Operational Management – Numerical.

Problem No. 1: Think Geek and Unicorn Meat

A) What is the fill rate under the current inventory policy?

σ2L = Leadtime x variance
=5 x 1280
=6,400.
σL= √6400
=80.

𝑠𝑠
z = σL = (benchmark inventory – mean x leadtime)/ σL
= (1650 -310 x 5)/80
=1.25
L(z)= 0.053

σL L(z)
β=1- 𝑄
80∗0.053
= 1 - 1240
= 99.66%
B) What order quantity and reorder point would minimize the total annual setup, holding and
shortage costs subject to having a fill rate at least equal to 98%?

Processing cost of each order = K = 120

λ= mean * leadtime =310*5 =15,500

h= 7 * 0.25 = 1.75
2𝑘λ
Q= EOQ = √ ℎ
= 1458

n(R)= (1-β)*Q = (1-0.98)*1458 =29.16

L(z)= 29.16/80 =0.3645 → z=0.08

R= σL z + µL = 0.08 * 80 + 310 * 5= 1557

c) Would the solution in part (b) change if Think Geek has a minimum Type I service level constraint
of 80%? Explain why.

(Q,R) = (1458, 1557)

R= σL z + µL = 1557 = 80z + 310 * 5 = 0.0875 = z

ɸ(0.0875) = 0.53(z table)

α= 53%
 The solution is subject to change since it has a Type 1 level of service of 53% that is >80%

Problem 2 – Queueing System

a) λ= 30 customers / hour
60
µ= 5
= 12/hour
𝜆 30 3
So fraction = 1 - 𝑁µ = 1 - 4∗12 = 8
b) Let N be the number of machines used. N has to satisfy
𝜆
𝑁µ
<1
𝜆 30
𝑁 > = = 2.5 ≈ 3 (Nmin)
µ 12

c) From the question, we know c= 16, and h= 0.5 * 60 = 30

𝜆ℎ
µ* = λ + √
𝑐
30∗30
= 30 + √ 16
= 37.5 customer/hour ≈ 38 customer/hour

C(µ*) = cλ + 2√λhc = 16 * 30 + 2 * √30*30*16 = 720

𝜆 30
d) ρ = = = 0.78 ≈ 0.8
µ 38

𝜌2 0.8^2
ɭq = = = 3.2 ≈ 3
1− 𝜌 1−0.8

e) The idea observed is that we possess deterministic arrival as well as service times. When the customer
enter at time slot i, they find the system empty.
She leaves the system at, let’s say, i + 1.
Now, the next customer arrives at the time slot i + 2. Hence, at any time we can have a maximum of one
customer in the system and no customer has to wait to be served. Therefore, length of the queue is 0.
Problem 3 – A drive-through car wash

To compute the parameters:

λ = ¼ , C2A = σ2A / E (A)2 = 3/42 = 0.1875 ≈ 0.188

µ= 1/7 , C2S= σ2S / E(S)2 = ((8-6)2/12)/72 = 0.006802721 ≈ 0.0068

ρ = (¼) / (5 * 1/7) = 7/20 = 0.35

a) Wq = (1/5µ) * [(ρ√2(5+1)-1 )/(1-ρ) ] * [(C2A + C2S )/2]

= 7/2 * [(0.35√12 -1 )/(1-0.35)] * [(0.188 + 0.0068)/2]
= 0.0158
b) Lq= λ * Wq = ¼ * 0.0158 = 0.00395
c) W = Wq + 1/µ = 0.00158 + 1/(1/7) = 7.0158
d) L = λ * W = ¼ * 7.0158 = 1.76
e) 1 – ρ = 1 – 0.35 = 0.65

Problem 4 – Data Service Business

a) Since its uniformly distributed 200 < x < 300

250−200
300−200
=½

b) F1(x)= (x-200)/(300-200) = (x-200)/100

1 – F1(x)= 100 – (x-200)/100 = (300-x)/100
gc(x)= 0.05 – 0.0002x , 150 ≤ x ≤ 250

P (150 ≤ x ≤ 200) = ∫200150 (0.05 – 0.0002x)

= |0.05x – 0.0001x2|200150
= 0.75
P (200 ≤ x ≤ 250) = ∫250200 (0.05 – 0.0002x) [(300-x)/100]
= ∫250200 [(15- 0.05x – 0.06x + 0.0002x2)/100]
=∫250200 [(15-0.11x+0.0002x2)/100]
= | [(15x) – (0.11x2/2) + (0.0002x3/3)]/100 |250200
= 0.208

P (150 ≤ x ≤ 250) = 0.75 + 0.208 = 0.958

c) P (179.29 ≤ x ≤ 200)= ∫200179.29 (0.1 – 0.0004x) dx

=|0.1x – 0.0002x2|200179.29
=0.5

P (200 ≤ x ≤ 250) = ∫250200 (0.1 – 0.0004x)[(300-x)/100] dx

= ∫250200 [(30-0.12x-0.1x-0.0004x2)/100]dx
=∫250200 [(30-0.22x-0.0004x2)/100]dx
 =|[(30 – (0.11x2)-(0.0004x3/3)/100]|250200
=0.41667

P (179.29 ≤ x ≤ 250)= 0.5+0.41667

=0.9667

d) E(Without Google)= 0.958 (100,000)

= 95,800
E( With Google) = 50,000 + 0.91667(100,000)
= 50,000 + 91,667
= 141, 667

Isaac should not purchase the server upgrade as it costs more.