# Solution Manual For Matching Supply with Demand: An Introduction to Operations Management, 4th Edition

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Matching Supply with Demand: An Introduction to Operations Management 4e Solutions to Chapter Problems Chapter 2 The Process View of the Organization Q2.1 Dell The following steps refer directly to Exhibit 2.1. #1: For 2001, we find in Dellโs 10-k: Inventory=\$400 (in million) #2: For 2001, we find in Dellโs 10-k: COGS=\$ 26,442 (in million) 26,442\$ / year #3: Inventory turns= = 66.105 turns per year 400\$ 40% per year #4: Per unit Inventory cost = = 0.605% per year 66.105 per year Q2.2. Airline We use Littleโs law to compute the flow time, since we know both the flow rate as well as the inventory level: Flow Time = Inventory / Flow Rate = 35 passengers / 255 passengers per hour = 0.137 hours = 8.24 minutes Q2.3 Inventory Cost (a) Sales = \$60,000,000 per year / \$2000 per unit = 30,000 units sold per year Inventory = \$20,000,000 / \$1000 per unit = 20,000 units in inventory Flow Time = Inventory / Flow Rate = 20,000 / 30,000 per year = 2/3 year = 8 months Turns = 1 / Flow Time = 1 / (2/3 year) = 1.5 turns per year Note: we can also get this number directly by writing: Inventory turns=COGS/ Inventory (b) Cost of Inventory: 25% per year / 1.5 turns=16.66%. For a \$1000 product, this would make an absolute inventory cost of \$166.66. Q2.4. Apparel Retailing (a) Revenue of \$100M implies COGS of \$50M (because of the 100% markup). Turns = COGS/Inventory = \$50M/\$5M = 10. 2-1 ยฉ 2019 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. (b) The inventory cost, given 10 turns, is 40%/10 = 4%. For a 30\$ item, the inventory cost is 0.4 x \$30 = \$1.20 per unit. Q2.5. La Villa (a) Flow Rate = Inventory / Flow Time = 1200 skiers / 10 days = 120 skiers per day (b) Last year: on any given day, 10% (1 of 10) of skiers are on their first day of skiing This year: on any given day, 20% (1 of 5) of skiers are on their first day of skiing Average amount spent in local restaurants (per skier) Last year = 0.1 * \$50 + 0.9 * \$30 = \$32 This year = 0.2 * \$50 + 0.8 * \$30 = \$34 % change = (\$34 – \$32) / \$32 = 6.25% increase Q2.6. Highway We look at 1 mile of highway as our process. Since the speed is 60 miles per hour, it takes a car 1 minute to travel through the process (flow time). There are 24 cars on ยผ of a mile, i.e. there are 96 cars on the 1 mile stretch (inventory). Inventory=Flow Rate * Flow Time: 96 cars=Flow Rate * 1 minute Thus, the Flow Rate is 96 cars per minute, corresponding to 96*60=5760 cars per hour. Q2.7. Strohrmann Baking The bread needs to be in the oven for 12 minutes (flow time). We want to produce at a flow rate of 4000 breads per hour, or 4000/60=66.66 breads per minute. Inventory=Flow Rate * Flow Time: Inventory=66.66 breads per minute* 12 minutes Thus, Inventory=800 breads, which is the required size of the oven. Q2.8. Mt Kinley Consulting We have the following information available from the question: Level Associate Manager Partner Inventory (number of consultants at that level) 200 60 20 Flow Time (time spent at that level) 4 years 6 years 10 years (a) We can use Littleโs law to find the flow rate for associate consultants: Inventory=Flow Rate * Flow Time; 200 consultants=Flow Rate * 4 years; thus, the flow rate is 50 consultants per year, which need to be recruited to keep the firm in its current size (note: while there are also 50 consultants leaving the associate level, this says 2-2 ยฉ 2019 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. nothing about how many of them are dismissed vs how many of them are promoted to Manager level). (b) We can perform a similar analysis at the manager level, which indicates that the flow rate there is 10 consultants. In order to have 10 consultants as a flow rate at the manager level, we need to promote 10 associates to manager level (remember, the firm is not recruiting to the higher ranks from the outside). Hence, every year, we dismiss 40 associates and promote 10 associates to the manager level (the odds at that level are 20%) Now, consider the partner level. The flow rate there is 2 consultants per year (obtained via the same calculations as before). Thus, from the 10 manager cases we evaluate every year, 8 are dismissed and 2 are promoted to partner (the odds at that level are thereby also 20%). In order to find the odds of a new hire to become partner, we need to multiply the promotion probabilities: 0.2*0.2=0.04. Thus, a new hire has a 4% chance of making it to partner. Q2.9. Major US Retailers a. Product stays on average for 31.9 days in Costcoโs inventory b. Costco has for a \$5 product an inventory cost of \$0.1311 which compares to a \$0.2049 at Wal-Mart Q2.10. McDonaldโs a. Inventory turns for McDonaldโs were 92.3. They were 30.05 for Wendyโs. b. McDonaldโs has per unit inventory costs of 0.32%, which for a 3\$ meal about \$0.00975. That compares to 0.998% at Wendyโs where the cost per meal is \$0.0299. Q2.11. BCH I = 400 associates, T = 2years. R = I / T = 400 associates / 2 yrs = 200 associates/yr. Q2.12. Kroger Turns = R / I = 76858 / 6244 = 12.3 2-3 ยฉ 2019 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

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### Solution Manual For Matching Supply with Demand: An Introduction to Operations Management, 4th Edition

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