PRODUCTION AND OPERATIONS MANAGEMENT

Final Examination

Name:_______________________________________________Date:____________Professor: Dr. Leonardo C. Medina, Jr.

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

1) Five sources exist for the civet cat coffee favored by true coffee connoisseurs. The four processing centers for
these coffee beans are scattered about the country, each with a different level of demand. The five sources all
face different cost structures for transporting their beans, the prices in the table reflect a dollar cost per 50 pound
bag of coffee beans. The total amounts supplied by each source and demanded by each destination are also
shown in the table, and as luck would have it, the total supply equals the total demand. What is the optimal
shipping scheme such that the total transportation cost is minimized?

Destination 1 Destination 2 Destination 3 Destination 4 Supply

Source 1 $5 $7 $2 $9 400
Source 2 $8 $6 $3 $4 400
Source 3 $11 $15 $18 $11 300
Source 4 $9 $6 $4 $3 200
Source 5 $7 $9 $11 $8 200
Demand 500 350 250 400 1500

2) Consider the transportation tableau shown below. What is the minimum cost of transporting the production
from Ada, Bugtussle, and Choctaw to Durant, Edmond, and Foss if costs per unit are shown at the intersections
of each location?

Durant Edmond Foss Capacity

Ada 5 7 3 200
Bugtussle 3 4 4 300
Choctaw 8 6 8 200
Requirements 250 300 150

3) Discuss the trade-offs with locating the inventory at the factory versus locating it closer to the customer at a
warehouse, distribution center, wholesaler, or retailers.

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4) A national firm has beef jerky processing facilities in Locations 1, 2, 3, and 4. They ship to central distributors
(represented as A, B, C, and D) handling four regions of the country. The per-unit shipping costs between each
possible combination of locations are shown in the following table.

A B C D
1 $5 $10 $5 $4
2 $3 $4 $4 $3
3 $8 $6 $8 $2
4 $2 $3 $5 $9

The processing facility locations are capable of monthly production (in tons) as follows:
Location 1: 600
Location 2: 350
Location 3: 475
Location 4: 850

The central distributors have firm commitments for the following quantities:
Distributor A: 650
Distributor B: 725
Distributor C: 400
Distributor D: 500

What is the lowest-cost shipping arrangement that can be made between the plant locations and distributors
and what is the annual shipping cost?

5) Jackson Sheds has four different warehouse configurations under study, ranging from four warehouses to seven
warehouses (only integer values). Each warehouse has a capacity of 200 units and costs $200 to maintain over
the course of a year. Demand can range from 1000 units per year up to 2000 units in increments of 250 units. If
the system warehouse capacity is sufficient to handle the year's demand, then the per unit cost is $2 per unit, but
if the warehouse capacity is insufficient, the per unit cost for each unit in excess of system capacity is $3 per
unit. The likelihood for each possible demand is shown in the table.

Likelihood 0.1 0.2 0.3 0.3 0.1

Demand 1000 1250 1500 1750 2000

Which warehouse configuration is BEST for Jackson Sheds?

6) What are the elements of the SCOR model?

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 7) The Bahouth Bike Company has completed an exhaustive analysis for four suppliers of bicycle frames to
support their business. They considered on-time speed, top quality and customization in their selection process.
Each criterion is given a weight (total = 100 points), and each supplier is scored on each criterion (1 = poor, 10 =
excellent). The data are shown in the following table.

CRITERION WEIGHT A B C D
Sustainability 3 9 2 0 1
Cost 6 3 0 3 10
Quality 8 4 0 9 4
On-time Delivery 4 0 6 1 0

Using the preference matrix (total weighted score) approach for selecting suppliers, which supplier should
Bahouth select? What is its total weighted score?

8) Describe a traveling salesman scenario from your own experience. How can the nearest neighbor heuristic be
used to solve it?

9) The Alphabet Soup Company is delivering the monthly supply of their fine product to their seven customers.
The distances in miles between the customers are shown in the table and, wishing to be as efficient as possible,
the driver would like to find the shortest route that takes her from the starting point A to every customer and
then back to the starting point. Use the nearest neighbor heuristic to identify a route that would minimize the
distance traveled.

From/To A B C D E F G H
A 0 288 231 210 89 216 118 264
B 62 0 51 166 211 36 223 270
C 176 196 0 126 90 235 190 83
D 210 216 86 0 171 46 276 125
E 223 93 242 160 0 238 104 139
F 193 44 73 79 137 0 50 196
G 255 275 241 116 41 293 0 164
H 271 31 33 79 52 107 225 0

10) What pressures do organizational leaders feel in the area of sustainability?

11) What is steady state in a simulation model? Why is it important to achieve steady state?

