Question 1 - In the context of the Wriston Manufacturing case, explain why shutting Detroit will increase Wriston's overall cost even though the network has excess capacity and Detroit is the most expensive plant to manufacture in.

Shutting Detroit will increase Wriston's overall cost because

Question 2 - Two companies A and B have invested in expensive flexible manufacturing systems that allow the changeover time between products to be reduced to seconds. The annual reports of the two companies contain the following information:

Circle the statement you most agree with:

• As sales volume increases it is better for a firm to invest in processes that have a lower variable cost per unit even if the fixed cost is higher
• As sales volume increases it is better for a firm to invest in processes that have a lower fixed cost even if the variable cost per unit is higher
• The volume sold has no impact on the type of process that is most appropriate for a firm

Explain.

Question 3 - In 2015, Blue Nile had COGS = $388 million and inventories of $46 million. The same year, Tiffany had COGS = $1,511 million and inventories of 2,157 million. How much inventory would Blue Nile have carried in 2015 if it carried the same number of days of inventory as Tiffany?

Question 4 - Testing a new drug starts with Toxicology tests followed by three stages of clinical trials. At each stage of testing 50% of the drugs fail. The ones that pass a certain stage then proceed to the next stage for testing.

Each year, a pharmaceutical company starts 100 drugs for toxicology testing. On average, toxicology testing takes a year after which 50% of the drugs fail. The rest move on to stage I clinical trials. The company purchases from external companies 30 drugs each year that have passed toxicology tests. These along with drugs that have passed toxicology tests are then sent for Stage I clinical trials. On average, there are 200 drugs undergoing Stage I clinical trials.  50% of the drugs that undergo Stage I clinical trials fail Stage I trials. Besides its own drugs that have passed Stage I trials, the company also purchases 20 drugs a year from external companies for Stage II trials. On average Stage II trials take 3 years. 50% of the drugs that undergo Stage II clinical trials fail Stage II trials.  Besides its own drugs that have passed Stage II trials, the company also purchases 10 drugs a year from external companies for Stage III trials. On average, Stage 3 trials take 4 years after which 50% of the drugs fail. Details are shown in the figure below:

a) On average, how long do drugs spend in Stage I Clinical trials?

b) On average, how much time do drugs spend (across all stages) in testing and clinical trials?

Question 5 - Custom Tailors (CT) has a manufacturing facility in southern Wisconsin where they make custom suits. The facility has six areas as shown below. The raw material warehouse receives an average of $4,000 of fabric per week. On average, the fabric inventory in the raw material warehouse is $16,000. Each week, $1,500 worth of fabric is drawn from the raw material warehouse for cutting into jackets. On average, $1,500 is spent each week (labor and other costs) in the jacket cutting department. The average time spent by a dollar in the jacket cutting department is 3 weeks. In the jacket sewing department the jackets are then made. On average $4,000 is spent each week in the jacket sewing area (labor and other costs). Average inventory in jacket sewing is $35,000.

The pants cutting area draws an average of $2,500 of fabric raw material per week from fabric inventory. The pants cutting area cuts the fabric for pants. On average, $1,500 is spent each week (labor and other costs) to convert fabric into cut pants. The average inventory in the pants cutting area is $12,000. In the pants sewing area the pants are sewn. On average $6,000 is spent each week in the pants sewing area (labor and other costs). On average a dollar spends 4 weeks in pants sewing.

The jackets and pants are then sent to the finished goods warehouse where they spend an average of 2 weeks before being sent to the customer.

All information is also shown in the figure above. Assume no losses in the system at any stage, i.e. all raw material that comes in is converted into finished goods that are sold.

(a) On average, how much inventory is carried at Custom Tailors?

(b) On average, how much time does a dollar spend in Custom Tailors?

Question 6 - When a homeowner wants to sell his or her home, the property is typically posted on a regional listing service. In a particular region, 60% of the new properties added to the listing service in the average week are houses. The remaining 40% of new listings are condominiums. The average house sells in 4.5 weeks. The average condominium sells in 8.25 weeks. What percent of active listings (i.e., properties posted on the listing service but not yet sold) are condominiums?

Question 7 - MMMD is a design consulting firm that helps companies design and prototype new products. The company has three types of people - managers, designers, and fabrication specialists. Managers are the interface between the client and the internal team and are responsible for bringing a precise understanding of client needs to the internal team. The flow chart for the process is as shown below.

