed is noncentered with respect to the specifications for that process.
Compute the appropriate capability index (Cpk) for each, and decide if the process is capable
Process mean Std Deviation Lower spec Higher spec
H 15 0.32 14.1 16
K 33 1 30 36.5
T 18.5 0.4 16.5 20.1

Answer: For process H:

X  LSL 15  14.1
  .93
3 (3)(.32)

USL  X 16  15
  1.04
3
C pk  min.938, 1.04  .93
(3)(.32)

.93  1.0, not cap able

For process K:

X  LSL 33  30
  1.0
3 (3)(1)

USL  X 36.5  33
  1.17
3 (3)(1)

C pk  min{1.0, 1.17}  1.0

Assuming the minimum acceptable C pk is 1.33, since 1.0 < 1.33, the process is not capable

For process T:

X  LSL 18.5  16.5

  1.67
3 (3)(0.4)

USL  X 20.1  18.5

  1.33
3 (3)(0.4)
C pk  min{1.67, 1.33}  1.33

Since the minimum acceptable C pk is 1.33, the process is capable.

 Questions for Module 7

7-1. What three levels of planning involve operations managers? What kinds of decisions are made
at the various levels?

Answer: Three levels of planning that involve operations managers are:

a. Business plan: It establishes production and capacity strategies.
b. Production plan: It establishes production capacity and intermediate term aggregate
production schedule.
c. Master schedule: It establishes schedules for specific products (disaggregation of
production plan).

7-2. Briefly discuss the advantages and disadvantages of each of these planning strategies

(a) Maintain a level rate of output and let inventories absorb fluctuations in demand.

(b) Vary the size of the workforce to correspond to predicted changes in demand requirements.

Answer: a. Maintaining a constant workforce has the advantage of making estimation of labor costs
relatively easy, is good for morale, and minimizes hiring and layoff costs. However,
inventory carrying costs tend to be high.
b. Since labor force has to be continually adjusted, hiring and layoff costs tend to be high. Due
to the instability of the labor force, employee morale is low. However, the inventory
carrying costs are very low because production is matched with demand, resulting in little
or no inventory.
7-3. Nowjuice, Inc., produces Shakewell fruit juice. A planner has developed an aggregate forecast
for demand (in cases) for the next eight months.
month Apr May Jun Jul Aug Sep Oct Nov
forecast 4500 4400 6200 6400 5800 6600 7200 6900
Use the following information to develop aggregate plans.
Regular production cost: $10.00 per case
Regular production capacity: 5,000 cases
Overtime production cost: $16 per case
Subcontracting cost: $20 per case
Holding cost: $1 per case per month
Beginning inventory: 0
Develop an aggregate plan using each of the following guidelines and compute the total cost for
each plan. Which plan has the lowest total cost?
(a) Use level production of 5,000 case per month. Supplement using overtime as needed
(b) Use a combination of overtime (500 cases per month for the first five months), inventory, and
subcontracting (500 cases per month from September to November, if necessary) to handle
variations in demand. Note that suitable amounts of overtime for the last three months should
be found to determine the total cost.
Answer: (a) Level production supplemented with overtime as needed

Forecast Regular Forecasting Inventory

Month Demand production Inventory level Overtime level
April 4500 5000 500 500
May 4400 5000 1100 1100
Jun 6200 5000 -100 100 0
Jul 6400 5000 -1400 1400 0
Aug 5800 5000 -800 800 0
Sep 6600 5000 -1600 1600 0
Oct 7200 5000 -2200 2200 0
Nov 6900 5000 -1900 1900 0
Total 48000 40000 8000 1600

Total cost calculation

Regular production cost: 40000 x $10=$400,000
Overtime production cost: 8000x$16=$128,000
Inventory Cost: 1600x$1=$1,600
Total cost: $529,600

(b) Use a combination of overtime and subcontracting

Forecast Regular Forecasting Subcontracting Inventory

Month Demand production Overtime Inventory level level
April 4500 5000 500 1000 1000
May 4400 5000 500 2100 2100
Jun 6200 5000 500 1400 1400
Jul 6400 5000 500 500 500
Aug 5800 5000 500 200 200
Sep 6600 5000 900 -1400 500 0
Oct 7200 5000 1700 -2200 500 0
Nov 6900 5000 1400 -1900 500 0
Total 48000 40000 6500 1500 5200
Total cost calculation
Regular production cost: 40000 x $10=$400,000
Overtime production cost: 6500x$16=$104,000
Subcontracting 1500x$20=$30,000
Inventory Cost: 5200x$1=$5,200
Total cost: $539,200
Answer: (a) is better since it is cheaper.

