MGMTEX 410-001 - Operations & Technology Management
Professor Suresh Muthulingam
Problem Set 2
Question 1
a) Gantt Chart of real estate development project
b) Assuming EIA only takes 2 months, the critical path of the project is shown in yellow.
c) The critical path tells us the sequence of events in the construction project that all
must be completed on-time to avoid any delay to the overall schedule. Activities not
on the critical path have some lag or buGer which can incur some delay before
becoming on the critical path.
d) You can aGord a total of 1-month delay to construction (water mains and sewage,
building homes, and roads). Any further delay to construction past 1-month would
delay the move in date for the new owner.
Question 2
a) Optimal order quantity for Jamaican Blue Mountain CoGee.
2𝐾𝐷
𝑂𝑝𝑡𝑖𝑚𝑎𝑙 𝑂𝑟𝑑𝑒𝑟 𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦: 𝑄 = 2
ℎ
D = yearly demand rate [units/year]
h = unit inventory holding costs [$/unit/year]
K = fixed ordering cost [$/order]
MGMTEX 410-001 - Operations & Technology Management
Professor Suresh Muthulingam
2 ∗ 45 ∗ 280 25,200 𝑝𝑜𝑢𝑛𝑑𝑠
𝑂𝑝𝑡𝑖𝑚𝑎𝑙 𝑂𝑟𝑑𝑒𝑟 𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦: 𝑄 = 2 =2 = 229.13
2.40 ∗ 20% 0.48 𝑜𝑟𝑑𝑒𝑟
b) Time between placement of orders
280 𝑝𝑜𝑢𝑛𝑑𝑠 229
=
365 𝑑𝑎𝑦𝑠 𝐷 (𝑑𝑎𝑦𝑠)
229
𝐷 (𝑑𝑎𝑦𝑠) = ∗ 365 𝑑𝑎𝑦𝑠
280
𝐷 = 298.7 𝑑𝑎𝑦𝑠
c) Average annual cost of holding and setup due to this item
𝑄 𝐷
𝑌𝑒𝑎𝑟𝑙𝑦 𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡 𝐶(𝑄) = ℎ ∗ + 𝐾 ∗ = √2𝐾𝐷ℎ
2 𝑄
𝑌𝑒𝑎𝑟𝑙𝑦 𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡 𝐶(𝑄) = √2 ∗ 45 ∗ 280 ∗ 0.48 = $109.98
d) Reorder point based on the on-hand inventory, (replenishment lead-time is three weeks
𝑝𝑜𝑢𝑛𝑑𝑠 1 𝑦𝑒𝑎𝑟 𝑝𝑜𝑢𝑛𝑑
280 ∗ = 5.38
𝑦𝑒𝑎𝑟 52 𝑤𝑒𝑒𝑘𝑠 𝑤𝑒𝑒𝑘
𝑝𝑜𝑢𝑛𝑑
5.38 ∗ 3 𝑤𝑒𝑒𝑘𝑠 = 16.14 𝑝𝑜𝑢𝑛𝑑𝑠 𝑝𝑒𝑟 3 𝑤𝑒𝑒𝑘𝑠
𝑤𝑒𝑒𝑘
When inventory falls below 16.14 pounds, an order of 229.1 pounds should be placed
Question 3
a) System utilization, average time in system and average number in system
𝜆 50
𝑈𝑡𝑖𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛: 𝜌 = = = 0.667
𝜇 75
1X 1X
𝜇 75
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑖𝑚𝑒 𝑖𝑛 𝑆𝑦𝑠𝑡𝑒𝑚: 𝑊 = = = 0.04 ℎ𝑜𝑢𝑟𝑠 = 2.4 𝑚𝑖𝑛
(1 − 𝜌) (1 − 0.667)
𝜌 0.667
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑁𝑢𝑚𝑏𝑒𝑟 𝑖𝑛 𝑆𝑦𝑠𝑡𝑒𝑚: 𝐿 = = = 2 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟𝑠
(1 − 𝜌) (1 − 0.667)
b) Compute the same system characteristics (utilization, average time in system and
average number in system) for: i) an arrival rate of 20 customers per hour and ii) an
MGMTEX 410-001 - Operations & Technology Management
Professor Suresh Muthulingam
arrival rate of 70 customers per hour assuming an exponential service rate of 75
customers per hour for both cases.
i) Arrival rate of 20 customers per hour
𝜆 20
𝑈𝑡𝑖𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛: 𝜌 = = = 0.2667
𝜇 75
1X 1X
𝜇 75
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑖𝑚𝑒 𝑖𝑛 𝑆𝑦𝑠𝑡𝑒𝑚: 𝑊 = = = 0.018 ℎ𝑜𝑢𝑟𝑠 = 1.09 𝑚𝑖𝑛
(1 − 𝜌) (1 − 0.2667)
𝜌 0.2667
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑁𝑢𝑚𝑏𝑒𝑟 𝑖𝑛 𝑆𝑦𝑠𝑡𝑒𝑚: 𝐿 = = = 0.36 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟𝑠
(1 − 𝜌) (1 − 0.2667)
ii) Arrival rate of 70 customers per hour
𝜆 70
𝑈𝑡𝑖𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛: 𝜌 = = = 0.933
𝜇 75
1X 1X
𝜇 75
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑖𝑚𝑒 𝑖𝑛 𝑆𝑦𝑠𝑡𝑒𝑚: 𝑊 = = = 0.2 ℎ𝑜𝑢𝑟𝑠 = 12 𝑚𝑖𝑛
(1 − 𝜌) (1 − 0.933)
𝜌 0.933
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑁𝑢𝑚𝑏𝑒𝑟 𝑖𝑛 𝑆𝑦𝑠𝑡𝑒𝑚: 𝐿 = = = 14 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟𝑠
(1 − 𝜌) (1 − 0.933)
c) From part (b), what is a good value for utilization of the system? (Hint: This is a
qualitative question.)
A lower utilization is better for the customer as it leads to a decrease in wait times for the
customer. In part b(i) the wait time is 0.29min while in b(ii) which has a higher utilization the
wait timer for each customer is 11.2min. The longer wait times can lead to customer
dissatisfaction.