MMMD submits a variety of proposals to potential customers. About 40% of the proposals are accepted by clients and turn into jobs. Preparing a proposal requires 3 days of manager time, 1 day of designer time, and 1 day of fabrication specialist time. For the accepted jobs, MMMD then prepares an Initial Design. Preparing the Initial Design requires 1 day of manager time, 12 days of designer time, and 2 days of fabrication specialist time. The initial design is then sent to the client. Clients approve 25% of the initial designs and request modifications for the other 75%. Modifications require 2 days of manager time, 6 days of designer time, and 2 days of fabrication specialist time. All finalized prototype designs are then sent for Fabrication. Fabrication requires 1 day of manager time, 2 days of designer time, and 10 days of fabrication specialist time.

MMMD currently has 3 managers, 6 designers, and 5 fabrication specialists. Each employee works 20 days a month.

[a]  What is the capacity at MMMD in terms of prototypes delivered per month (a completed projects ends with the delivery of the prototype)? What is the bottleneck?

[b] The managing director of MMMD plans to participate in 15 proposals/month in each of the coming months. Assuming the same acceptance and design approval rate as shown above, will the current capacity at MMMD allow this level of processing? Circle one.

[c] If the proportion of accepted proposals decreases from 40% to 30%, the capacity of the process in terms of completed projects (delivered prototypes) will (circle one)

• Increase
• Decrease
• Remain unchanged

Question 8 - Amy, Amol, and Arabella work together to prepare Apps (for both IOS and Android) for clients. Amy designs the apps, Amol codes them and Arabella tests and deploys them for the client. Currently half their demand is for Android apps and half is for IOS apps. The time taken for each type of app at each activity is as shown in the figure below.

The forecast for the next quarter indicates that the product mix will change with 60% of the demand for Android apps and 40% for IOS. As a result,

[a] The theoretical average flow time of the process will (circle one)

• increase
• decrease
• remain unchanged

[b] The theoretical average capacity of the process (in terms of toys per hour) will (circle one)

• increase
• decrease
• remain unchanged

Question 9 - A factory produces build-to-order widgets with a machining operation followed by polishing. Each stage works on one widget at a time. Products are transferred between the two operations in batches of 200 units. The polishing stage is currently the bottleneck with a capacity of 100 widgets / day (machining has a capacity of 110 widgets / day).  Customers have been complaining about the long time it takes for orders to be processed (a typical order is for 1,000 widgets). Jill (the production manager) suggests that product can be transferred between the two operations in smaller batches of 10 (instead of the current 200.

[a] As a result of Jill's suggestion, the flow time for a customer order will (circle one)

(i) Increase

(ii) Decrease

(iii) Remain unchanged

[b] As a result of Jill's suggestion, the capacity of the process will (circle one)

(i) Increase

(ii) Decrease

(iii) Remain unchanged

Question 10 - State whether the following statements are true or false (circle):

[a] A process currently consists of 3 activities A, B, C performed in sequence. The current defect rate at activity A is 20%. The location in the process (after A, B, or C) where the defects are detected has no impact on flow time or throughput as long as the defect rate at activity A remains 20%.

True  

False

[b] Limiting the maximum size of work in process buffers between stages of a process results in a pull system.

True  

False

Question 11 - Discuss a company whose strategy is based on having small lot sizes. How do small lot sizes help the firm?

Question 12 - Amazon has seen its days of inventory increase over the last several years. List two reason why this might be the case.

Reason 1:

Reason 2:

Question 13 - In 2014, Amazon achieved 7.55 turns of inventory. The same year Costco achieved 11.34 turns of inventory. Explain how Costco could achieve higher turns despite the fact that Costco decentralizes its inventory in over 600 stores while Amazon centralizes it inventory in less than 100 warehouses?

Question 14 - List five key actions that help a firm improve synchronization and reduce waste.

Action 1:

Action 2:

Action 3:

Action 4:

Action 5:

Question 15 - Discuss how short lead times help Zara better match supply and demand? What are some characteristics of products where short lead times may not be as beneficial?

Question 16 - What supply chain factors do you think helped Redbox succeed (despite having ten times as many locations as Blockbuster) while Blockbuster was reduced to declaring bankruptcy?

Question 17 - Aggregation of safety inventory reduces the required level of safety inventory for a given level of product availability. State whether the following statements are true or false in this context. Please give a specific explanation in each case.

[a] Detergent is likely to benefit more from aggregating safety inventory than a product like computers.

True 

False.  

Explain.

[b] Having short lead times is more beneficial to an apparel retailer selling online than to an apparel retailer selling through retail stores.

True 

False. 

Explain.