Week 6 Homework #3

Week 6: Homework #3 Problems (chapters 9-12): 9.5, 9.11, 11.3, 12.7, 12.15 Chapter 10: Jackson Manufacturing Case (p. 437), complete the assignment as outlined in the text (4 questions). Chapter 11:  Arnold Palmer Hospital's Supply Chain.  Review this video and answer the discussion questions in 2 pages or less. https://www.youtube.com/watch?v=1ELl4CRts6Y 9.5 Adam Munson Manufacturing, in Gainesville, Florida, wants to arrange its four work centers so as to minimize interdepartmental parts handling costs. The flows and existing facility layout are shown in Figure 9.19. For example, to move a part from Work Center A to Work Center C is a 60-foot movement distance. It is 90 feet from A to D. Parts Moved Between Work Centers A B C D A — 450 550 50 B 350 — 200 0 C 0 0 — 750 D 0 0 0 — Existing Layout A B C D |———30’———|———30’———|———30’———| a) What is the “load x distance,” or “movement cost,” of the layout shown? A to B: 30 x 450 = 13,500 A to C: 60 x 550 = 33,000 A to D: 90 x 50 = 4,500 B to A: 30 x 350 = 10,500 B to C: 30 x 200 = 6,000 C to D: 30 x 750 = 22,500 90,000 The total “load x distance” or “movement cost” of the layout is 90,000. b) Provide an improved layout and compute its movement cost. B A C D |———30’———|———30’———|———30’———| A to B: 30 x 450 = 13,500 A to C: 30 x 550 = 16,500 A to D: 60 x 50 = 3,000 B to A: 30 x 350 = 10,500 B to C: 60 x 200 = 12,000 C to D: 30 x 750 = 22,500 78,000 The movement cost of the improved layout is 78,000. 9.11 After an extensive product analysis using group technology, Leon Bazil has identified a product he believes should be pulled out of his process facility and handled in a work cell. Leon has identified the following operations as necessary for the work cell. The customer expects delivery of 250 units per day, and the workday is 420 minutes. a) What is the takt take? Takt time = Total work time available / Units required to satisfy customer demand Takt time = 420 minutes / 250 units = 1.68 units The takt time is 1.68 minutes. b) How many employees should be cross-trained for the cell? Workers required = Total operation time required / Takt time Workers required = (1.1 + 1.1 + 1.7 + 3.1 + 1.0) minutes / 1.68 minutes 8 / 1.68 = 4.76 = 5 The number of employees that should be cross-trained for the cell is 5 employees. c) Which operations may warrant special consideration? OPERATION STANDARD TIME (min) Shear 1.1 Bend 1.1 Weld 1.7 Clean 3.1 Paint 1.0 Cleaning operations may warrant special consideration because they require 3.1 minutes out of a total operation time of 8 minutes for each unit. 11.3 Kamal Fatehl, production manager of Kennesaw Manufacturing, finds his profit at $15,000 (as shown in the statement below)—inadequate for expanding his business. The bank is insisting on an improved profit picture prior to approval of a loan for some new equipment. Kamal would like to improve the profit line to $25,000 so he can obtain the bank’s approval for the loan. % OF SALES Sales $250,000 100% Cost of supply chain purchases 175,000 70% Other production costs 30,000 12% Fixed costs 30,000 12% Profit 15,000 6% a) What percentage improvement is needed in a supply chain strategy for profit to improve to $25,000? What is the cost of material with a $25,000 profit? Total cost = $175,000 + 30,000 + 30,000 = $235,000 Percentage improvement in supply chain strategy = (25,000 - 15,000) / 175,000 x 100 = 5.71% New supply chain purchase = 175,000 - 25,000 + 15,000 = $165,000 A decrease of 5.71% in supply chain costs is required to yield a profit of $25,000 for a new cost of supply chain purchases of $165,000. b) What percentage improvement is needed in a sales strategy for profit to improve to $25,000? What must sales be for profit to improve to $25,000? (Hint: See Example 1.) Percentage improvement in sales strategy = (25,000 - 15,000) / 250,000 x 100 = 4% New level of sales = 250,000 - 25,000 + 15,000 = $240,000 An increase of 4% in sales is required to yield a profit of $25,000, for a new level of sales of $240,000. 