p
a
r
m
nominator
denominator
3 [min/unit]
1 [min/unit]
3
5 has to be less than 10
r^m/m!
counter
indicator
product
sum
2.025
0
1
1
1
18.4
1
1
3
3
2
1
4.5
4.5
3
1
4.5
4.5
4
1
3.375
3.375
Pm (probability of all 0.110054348
11.00543478 %
Flow Rate
Loss rate

America's Most Successful Export to Japan: Continuous Improvement Programs
Schroeder, Dean M;Robinson, Alan G
MIT Sloan Management Review; Spring 1991; 32, 3; ABI/INFORM Global
pg. 67
Reproduced with permission of the copyright owner. Further reproduction

CHAPTER 16: SELECTED PROBLEM SOLUTIONS
Q16.7 (Annenberg)
a) The high-fare protection level = Capacity Low-fare booking limit = 100 50 = 50.
So, given that there are 50 seats available for high-fare sales, we need to estimate
the expected high-fare sales.

Newsvendor Model Example with Discrete Demand
A manufacturer offers a seasonal product to a retailer at a wholesale price of $ 150 per unit. The
retailer has to decide how many units to order, to sell during the upcoming season at $250 per unit. At
the en

Where in the World Is Timbuk2?
Outsourcing, Offshoring, and Mass Customization1
Brennan Mulligan paused to admire the San Francisco skyline before entering the leased
building that housed all of Timbuk2s activities, from management to manufacturing (Figur

Medtronics InSync pacemaker supply chain and
objectives
Supply chain:
One distribution center (DC) in
Mounds View, MN.
About 500 sales territories
throughout the country.
Consider Susan Magnottos
territory in Madison, Wisconsin.
Objective:
Because the

CHAPTER 14: SELECTED PROBLEM SOLUTIONS
Q14.6 (Blood Bank)
a) His inventory position is (on hand inventory + on order, that is, pipeline inventory
backorder quantity) = 200 + 73 0 = 273 pints. His order-up-to level S is 285 pints.
Therefore, he will order

The Newsvendor Model
Slide 1
ONeills Hammer 3/2 wetsuit
Slide 2
Hammer 3/2 timeline
Generate forecast
of demand and
submit an order
to TEC
Spring selling season
Nov Dec Jan
Feb Mar Apr May Jun
Receive order
from TEC at the
end of the
month
Jul Aug
Left ov

CHAPTER 12: SELECTED PROBLEM SOLUTIONS
Q12.6
a) The parka sells less than half of the forecast if demand is 2100/2 = 1050 or fewer
units. Normalize the quantity 1050, by calculating z 1050 2100/1200 0.88.
Now, from the Standard Normal Distribution Functio

INDEPENDENT FORECASTING, WITHOUT POINT OF SALE VISIBILITY
REPLENISHMENT LEAD TIME = 1 DAY
SAFETY STOCK = 50 UNITS
ENDING INVENTORY = BEGINNING INVENTORY + INVENTORY RECEIVED - DEMAND
FORECAST = MOST RECENT DEMAND FROM IMMEDIATE CUSTOMER
ORDER QUANTITY = M

Introduction
Four Dimensions of Performance: Trade-offs
Cost
Efficiency
Measured by:
- cost per unit
- utilization
Quality
Product quality (how good?)
=> Price
Process quality (as good as
promised?)
=> Defect rate
Variety
Time
Customer heterogeneity
Measu

The Bullwhip Effect
Supply chain demand and variability
Over the long run the average inflow to a firm must equal the average
outflow
Inflow
Firm
Outflow
(sales)
However, the volatility of the inflow can differ substantially from the volatility
of the out

CHAPTER 10: SELECTED PROBLEM SOLUTIONS
Q10.2 Process with Rework
(a) All 5 units arriving each hour will have to pass through operation 1, creating a workload of
(5 units/hour * 6 minutes/unit), or 30 minutes per hour. However, only 80% of these units, i.

Matching Supply with Demand:
An Introduction to Operations Management
Grard Cachon
ChristianTerwiesch
All slides in this file are copyrighted by Gerard Cachon and Christian
Terwiesch. Any instructor that adopts Matching Supply with Demand:
An Introduction

CHAPTER 8: SELECTED PROBLEM SOLUTIONS
Q8.6 RentAPhone
(a) To answer this question, we consider the phones as servers. Thus m = 80, a = 24 hours/25
customers, i.e., 0.96 hours average interarrival time, and p = 72 hours. So, utilization = p /
(m*a) = 72/(8

Setup Times, Setup Costs, and Batching
Buying Custom Shirts: The Demand Size
Custom shirts ordered online
Large variety of styles
Basically infinitely many sizes
Four weeks lead time
Custom Tailored Shirts: The Supply Side
Cutting Department
Draw a shirt

The Great Nuclear Fizzle at Old Babcock & Wilcox
( Fortune Magazine, November 1969 )
Everything went wrong when the venerable boilermakers turned to building pressure vessels for atomic reactors.
The whole electric-power industry felt the consequences.
Th

CHAPTER 2: SELECTED PROBLEM SOLUTIONS
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 / 30,0

Quality
Rework
Quality at the Source
Slide 1
The Concept of Yields
Yield of Resource =
Yield of Process =
90%
Flow rate of units processed correctly at the resource
Flow rate
Flow rate of units processed correctly
Flow rate
80%
90%
Line Yield: 0.9 x 0.8 x

Revenue Management
(a.k.a. yield management)
Matching supply to demand when supply is fixed
Examples of fixed supply:
Travel industries (fixed number of seats, rooms, cars, etc).
Advertising time (limited number of time slots).
Telecommunications bandw

Order up-to model with normally distributed demand
Inputs are in red, outputs in black
Lead time (number of periods)
Single period demand:
Mean
Standard deviation
m (mean demand over l+1 periods)
s (std. dev. demand over l+1 periods)
4
200
100
1000
224
Or

Forecasting and Procurement at Le Club
Franais du Vin1
CHRISTIAN TERWIESCH
ANTOINE GOUZE
Stphane Zanella took a second careful sip from the glass of the 2002 St Emilion in front
of him. He spun the stem of the wine glass slowly, watching the velvet-red li

Newsvendor model with normally distributed demand
Inputs are in red, outputs in black
Mean demand, m :
Standard deviation of demand, s :
200
24
Optimal Order Quantity
Overage penalty, Co :
0.05
Order quantity, Q :
Underage penalty, Cu :
0.35
Standard Norm

The Process View
Slide 1
Examples of processes
wood
Factory
guitars
students
University
alumni
bulk items
Distribution
center
small parcels
mortgage
applications
Calculate
credit risk
metal
approved loans
rejected loans
Processes can involve both goods an

Business Model Innovation
Two paths to business model innovation
What do customers want?
Net Utility = Utility Price
What does the firm want?
Profit = Flow rate x (Price Cost)
There is a tension with Price.
So the best paths to business model innovation a

CHAPTER 7: SELECTED PROBLEM SOLUTIONS
Q7.3. Gelato
(a) Each batch consists of a set of three flavors. The total setup time is 3/4 + 1/2 + 1/6 = 17/12 hours. The
desired flow rate is 10 + 15 + 5 = 30 kgs/hr. The processing time is 1/50 hrs/kg. The desired