Module 2 - Homework Solutions

Homework Assignment: Module 2 - Process Analysis

1. Posh Nails

Katie Posh runs an upscale nail salon. The service process includes five activities that are
conducted in the sequence described below. (The time required for each activity is shown in
parentheses):

Activity 1: Welcome a guest. (1 minute)

Activity 2: Clip and file nails. (3 minutes)

Activity 3: Paint. (5 minutes)

Activity 4: Dry. (10 minutes)

Activity 5: Check out the customer. (4 minutes)

Three servers (S1, S2, and S3) offer the services in a worker-paced line. The assignment of tasks
to servers is the following: S1 does Activity 1. S2 does Activities 2 and 3. S3 does Activities 4
and 5. The drying process does not require server 3’s constant attention; she/he needs to only
escort the customer to the salon’s drying chair (equipped with fans for drying). The time to do
this is negligible. There exists only one drying chair in the salon.

Which resource is the bottleneck of the process?

PN1. S1: 1min; S2: 8min; Dryer chair: 10min; S3: 4min Bottleneck: The dryer chair

2. Posh Nails

Katie Posh runs an upscale nail salon. The service process includes five activities that are
conducted in the sequence described below. (The time required for each activity is shown in
parentheses):

Activity 1: Welcome a guest. (1 minute)

Activity 2: Clip and file nails. (3 minutes)

Activity 3: Paint. (5 minutes)

Activity 4: Dry. (10 minutes)

Activity 5: Check out the customer. (4 minutes)

Three servers (S1, S2, and S3) offer the services in a worker-paced line. The assignment of tasks
to servers is the following: S1 does Activity 1. S2 does Activities 2 and 3. S3 does Activities 4
and 5. The drying process does not require server 3’s constant attention; she/he needs to only
escort the customer to the salon’s drying chair (equipped with fans for drying). The time to do
this is negligible. There exists only one drying chair in the salon.

What is the utilization of server 2 (in decimal form)? Assume that there is unlimited demand
and that the process only admits customers at the rate of the bottleneck.

PN2. Flow rate/capacity = (1/10) / (1/8) = 8/10 = 0.8

3. Posh Nails

Katie Posh runs an upscale nail salon. The service process includes five activities that are
conducted in the sequence described below. (The time required for each activity is shown in
parentheses):

Activity 1: Welcome a guest. (1 minute)

Activity 2: Clip and file nails. (3 minutes)

Activity 3: Paint. (5 minutes)

Activity 4: Dry. (10 minutes)

Activity 5: Check out the customer. (4 minutes)

Three servers (S1, S2, and S3) offer the services in a worker-paced line. The assignment of tasks
to servers is the following: S1 does Activity 1. S2 does Activities 2 and 3. S3 does Activities 4
and 5. The drying process does not require server 3’s constant attention; she/he needs to only
escort the customer to the salon’s drying chair (equipped with fans for drying). The time to do
this is negligible. There exists only one drying chair in the salon.

What is the average labor utilization of the servers (in decimal form)? Assume that there is
unlimited demand and that the process only admits customers at the rate of the bottleneck.

PN3. (1+8+4)/(13 + (9+2+6)) = 3/30 = 0.433

4. Posh Nails

Katie Posh runs an upscale nail salon. The service process includes five activities that are
conducted in the sequence described below. (The time required for each activity is shown in
parentheses):

Activity 1: Welcome a guest. (1 minute)

Activity 2: Clip and file nails. (3 minutes)

Activity 3: Paint. (5 minutes)

Activity 4: Dry. (10 minutes)

Activity 5: Check out the customer. (4 minutes)

Three servers (S1, S2, and S3) offer the services in a worker-paced line. The assignment of tasks
to servers is the following: S1 does Activity 1. S2 does Activities 2 and 3. S3 does Activities 4
and 5. The drying process does not require server 3’s constant attention; she/he needs to only
escort the customer to the salon’s drying chair (equipped with fans for drying). The time to do
this is negligible. There exists only one drying chair in the salon.

Assume a wage rate of $12 per hour. What are the direct labor costs for one customer (in
dollars)?

PN4. Direct labor cost = wage rate per hour / flow rate per hour = $36 per hour / 6 customers
per hour = $6 per customer

5. BN1. Butternut is a ski resort in Massachusetts. One of their triple chair lifts unloads 1296
skiers per hour at the top of the slope. (A triple chair lift can carry three passengers per chair.
Note that each lift contains multiple chairs.) The ride from the bottom to the top takes 5
minutes. On average, how many skiers are riding on the lift at any one time?

BN1. Use Little’s Law: 1296 skiers/hour*5/60 = 108 skiers

6. Tech Company is a medium-sized consumer electronics retailer. The company reported

$155,000,000 in revenues for 2007 and $110,050,000 in Costs of Goods Sold (COGS). In the
same year, Tech Co. held an average of $20,000,000 in inventory.

How many times did Tech Co. turn its inventory in 2007?

TC1. COGS = Revenue*(1-gross margin) $ 155,000,000*(1-0.29) = 110,050,000 COGS/Inventory

= Inventory Turns 110,050,000/20,000,000 = 5.5

7. Tech Company is a medium-sized consumer electronics retailer. The company reported

$155,000,000 in revenues for 2007 and $110,050,000 in Costs of Goods Sold (COGS). In the
same year, Tech Co. held an average of $20,000,000 in inventory.