12.7 William Beville’s computer training school, in Richmond, stocks workbooks with the following characteristics: Demand D = 19,500 units/year Ordering cost S = $25/order Holding cost H = $4/unit/year a) Calculate the EOQ for the workbooks. EOQ = ?2D x S / H EOQ = ?2 x 19,500 x $25 / 4 ?975,000 / 4 ?243,750 = 493.7 The EOQ for the workbooks is 494 units. b) What are the annual holding costs for the workbooks? Annual holding costs = EOQ / 2 x H Annual holding costs = 494 / 2 x 4 = $988 The annual holding costs for the workbooks are $988. c) What are the annual ordering costs? Annual ordering costs = D / Q x S Annual ordering costs = 19,500 / 494 x 25 = $987 The annual ordering costs are $987. 12.15 Joe Henry’s machine shop uses 2,500 brackets during the course of a year. These brackets are purchased from a supplier 90 miles away. The following information is known about the brackets: Annual demand: 2,500 Holding cost per bracket per year: $1.50 Order cost per order: $18.75 Lead time: 2 days Working days per year: 250 a) Given the above information, what would be the economic order quantity (EOQ)? EOQ = ?2D x S / H EOQ = ?2 x 2,500 x $18.75 / $1.50 ?93,750 / 1.50 ?62,500 = 250 units Given the above information, the economic order quantity (EOQ) is 250 units. b) Given the EOQ, what would be the average inventory? What would be the annual inventory holding cost? Average inventory = EOQ / 2 Average inventory = 250 / 2 = 125 units Given the EOQ, the average inventory would be 125 units. Annual inventory holding cost = EOQ / 2 x H Annual inventory holding cost = 250 / 2 x 1.5 = $187.50 The annual inventory holding cost would be $187.50. c) Given the EOQ, how many orders would be made each year? What would be the annual order cost? Number of orders = D / EOQ Number of orders = 2,500 / 250 = 10 Given the EOQ, 10 orders would be made each year. Annual order cost = 10 x 18.75 = $187.50 The annual order cost would be $187.50. d) Given the EOQ, what is the total annual cost of managing the inventory? Annual inventory holding cost = EOQ / 2 x H Annual inventory holding cost = 250 / 2 x 1.5 = $187.50 Total annual cost = $187.50 + 187.50 = $375 per year Given the EOQ, the total annual cost of managing the inventory is $375 per year. e) What is the time between orders? Time between orders = 250 / 10 = 25 days The time between orders is 25 days. f) What is the reorder point (ROP)? ROP = d x L ROP = 2,500 / 250 = 10 ROP = 10 x 2 = 20 units The reorder point (ROP) is 20 units. Chapter 10: Jackson Manufacturing Case (p. 437), complete the assignment as outlined in the text (4 questions). In your report to Ms. McFadden, you realize you will want to address several factors: 1. How big should the sample be for a statistically accurate standard (at, say, the 99.73% confidence level and accuracy of ±5%)? Observations xi x? (xi - x?) (xi - x?)2 1 2.05 1.90 0.15 0.0225 2 1.92 1.90 0.02 0.0004 3 2.01 1.90 0.11 0.0121 4 1.89 1.90 -0.01 0.0001 5 1.77 1.90 -0.13 0.0169 6 1.80 1.90 -0.1 0.01 7 1.86 1.90 -0.04 0.0016 8 1.83 1.90 -0.07 0.0049 9 1.93 1.90 0.03 0.0009 10 1.96 1.90 0.06 0.0036 11 1.95 1.90 0.05 0.0025 12 2.05 1.90 0.15 0.0225 13 1.79 1.90 -0.11 0.0121 14 1.82 1.90 -0.08 0.0064 15 1.85 1.90 -0.05 0.0025 16 1.85 1.90 -0.05 0.0025 17 1.99 1.90 0.09 0.0081 ?(xi - x?)2 0.1296 s = ??(Each sample observation - x?)2 / Number in sample - 1 s = ?0.1296 / 17 - 1 s = ?0.0081 = 0.09 n = (z x s / h x x?)2 n = (3 x 0.09 / 0.05 x 1.90)2 n = (0.27 / 0.095)2 = 8.077 = 9 units The number of observations required for a statistically accurate standard is 9 units. 2. Is the sample size adequate? The sample size is more than adequate. The sample size of 17 observations is a lot more than the minimum sample size of 8. 