5 has to be less than 10
Pm (probability of all 0.110054348
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
Reproduced with permission of the copyright owner. Further reproduction
CHAPTER 16: SELECTED PROBLEM SOLUTIONS
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
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
One distribution center (DC) in
Mounds View, MN.
About 500 sales territories
throughout the country.
Consider Susan Magnottos
territory in Madison, Wisconsin.
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
ONeills Hammer 3/2 wetsuit
Hammer 3/2 timeline
of demand and
submit an order
Spring selling season
Nov Dec Jan
Feb Mar Apr May Jun
from TEC at the
end of the
CHAPTER 12: SELECTED PROBLEM SOLUTIONS
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
Four Dimensions of Performance: Trade-offs
- cost per unit
Product quality (how good?)
Process quality (as good as
=> Defect rate
The Bullwhip Effect
Supply chain demand and variability
Over the long run the average inflow to a firm must equal the average
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
All slides in this file are copyrighted by Gerard Cachon and Christian
Terwiesch. Any instructor that adopts Matching Supply with Demand:
CHAPTER 8: SELECTED PROBLEM SOLUTIONS
(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
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.
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 at the Source
The Concept of Yields
Yield of Resource =
Yield of Process =
Flow rate of units processed correctly at the resource
Flow rate of units processed correctly
Line Yield: 0.9 x 0.8 x
(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).
Order up-to model with normally distributed demand
Inputs are in red, outputs in black
Lead time (number of periods)
Single period demand:
m (mean demand over l+1 periods)
s (std. dev. demand over l+1 periods)
Forecasting and Procurement at Le Club
Franais du Vin1
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 :
Optimal Order Quantity
Overage penalty, Co :
Order quantity, Q :
Underage penalty, Cu :
The Process View
Examples of processes
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
(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