Inventory cost at Tech Co. is 35 percent per year. What is the per unit inventory cost (in
dollars) for an MP3 player sold at $50? Assume that the margin corresponds to the retailer’s
average margin.

TC2. Annual Inventory cost of MP3s = Cost of MP3s sold*Inventory cost Assuming the margin
for the MP3 player is the same as for the rest of the firm, the MP3 player is purchased for
$35.50 Per unit Inventory cost of MP3s = Annual Inventory Cost of MP3s/Inventory Turns
$35.50*.35/5.5 = $2.26
8. The Gamer Company is a video game production company that specializes in educational
video games for kids. The company’s R&D department is always looking for great ideas for new
games. On average, the R&D department generates about 25 new ideas a week. To go from
idea to approved product, the idea must pass through the following stages: paper screening (a
1-page document describing the idea and giving a rough sketch of the design), prototype
development, testing, and a focus group. At the end of each stage, successful ideas enter the
next stage. All other ideas are dropped. The following chart depicts this process, and the
probability of succeeding at each stage.

The paper screening for each idea takes 2 hours of a staff member’s time. After that, there is a
stage of designing and producing a prototype. A designer spends 4 hours designing the game
in a computer-aided-design (CAD) package. The actual creation of the mock-up is outsourced
to one of many suppliers with essentially limitless capacity. It takes 4 days to get the prototype
programmed, and multiple prototypes can be created simultaneously. A staff member of the
testing team needs 2 days to test an idea. Running the focus group takes 2 hours of a staff
member’s time per idea, and only one game is tested in each focus group. Finally, the
management team meets for 3 hours per idea to decide if the game should go into production.

Available working hours for each staff member are 8 hours per day, 5 days a week. The current
staffing plan is as follows:

A. Paper screening: 3 staff members.

B. Design and Production: 4 staff members.

C. Testing: 6 staff members.

D. Focus Group: 1 staff member.

E. Final Decision: 1 management team

How many new ideas would Gamer Co. approve for production per week if it had unlimited
capacity (staff) in its R&D process?
This would be 25*0.6*0.5*0.35*0.75 = 1.97 ideas/week. ANSWER: __1.97 _ idea(s)/week

9. The Gamer Company is a video game production company that specializes in educational
video games for kids. The company’s R&D department is always looking for great ideas for new
games. On average, the R&D department generates about 25 new ideas a week. To go from
idea to approved product, the idea must pass through the following stages: paper screening (a
1-page document describing the idea and giving a rough sketch of the design), prototype
development, testing, and a focus group. At the end of each stage, successful ideas enter the
next stage. All other ideas are dropped. The following chart depicts this process, and the
probability of succeeding at each stage.

The paper screening for each idea takes 2 hours of a staff member’s time. After that, there is a
stage of designing and producing a prototype. A designer spends 4 hours designing the game
in a computer-aided-design (CAD) package. The actual creation of the mock-up is outsourced
to one of many suppliers with essentially limitless capacity. It takes 4 days to get the prototype
programmed, and multiple prototypes can be created simultaneously. A staff member of the
testing team needs 2 days to test an idea. Running the focus group takes 2 hours of a staff
member’s time per idea, and only one game is tested in each focus group. Finally, the
management team meets for 3 hours per idea to decide if the game should go into production.
Available working hours for each staff member are 8 hours per day, 5 days a week. The current
staffing plan is as follows:

A. Paper screening: 3 staff members.

B. Design and Production: 4 staff members.

C. Testing: 6 staff members.

D. Focus Group: 1 staff member.

E. Final Decision: 1 management team

Which stage is the bottleneck according to the current staffing plan?

GC2. ANSWER: Testing .

10. The Gamer Company is a video game production company that specializes in educational
video games for kids. The company’s R&D department is always looking for great ideas for new
games. On average, the R&D department generates about 25 new ideas a week. To go from
idea to approved product, the idea must pass through the following stages: paper screening (a
1-page document describing the idea and giving a rough sketch of the design), prototype
development, testing, and a focus group. At the end of each stage, successful ideas enter the
next stage. All other ideas are dropped. The following chart depicts this process, and the
probability of succeeding at each stage.

The paper screening for each idea takes 2 hours of a staff member’s time. After that, there is a
stage of designing and producing a prototype. A designer spends 4 hours designing the game
in a computer-aided-design (CAD) package. The actual creation of the mock-up is outsourced
to one of many suppliers with essentially limitless capacity. It takes 4 days to get the prototype
programmed, and multiple prototypes can be created simultaneously. A staff member of the
testing team needs 2 days to test an idea. Running the focus group takes 2 hours of a staff
member’s time per idea, and only one game is tested in each focus group. Finally, the
management team meets for 3 hours per idea to decide if the game should go into production.

Available working hours for each staff member are 8 hours per day, 5 days a week. The current
staffing plan is as follows:

A. Paper screening: 3 staff members.

B. Design and Production: 4 staff members.

C. Testing: 6 staff members.

D. Focus Group: 1 staff member.

E. Final Decision: 1 management team

With the current staffing plan, how many new ideas will be put into production per week?

GC3. At the testing stage, only 0.375 ideas/hour will make it through. So this means 0.375 * 0.5
* 0.35 * 0.75 = .049 ideas/hour or 1.96 ideas/week will be put into production. Note that this is
the same as the unconstrained amount in question GC1 (no implied utilization exceeds 100%).