3. How many units should be produced at this workstation per day? Normal time = (Average time) x (Performance rating) Normal time = 1.90 minutes x 115% = 2.185 minutes Standard time = Normal time / 1 - Allowance factor Standard time = 2.185 / 1 - 0.16 Standard time = 2.185 / 0.84 = 2.60 minutes 7.50 x 60 / Standard time 450 / 2.6 = 173 The number of units that should be produced at this workstation per day is 173 units. 4. What is the cost per unit for this task in direct labor cost? Direct labor cost per unit = $12.50 x 8 / 173 = $0.578 The cost per unit for this task in direct labor cost is $0.578. Chapter 11:  Arnold Palmer Hospital's Supply Chain.  Review this video and answer the discussion questions in 2 pages or less. https://www.youtube.com/watch?v=1ELl4CRts6Y 1. How does this supply chain differ from that in a manufacturing firm? This supply chain differs from that in a manufacturing firm for several reasons. In a manufacturing firm, the management focuses on innovating new products and maintains efficiency through buyer-vendor collaboration. However, in service industries like Arnold Palmer Hospital, the majority of decisions are made through the Medical Economic Outcomes Committee where the medical and nursing staff are involved in the negotiation and buying process. In Arnold Palmer Hospital, the negotiations are completely based on the quality problem with some manufacturers and give the orders for the lower-cost bidder. They also develop new products for their operating rooms in collaboration with manufacturers along with long-term contracts, more control of the product, blanket purchase orders, and other benefits, which are substantial. 2. What are the constraints on making decisions based on economics alone at Arnold Palmer Hospital? There are a number of constraints on making decisions based on economics alone at Arnold Palmer Hospital. First, Medical Outcomes Committee is involved in the buying process and maintaining the relationship with vendors and distributors. Next, Arnold Palmer Hospital develops new products for their operations with the help of Healthcare Purchasing Alliance and negotiates with the different distributors where they give importance to the major cost savings, standardization, blanket purchase orders, long-term contracts, and more control of product development. Finally, Arnold Palmer Hospital’s negotiation process gives value to the lower-cost bidder who has excellent quality. 3. What role do doctors and nurses play in supply chain decisions in a hospital? How is this participation handled at Arnold Palmer Hospital? Doctors and nurses play a vital role in supply chain decisions in a hospital. Doctors and nurses are key members in the Medical Economic Outcomes Committee where they are involved in the entire buying process of equipment and other necessary products. They can be seen as the members of the decision-making in the Medical Economic Outcomes Committee with a disproportionate input in the decision. For example, the heart pacemaker negotiation by the cardiology department saved $2 million. 4. Doctor Smith just returned from the Annual Physician’s Orthopedic Conference, where she saw a new hip joint replacement demonstrated. She decides she wants to start using the replacement joint at Arnold Palmer Hospital. What process will Dr. Smith have to go through at the hospital to introduce this new product into the supply chain for future surgical use? Dr. Smith will have to go through implementation of a new surgical process at the hospital to introduce this new product into the supply chain for future surgical use. Every doctor who wants to implement a new procedure of treatment must report to the Medical Economic Outcomes Committee. Dr. Smith should conduct a seminar and discuss the procedure with the medical and nursing staff. She needs to get approval from the Medical Economic Outcomes Committee and involve them in the negotiation process of buying if any new products are to be purchased in accordance with the procedure to be implemented.