7-4. A company that makes industrial pumps wants to prepare a master production schedule for
June and July. Market forecast is given below. The weekly demand forecast is given as shown in the
table. The customer order (already committed) are also shown. The beginning inventory level is 64.
Determine Available-to-promise inventory u de the o ditio that schedule production when the
projected on-hand inventory would be negative without production . Suppose the production lot
size is 70.

June July
1 2 3 4 1 2 3 4
Forecast 30 30 30 30 40 40 40 40
Customer order (committed) 33 25 16 11 8 3

Answer:

May June July

4 1 2 3 4 1 2 3 4
Forecast 30 30 30 30 40 40 40 40
Customer order
33 25 16 11 8 3
(committed)
1- 11- 1- 31-
Projected on- 64-33 31-30 41-30 41-40
64 30+70 40+70 40+70 40+70
hand inventory =31 =1 =11 =1
=41 =41 =31 =61
MPS 70 70 70 70
(64+0)- 70-
70-8-3
ATP (33+25) 16-11 70 70
= 59
=6 =43

7-5. The forecast for each week of Question 8-6 has changed to 50 units each week and customer
orders are changed as well. (see the table below). The beginning inventory level is 0 and the
production lot size is 75. Determine Available-to-promise inventory under the condition that
schedule production when the projected on-hand inventory would be negative without
production .

June July
1 2 3 4 1 2 3 4
Forecast 50 50 50 50 50 50 50 50
Customer order
52 35 20 12
(committed)

Answer:

May June July

4 1 2 3 4 1 2 3 4
Forecast 50 50 50 50 50 50 50 50
Customer order
52 35 20 12
(committed)
Projected on- 75-52 23+75 48+75- 73- 23+75 48+75- 73-50 23+75
0
hand inventory =23 -50=48 50=73 50=23 -50=48 50=73 =23 -50 =48
MPS 75 75 75 75 75 75
 75-52 75-35 75-20-
ATP 75 75 75
=23 =40 12 =43

7-6. The forecast and customer orders are as shown in the table below. The beginning inventory
level is 70 and the production lot size is 100 units. Determine Available-to-promise inventory under
the o ditio that schedule production when the projected on-hand inventory would be negative
without production .

January February
1 2 3 4 1 2 3 4
Forecast 70 70 70 50 55 50 50 55
Customer order
40 15 90 0 35 65 0 0
(committed)
Projected on-hand 70- 0+100- 30+100- 40+100- 90-55 35+100- 70-50 20+100
inventory 70=0 70=30 90 =40 50=90 =35 65=70 =20 -55=65

MPS 100 100 100 100 100

70- 100-15 100-90 100-35 100-65

ATP 100
40=30 =85 =10 =65 =35

Questions for Module 8

8-1. How is safety stock included in a material requirements plan?

Answer: Safety stock is not normally needed for dependent demand items below the end-item level
because the usage of these items are calculated from the quantities established for the end
item in the master schedule. However, in practice, there are a number of reasons to carry
safety stock in an MRP system. Some of these reasons include scrap, defective units, late
deliveries due to longer than expected production time of components or late deliveries of
parts from the suppliers. Maintaining safety stock is important for multi-level items because
a shortage for a lower level item in the BOM will cause a shortage for the end-item.
However, if safety stock is carried for all dependent demand items, the main advantage of
MRP will be lost.

8-2. What is meant by the term safety time?

ANSWER: Because of the pyramid relationship that exists for components in an MRP system, it is not
realistic to attempt to provide safety stock at all levels because this would result in huge carrying
costs. Moreover, because shortage at any level will mean shortages from that point up to the top of
the tree, safety stock at lower levels provides only minimal protection. Instead, on items subject to
lead time variability, orders are submitted a bit earlier than needed, thereby gaining some safety
ti e to o pe sate fo the possi ility of i eased lead ti e

8-3. What is lot sizing, what is its goal, and why is it an issue with lumpy demand?
ANSWER: The term lot sizing refers to selecting a lot size to order. In the case of uniform demand, an
EOQ approach will yield an appropriate lot size. Under lumpy demand, it usually makes
sense to time orders so that they arrive as needed. The EOQ amount, though, may not equal
the quantity needed at a particular point in time. Lot-for-lot ordering is often used instead.
However, some other lot size may yield lower total costs. Because of the variations in timing
and quantity generally inherent in lumpy demand cases, there may not be a single approach
which will consistently yield a reasonably good answer.

