MSCI 432: Production and Service Operations Management, Winter Assignment # 1

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1 MSCI 432: Production and Service Operations Management, Winter 2010 Assignment # 1 Due by Thursday, January 28, 2010 in class, individual submissions 1. [3 marks] Read the article Russia s Factories Shift Gears and pay attention to Gartung s changes at Chelyabinsk Forge-and-Press. a. Using a bullet-point list, briefly summarize the changes, keeping in mind terminology used in the class. Cite the text to support your points. (try to limit your answer to 120 words) b. Comment on Gartung s prediction regarding the fate of his competitors. 2. [4 marks] Retrieve the income statements and balance sheets of two publicly-traded firms from the same industry for the three most recent years (different from those already discussed in the class). Then, generate the 6 financial ratios mentioned in the class. a. Generate and plot the inventory related measures/ratios of these firms. b. Assess the inventory measures/ratios of each firm. c. Contrast the two firms. Which stock were you to choose among the two based on these measures/ratios? Note: since you need to submit you work independently, it is highly unlikely your choice of firms will coincide with that of another student. 3. [3 marks] A major oil company is considering the optimal timing for the construction of new refineries. From the past experience, each doubling of the size of a refinery at a single location results in an increase in the construction costs of about 68%. Furthermore, a plant size of 10,000 barrels per day costs $6 million. Assume that the demand for the oil is increasing at a rate of 2 million barrels yearly and the discount rate for the future costs is 15 percent. a) Find the value of k and a assuming a relationship of the form f(y) = ky a. Assume that y is in units of barrels per day. b) Determine the optimal timing of the plant additions and the optimal size of each plant. c) Suppose that the largest single refinery that can be built with current technology is barrels per day. Determine the optimal timing of plant additions and the optimal size of each plant in this case. ( Year = 365 days) 4. [20 marks] Shouldice Hospital Case Analysis Learning Objectives: To apply process analysis methods and Little s Law To understand how OM can be applied to healthcare management problems Purpose of the Analysis: To determine capacity, throughput, and resource utilization of the current and the future Shouldice Hospital

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4 Question 1:[2 points] Let s say our purpose of the analysis is to determine the capacity of the Shouldice Hospital. Consider the following linear flowchart: Patient Pre-surgery examinations, orientation, etc Surgery Recovery Healthy individual What are the resources needed for each of the above task? Question 2 (Bottleneck analysis): [4 points] What is the bottleneck of the Shouldice Hospital, and what is the weekly capacity rate of the hospital? Make the following assumptions: a) Assume that the resources are available on all seven days of the week. b) Assume that each surgeon can operate on four patients per day, and there are 12 surgeons who work at Shouldice hospital. c) Each operation takes one hour. Assuming each of the five operating rooms can be used from 7:30 am till 3:30 pm. d) The Shouldice Hospital has 90 beds, and is committed to a three-day process. e) Assume that all the other resources have sufficient capacity. Question 3 (Actual throughput rate): [4 points] Assume that there are no weekend (Saturday and Sunday) operations. Suppose the hospital admits patients 30 patients per day on Sunday, Monday, Tuesday, Wednesday, and Thursday. f) What is the weekly throughput rate of the hospital? g) Draw a Gantt chart for the beds usage. What is the average bed utilization? h) Use Little s Law to calculate the average bed utilization. Question 4 (Increasing throughput rate): [4 points] The vice-president of the hospital wants to increase the throughput rate of the hospital. He has a target of increasing the throughput rate by 20% (as compared to the throughput rate of Q3). One option to increase throughput is to add Saturday operations (i.e., admit 30 patients on Friday). a) Draw a Gantt chart for the beds usage. What is the average bed utilization? b) Use Little s Law to calculate the average bed utilization. c) Do any surgeons have to work 6 days per week or can all surgeons still work 5 days per week? Please develop a Gantt chart for surgeons. Question 5: [6 points] The surgeons and other hospital unions reject the idea of having Saturday operations. The vice president is determined to increase the throughput rate by 20%. a) Can the throughput rate be increased by 20% while still maintaining five-day operations? b) Does any capacity needed to be added to the hospital? If so, what resources need to added? c) Suggest a plan to increase the throughput rate of the hospital by 20% while maintaining five-day operations and adding the absolute minimum number of additional resources.

5 The following two questions are for MSCI 633 students only! 5. [5 marks] The Ministry of Health Services, British Columbia, announced the following data: Average # of Patients Waiting Median Waiting Time Average # of Surgeries Performed per month days Based on your understanding of Little s Law, are the above three reported numbers consistent? If yes, please verify the above report by the Little s Law. If not, and if you were told that the above report is really true and data are precise, how could you explain the inconsistency? (Hint: Median is different from the arithmetic average. Median is the middle number in a set of ordered data. For example, the median of {1,1,2,3,5,6,6} is 3 since 3 is the middle number when all of the data points are placed in order. If there is an even number of data points, the median is the arithmetic average of the two middle numbers. In the above case, median wait time 64 days means that among all of the people who have had their surgery during the three months, half waited less than 64 days.) 6. [5 marks] Consider the following three-stage production process of glass ceramics, which is operated as a work-paced line. Components 6 Min./Unit 5 Min./Unit 4 Min./Unit Finished Units Rework The process is experiencing severe quality problems related to insufficiently trained workers. Specifically, 20% of the parts going through operation 1 are badly processed by the operator. Rather than scrapping the unit, it is moved to a highly skilled rework operator, who can correct the mistake and finish up the unit completely within 15 minutes. The same problem occurs at station 2, where 10% of the parts are badly processed, requiring 10 minutes of rework. Station 3 also has 10% ratio of badly processed parts, each of them requiring 5 minutes by the rework operator. a. What is the utilization of station 2 if work is released into the process at a rate of five units per hour? b. Where in the process is the bottleneck? Why? (remember, the bottleneck is the resource with the lowest capacity, independent of demand) c. What is the process capacity?