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    Business Operation Management - Process Improvement

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    Question 1
    A company has introduced a process improvement that reduces processing time for each unit, so that output is increased by 25% wtih less material, but one additional worker required. Under the old process, five workers could produce 60 units per hour. labor costs are $12/hour, material input was previously $16/unit. For the process, material is now $10/unit. Overhead is charged at 1.6 times direct labor cost. Finished units sell for $31 each. What increase in productivity is associated with the process improvement?

    Answer to Question 1
    The increase in productivity that is associated with this process improvement is an improvement in cost structure. Improvement in cost structure involves the lowering of direct costs of products and services as well as reduction of indirect costs. This is evident by the increase in output with less material.

    60 units per hour/5 workers = 12 units per worker per hour
    375/6 = 62.5

    Current production is 60 units per hour, which equates to a production capacity of 12 units per worker in every hour. The 25% increase in the 60 units already being produced would give a production capacity of 75 units per hour. In order to meet that 75 unit per hour capacity, six workers must be present. 75 units divided by 6 = 12.5 units per hour. Therefore .5 units per hour are associated with the increase in productivity.

    Since productivity strategy features the efficient execution of operational activities (which would be a focus on cost reduction and efficiency), the introduction of a process that improved productivity by .5 units per hour and used less material. This is reflected also with the reduction in material cost by $6.00 per unit, thus further exemplifying the changes of processes that improved production.

    Question 2:
    Which of the following smoothing constants would make an exponential smoothing equal to a naive forecast? a) 1.0, b) 0.01, c) 0.0, d) 0.5, e) none of the above.

    Answer to Question 2:
    C, 0.0
    Question 3:
    A manager uses this equation to predict demand: Y of t = 20+4t. Over the past 8 periods, demand has been as follows.
    Period 1 2 3 4 5 6 7 8
    Demand 25 28 31 34 36 43 50 54
    i) are these results acceptable. Explain.
    ii) use the model to forecast for May next year if t=0 in March this year.

    Answer to Question 3:
    i) Using the preiods provided (1-8) and substituting them for time "t" in the equation provided would not yield the same demands that are listed on this test. I would not deem these results acceptable because (except for the value provided under period 2) they are close but are not mathematically correct.
    ii) If t = March of this year, then t = 14 in May of next year. Using the formula Y of 14 = 20 + 4(14). Y of 14 = 76
    Question 4:
    On a project network, Activity A precedes B and C. Given the following information, determine the latest start time for activity A. EF = Earliest Finish; LF = Latest Finish
    EF for B = 15. EF for C = 17. LF for B = 24. LF for C = 27. Activity times are A = 4, B = 6 and C = 8.

    Answer to Question 4:
    A's late start is 5 (please see attached file)
    Question 5:
    The cycle time for each stage of a 4 stage process are as follows:
    Stage 1 = 10 seconds; Stage 2 = 20 seconds; Stage 3 = 15 seconds and Stage 4 = 10 seconds.
    a) what is the process cycle time?
    b) if the process needs to produce 200 units how long will it take to complete all the 200 units?
    c) if an inventory buffer is placed between stages 1 and 2 how long will it take for Stage 1 to complete 200 units of its own task?
    d)if an inventory buffer is placed between stages 1 and 2 how many units will the second stage complete out of its own task by the time the first stage completes these 200 units of its own task?
    e) if an inventory buffer is placed between stages 1 and 2 how many units will the third stage complete out of its own task by the time the first stage completes these 200 units of its own task?

    Answers to Question 5
    a) 55 seconds
    b) 11,010 seconds
    c) 2,000 seconds
    d) 99.5 units
    e) 98.75 units

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