8-4. Given the following diagram for a product, determine the ADDITIONAL quantity of each
component required to assemble 20 unit of the finished product.

The current inventory is as follows.

B C D E F G H
10 10 25 12 30 5 0

Answer:

B(20x2-10=30) - E(30x2-12=48), F(30x3-30=60),

C(20x1-10=10) - G(10x2-5=15), E(10x2=20)

D(20x3-25=35) – H(35x4-0=140), E(35x2=70).

Total number of E requires: 48+20+70=138.

8-5. Given the following diagram for a product, determine the ADDITIONAL quantity of each
component required to assemble 40 unit of the finished product.

End Item

L(2) C K(3)

B(2) J(3) G(2) B(2) H(4) B(2)

The current inventory is as follows.

L C K B J G H
10 15 20 30 30 5 0
ANSWER;

L(40x2-10=70): B(70x2-30=110), J(70x3-30=180)

C(40x1-15=25): G(25x2-5=45), B(25x2=50)

K(40x3-20=100): H(100x4-0=400), B(100x2=200)

Total number of B requires 110+50+200=360.

8-6. A table is assembled using three components, as shown in the accompanying product structure
tree. The company that makes the table wants to ship 100 units at the beginning of day 4, 150 units
at the beginning of day 5, and 200 units at the beginning of day 7. Receipts of 100 wood sections are
scheduled at the beginning of day 2. There are 120 legs on hand. An additional 10 percent of the
order size on legs is added for safety stock. There are 60 braces on hand with no safety stock
requirement for braces. Lead times (in days) for all items are shown in the following table. Prepare a
material requirements plan using lot-for-lot ordering. Ordering Lot size for wood section is 400 units.

Quantity Lead time (days)

1-200 1
201-550 2
551-999 3

Note you should show the formula to obtain all necessary figures. List only numbers is in each item
will not be counted for the marking. (for example, you have to show how to obtain figures in
projected on-hand)

ANSWER:

Master schedule
Beg.
Day 1 2 3 4 5 6 7
Inv.
Quantity 100 150 200

For Table

Table Beg. 1 2 3 4 5 6 7
Gross requirements Inv. 100 150 200
Scheduled receipts
Projected on hand 0 0 0 0 0 0 0 0
Net requirements 100 150 200
Planned-order receipts 100 150 200
Planned-order releases 100 150 200

For Wood section

Wood Sections Beg. 1 2 3 4 5 6 7

Gross requirements Inv. 200 300 400
Scheduled receipts 100
 400-
100+400 300-
Projected on hand 0 0 100 0 400 0
-200=300 300=0
=0
100-200 0-
Net requirements =100 0 400=
400
Planned-order receipts 400 400

Planned-order releases 400 400

For braces

Braces Beg. 1 2 3 4 5 6 7
Gross requirements Inv. 300 450 600
Scheduled receipts
410+
60+550 - 310+550 - 550-
Projected on hand 60 60 60 410 360
300 =310 450= 410 600=
360
410-
60-300 310-450 =
Net requirements 600=
=240 140
190
Planned-order receipts 550 550 550
Planned-order releases 550 550 550

For legs

Legs Beg. 1 2 3 4 5 6 7
Gross requirements Inv. 400 600 800
Scheduled receipts
28+63 58+817
120-400
Projected on hand 120 120 120 0-600= 58 -800 75
+308=28
58 =75
400-120 600-28 800-58
Net requirements
=280 =572 =742

280x1.1 572x1.1 742x1.1

Planned-order receipts
=308 =630 =817
308+
Planned-order releases 630 817
=968
8-7. A company produces two very similar products that go through a three-step sequence of
fabrication, assembly, and packaging. Each step requires one day for a lot to be completely
processed and moved to the next department. Processing requirements for the departments (hours
per unit) are

Fabrication Assembly Packaging

 Product Labour Machine Labour Machine Labour Machine
A 2 1 1.5 1 1 0.5
B 1 1 1 1 1.5 0.5

Department capacities are 700 hours of labour and 500 hours of machine time, except Friday, when
capacities are 200 hours for both labour and machine time. Note that this amount of time is for all
tasks not individual. The following production schedule

Product Mon Tue Wed Thu Fri

A 200 400 100 300 100
B 300 200 200 200 200

(a) Develop the capacity requirements for each product and the total load for each day for each
department. Ignore changeover time.

