Suppose the assembly line at a Toyota plant moves at the rate of one vehicle per minute. Once the assembly process begins, it takes 2.

  1. Suppose the assembly line at a Toyota plant moves at the rate of one vehicle per minute.

Once the assembly process begins, it takes 2.5 hours for a vehicle to reach final assembly,

where seats are installed. While in final assembly, vehicles with defective seats are driven

to the “code-1” parking area, which is used exclusively for seat defects. Vehicles in code-1

wait on average one week for replacement seats to arrive and be installed. At any given

time an average of 8 vehicles are waiting in code-1. Assume the plant operates non-stop,

24 hours a day, 7 days a week.

  1. What is the average number of vehicles in the assembly line (excluding final assembly) at any given time?
  2. On average, how many vehicles per day are sent to code-1 parking?
  1. A manicure spa is structured as a two-stage process. Upon arrival, customers wait in a

common area an average of 6 minutes before proceeding to the _rst available manicurist.

There is a total of six manicurists. The average time for a manicure is 16 minutes regardless

of the manicurist providing it. Customers then proceed to pay, but they typically must

wait in line an average of 2 minutes before they are able to do so since there is only one

cashier who takes on average 4 minutes to process each payment.

(a) What is the cycle time of the two-stage process?

(b) What is the capacity of the two-stage process?

  1. One of your classmates is inviting you into a partnership to sell holiday gift baskets. He

has found a local source of unique baskets made in Thailand. The baskets are hand-made

and must be ordered far in advance of the holiday season at a cost of $8 each. The plan

is to fill each basket with an assortment of readily available items, which the two of you

will buy on demand upon securing each order. The average cost of a basket’s contents is

$73. The unit selling price of a gift basket will be $100. The basket supplier has agreed

to buy-back any leftover empty baskets for $2 each at the end of the season.

Demand for gift baskets is random with the following discrete distribution:

Total number of

gift baskets demanded. Probability

5 .07

10 .13

15 .10

20 .15

25 .10

30 .15

35 .15

40 .10

45 .05

(a) What is the marginal cost of shortage?

(b) What is the marginal cost of excess?

(c) How many empty baskets do you recommend ordering in advance of the holiday


  1. Crapo Appliance Service (CAS) specializes in repairing vacuum cleaners. CAS receives

weekly deliveries from its vacuum cleaner belt supplier, who replenishes belts up to a level

that Crapo Appliance is free to specify. CAS buys a very popular belt at a unit price of

$17.50. The annual inventory carrying charge is 20%. Weekly demand for belts is normally

distributed with mean 86 and standard deviation 24. CAS’ management wants to limit

the probability of a stock-out on any given week not to exceed 1%.

(a) What replenishment level would you recommend?

(b) What is CAS’ average level of safety stock?

(c)  What is CAS’ annual cost of holding cycle stock?

  1. Justin Time manages a convenience store in which he sells phone cards to consumers. He

purchases the phone cards from a distributor at $2 each, and pays a fixed $37.50 shipping

and handling charge per order. The lead time from his distributor is 2 weeks. Assume an

annual rate of 25% for inventory carrying charges and 50 weeks per year. Weekly demand

is normally distributed with a mean and standard deviation of 300 and 14 phone cards

respectively. Assume full backorders.

(a) What is the optimal order quantity?

(b) Suppose that Justin wants to provide a 90% service level. What is the optimal

reorder point?

6. Consider a serial sequence of tasks. The processing time of a non-bottleneck resource

is decreased. Then we can most clearly conclude that

(a) capacity will increase

(b) throughput will increase

(c) cycle time will decrease

(d) average inventory will increase

7. If a firm’s demand is doubled and its capacity is doubled as well, we would expect the

average time orders spend in the system to approximately

(a) double

(b) increase by SQR2

(c) remain the same

(d) decrease by 1/SQR2

(e) half

8.We argued in class that selling unisex as opposed to gender specific diapers is likely to

(a) increase inventory levels because of pooling

(b) decrease inventory levels because of pooling

(c) not exhibit pooling effects on inventory levels

(d) exhibit pooling effects on inventory levels as long as demands are normally distributed

9. [1] The optimal solution to the newsvendor model

(a) balances the cost of an extra item with the cost of running out of an item

(b) balances holding costs and ordering costs

(c) balances the shadow price of a resource with the objective function

(d) balances work in process with machine and worker utilization

10. We argued that the most significant component of Barilla’s JITD program was that

Barilla would

(a) get better demand information from distributors

(b) make stocking decisions for distributors

(c) schedule production according to the JIT method

(d) install electronic links with distributors

11. We argued that from an operations perspective, a significant contributing factor

to Webvan’s demise was

(a) neglecting the impact of tight delivery windows on routing efficiency

(b) being too optimistic about the adoption rate of its service

(c) neglecting the high fixed costs for its distribution centers

(d) neglecting the high variable cost of order picking

12. Which of the following inventory model(s) require the firm to continuously track its

inventory level?

(a) Basestock

(b) (Q,R)

(c) Newsvendor

(d) Basestock and Newsvendor

(e) Basestock, (Q,R), and Newsvendor

13. When planning to build a cross-dock, the most important consideration should be

(a) the building’s geographic location relative to suppliers and retailers

(b) the cost of land at the building’s location

(c) the design of the area in which pallets are broken down into cases

(d) the design of the order-picking area

(e) the quack ratio

14. In the Confederated Pulp & Paper case, suppose the cost of a local cunit is reduced.

The optimal service level would, as a result

(a) decrease

(b) increase

(c) increase or decrease, depending on the magnitude of the cost reduction for a local cunit

(d) not be affected

15. Consider a company with both a retail outlet division (with over 100 retail stores) and

a catalog sales division. Each division stocks the same selection of items and suppose the

total sales in each division is about the same. The fact that the catalog division requires

less inventory can be most directly explained as a result of:

(a) A newsvendor model

(b) A risk pooling model

(c) A Six Sigma model

(d) A vehicle routing model

(e) A supermodel