12) What is the difference between a waiting line model as described in Supplement B and a simulation model of a
waiting line problem?

13) Refer to the bank process model. The Marketing Department for the bank has decided to run a special
promotion for new customers that will increase the number of customers arriving at the bank. The new arrival
rate is expected to be an average time between arrivals of 2.0 minutes instead of the current average time
between arrivals of 2.5 minutes. With the potential increase in business, the bank manager is concerned about
the number of customers who will arrive and leave because the line is full (with 6 customers) and the average
wait time in line at the bank. All other parameters of the model remain the same. Using SimQuick, estimate the
new arrive and immediately leave rate and average time in line. Should the manager be concerned?

14) Since 1986, the only acceptable accelerated depreciation method is the ________.

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15) The ________ is the discount rate that makes the NPV of a project zero.

16) A single-sampling plan by attributes is needed for a purchased component. Table G.1 is appended to this exam.
Sample size = 80
Acceptance number (c) = 1
Acceptance quality level (AQL) = 0.02
Lot tolerance proportion defective (LTPD) = 0.06
Given the preceding information draw the AOQ curve and determine the AOQL.

17) A single-sampling plan by attributes is needed for a purchased component. Table G.1 is appended to this exam.
Sample size = 100
Acceptance number (c) = 2
Acceptance quality level (AQL) = 0.01
Lot tolerance proportion defective (LTPD) = 0.04
Given the preceding information:

18) An undergraduate business student studies diligently in the library during dead week in anticipation of an
outstanding performance on her final exams. She asks a friend to spy on her at random intervals to determine
what percentage of time she is actually studying. Over the course of three days, her friend records the following
observations:

Times Times Not

Observation Period Studying Studying Observations
Monday 20 3 23
Tuesday 21 4 25
Wednesday 10 1 11

Total 51 8 59

If the student wants a 95 percent confidence level (z = 1.96) and a degree of precision of + 0.08, how many more
observations are needed?

19) Why would the elemental standard data approach be used instead of a work sampling study when developing
a time standard?

20) How are learning curves useful in financial planning?

21) When production time standards are being developed for a brand new process for several of the hand assembly
components of the production line, what are the implications of learning effects on the time standards and the
line balance? What could be done to address this situation?

22) Describe the difference between front office and back office operations from the standpoint of scheduling
customer jobs.

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23) A firm of four departments has the following trip matrix and current block plan of all departments:

a. What is the weighted-distance score for the current layout? (Assume rectilinear distance and that the distance
between departments A and B is one unit of distance.)
b. What would be the weighted-distance score for the following layout?

24) Consider any two factors that a service operation assigns the greatest weight when making a location decision.
Using those two factors, identify one local service operation that likely used one of those factors as their top
priority and a different service operations that likely used the other of your two factors as their dominant
criterion. Briefly describe the business and justify your assignment of each factor as the overriding concern.

25) Draw a graph illustrating the bullwhip effect and discuss its impact on the measures of supply chain
performance.

26) Sweet Action, Inc. is making the daily cupcake run across the Oklahoma City metropolitan area. They have
seven customers and have identified the driving distance (in miles) between each pairwise combination as
shown in the table. One-way streets and various construction projects affect driving distances such that the
distance from one to the other may not be same depending on which site is the starting point. Identify the most
energy efficient route that begins at Sweet Action headquarters (SA) and visits each customer once before
returning to headquarters.

From/To SA Bosco's Champion Damron Enumclaw Luther Jones Heidi

SA 0 9 97 17 22 34 55 71
Bosco's 14 0 99 29 20 39 84 53
Champion 63 8 0 90 96 89 66 78
Damron 98 90 29 0 46 88 62 13
Enumclaw 27 88 94 81 0 49 53 35
Luther 91 95 62 91 19 0 73 91
Jones 87 2 27 69 11 4 0 25
Heidi 61 31 58 13 15 92 44 0

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27) SimQuick is to be used to simulate the following bank process:

Customers arrive at the Entrance Door of the bank with an average time between arrivals of 2.5 minutes The
Line Buffer holds 6 customers. If a customer arrives and the buffer line is filled, the customer leaves. The Work
Station Teller's processing time per customer is normally distributed, with a mean of 3.0 minutes and a standard
deviation of 0.5 minutes. The Served Customer Buffer in the flowchart is used to count the number of customers
processed during the simulation period. A 2-hour period is to be simulated and the simulation should be
repeated 30 times. Determine:
a) The number of customers served during the 2-hour period;
b) The percentage of customers who arrived at the bank and left because the buffer line was full;
c) The utilization of the teller (% of time working) during the 2-hour period;

28) Explain the time-value-of-money concept.