(b) Evaluate the projected loading for the first three days of the week. Is the schedule feasible?
What do you suggest for balancing the load?

ANSWER:

Fabrication Assembly Packaging

Day Product Labour Machine Labour Machine Labour Machine
A 400 200 300 200 200 100
Mon B 300 300 300 300 450 150
Total 700 500 600 500 650 250
A 800 400 600 400 400 200
Tue B 200 200 200 200 300 100
Total 1000 600 800 600 700 300
A 200 100 150 100 100 50
Wed B 200 200 200 200 300 100
Total 400 300 350 300 400 150
A 600 300 450 300 300 150
Thu B 200 200 200 200 300 100
Total 800 500 650 500 600 250
A 200 100 150 100 100 50
Fri B 200 200 200 200 300 100
Total 400 300 350 300 400 150
Labor capacity of 700 hours is exceeded on Tuesday in the Fabrication Department and the
Assembly Department. Machine capacity of 500 hours is also exceeded in the same two
departments on Tuesday. Shift 150 units of A (300 labour hours, 150 machine hours) to
Wednesday in the Fabrication Department. For assembly, a similar shift of 150 units of A
could be made, although other combinations are possible (e.g., some A and some B). Friday
capacity might needs to be increased to cope with demand.

Questions for Module 9

9-1. What is the ultimate goal of a lean system? What are the supporting goals?
ANSWER: The ultimate goals of JIT are to improve customer service and to improve operational
efficiency through improved balanced flow through the workstations. In order to achieve these
goals, JIT has the following supporting goals: elimination of waste and disruptions, reduction of
inventories, reduction in setup times and lead times and increased flexibility of the system to be able
to produce a wider variety of products.

9-2. What is the kanban aspect of JIT?

Answer: A kanban is a signal used in some JIT systems to authorize movement of materials or to
authorize work. Hence, kanbans control movement of work in such systems. One important aspect
of ka a s is that they p o ide lo al sig als as opposed to e t alized sig als, and these are tied
directly to the pull system used by JIT

9-3. What are the benefits and risks of small lot sizes?

Answer: Small lot sizes allow in-process inventory to be considerably less. This in turn reduces
carrying costs, space requirements, and clutter in the workplace. Inspection and rework costs are
less. Small lot sizes allow for more flexibility in scheduling. A risk with small lot sizes is not having
enough when something goes wrong.

9-4. A JIT system uses kanban cards to authorize movement of incoming parts. In one portion of the
system, a work center uses an average of 100 parts per hour while running. The manager has
assigned an inefficiency factor of .20 to the center. Standard containers are designed to hold six
dozen parts each. The cycle time for parts containers is about 105 minutes. How many containers
are needed?

ANSWER: N= ?
D= 100 pieces per hour
T= 105 min. = 1.75 hr.
C= 72
X = .20

DT (1  X ) (100)(1.75)(1  0.20)
N   2.917  3
C 72

9-5. Compute the takt time for a service system that intended to perform a standardized service.
The system will have a total work time of 440 minutes per day, two 10-minute breaks, and an hour
for lunch. There are two shift per day. The service system must process 90 jobs a day
Answer:
Net time available per shift: 440-20-60=360 minutes
2 shift per day: 360 minutes × 2 = 720 per day
Daily demand: 90 jobs
Takt time: 720/90=8 minutes

9-6. What cycle time would match capacity and demand if demand is 120 units a day, there are two
shifts of 480 minutes each, and workers are given three half-hour breaks during each shift, one of
which is for lunch or dinner?
Answer:
Net time available per shift: 480-90=390 minutes
2 shift per day: 390 minutes × 2 = 780 per day
Daily demand: 120 units
Takt time: 780/120=6.5 minutes