29) A small ________ can be disregarded in AOQ calculations involving an extremely large lot size.

30) What are the limitations of time studies?

31) Tim usually exhibits an 80% learning rate for the mechanical tasks he undertakes. His next big project, the fence
along the street, will require 35 iterations of the fencepost task. If he has 80 hours available to work on the
project, how fast must he perform the first iteration in order to finish all 35 within his allotted time? Refer to the
copy of Table I.1 appended to this exam.

32) Use the information in the table and sequence the six jobs using the critical ratio algorithm. Calculate the
average flow times and average lateness. All jobs arrived at time zero and are ready at time zero.

Production
Job Time Due Date
A 10 20
B 15 25
C 17 22
D 20 31
E 16 20
F 20 24

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33) A department store chain is designing a layout for a new store. The store manager wants to provide as much
convenience as possible for her customers. Based on historical data, the number of trips between departments
per hour is given in the following closeness matrix. A block plan showing a preliminary layout is also shown.

Customer travel between departments is restricted to the aisles shown in the block plan as dotted lines.

CALCULATIONS TABLE
Closeness Original Revision #1
Dept. Pair Factor (w) Distance (d O) w × dO Distance (d1 ) w × d1
1—2
1—3
1—4
1—5
1—6
2—3
2—4
2—5
2—6
3—4
3—5
3—6
4—5
4—6
5—6
TOTAL

a. What is the total expected weighted-distance score between Office Supplies and Hardware?
b. What is the total weighted-distance score between Hardware and Toys?
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 c. What is the total weighted-distance score for the entire store?
d. A suggestion has been made to switch Hardware and Automotive. What would the total weighted-distance
score for the entire store be if these two departments were switched?
e. Based on your calculations, would you recommend that Hardware and Toys be switched?

34) Excel Products is planning a new warehouse to serve the Southeast. Locations A, B, and C are under
consideration. Fixed and variable costs follow.

Fixed Cost per Variable Cost

Location Year per Unit
A $2,500,000 $7
B 1,500,000 19
C 2,000,000 13

For what range of volume is each location the best?

Table 14.1
Alison's Accessories is a high volume worldwide fashion house with outlets in 65 countries. Sadly, space does not permit an
exhaustive list but once the test is over, check out their website. Kalil, the supply chain manager is conducting her usual
thorough analysis of her final four candidates for supplier and has developed the following tables of pertinent costs and
other shipping metrics. Regardless of supplier, Alison's Accessories will operate 220 days per year and has forecast annual
demand of 250,000 units. Kalil has obtained quotes for three different shipment sizes (Freight Costs table). All costs are in US
Dollars.
Unit costs
Supplier Price/Unit Carrying Cost
A 123 22
B 125 19
C 126 18
D 100 40

Freight Costs
Supplier 15,000 units 25,000 units 50,000 units
A 380,000 260,000 237,000
B 615,000 547,000 470,000
C 285,000 240,000 200,000
D 380,000 260,000 237,000

Other Costs
Supplier Lead Time Admin Costs
A 30 250,000
B 15 275,000
C 7 225,000
D 90 2,500,000

35) Use the date in Table 14.1. Analyze costs and make recommendations regarding the shipping options and
suppliers. Which combination of shipping amount and supplier yields the lowest total cost?

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36) Copies of the Wall Street Journal are printed locally and delivered to ten different newsstands throughout the
area. The spotter picks up the papers at 4 a.m. and visits each site once, drops off a predetermined number of
copies, and proceeds to the next location before returning to the printer. The driver has always determined his
route "pretty much at random" however he recently read an article (in the Wall Street Journal) that addressed
sustainability issues in services. He was so taken with the sustainability concept that he has decided to
determine an optimal route for his ten stops. One morning he picks up his papers at 4 a.m. and then jots down
each possible route and adds up the total distance traveled for that route. If it takes him one minute to evaluate
a route, at what time will he begin to make his deliveries?

37) Why would data need to be collected prior to conducting a simulation?

38) Acapella University offers to lock-in a student's tuition for a four year period. If tuition is $30,000 per year
(payable at the end of each year) and the interest rate is currently 8%, what amount of money now would
enable you to withdraw the $30,000 figure at the end of each of the next four years?

39) Relative to an acceptance sampling plan, what is the net effect of increasing n while holding c constant?

40) A pilot work study has been conducted on a new operation with four work elements. The following times, in
seconds, were obtained using the continuous method.

a. What is the normal time for this operation?

b. If an allowance of 20 percent is used, what is the standard time for this task?
c. What sample size is appropriate for estimating the time for element 3 within + 3 percent of the true mean
time with 95 percent confidence (z = 1.96)?