EMBA 638 –Operations Management

Summer 2013 Final Exam


· This exam is open book, open Blackboard and open notes. You may use Excel as needed or a calculator. You are not allowed to use other person’s help or material from Internet (with the exception of Blackboard) in taking the exam.

· You have until Sunday August 25th, 2013 midnight EST to finish this exam.

· Show your work on the word document. This will allow you to obtain partial credit for your work even if the final answer is not correct.

· Your interpretation of a question, if any, is part of the exam. Only clarification questions will be answered.






Quality Control



Inventory Management



Process Analysis and Queuing



Short Answer Questions



Multiple Choice, T/F Questions




* 2 = ____/200

The Honor Pledge:

On my honor, I have neither given nor received unauthorized aid on this exam.

__________ _________________

Student Signature (type your name)


Part I –Quality Control (11 points)

    Southwest keeps gate time of its planes at a minimum in order to maximize the flying time, hence capacity utilization of its planes. They want to achieve a turnaround time of 20 minutes on average with a maximum of 25 minutes and a minimum of 15 minutes. (Although faster would be fine with them, the FAA and passengers might think they are cutting corners and not doing everything correctly).

At the Baltimore airport (BWI), 3 gates a day were sampled over four days to determine how the Southwest ground crew at BWI was doing on this standard. The average of the process was 20.5 minutes and the standard deviation was 1.5 minutes.

        (2 points) Fill in the following table.


20 minutes


25 minutes


15 minutes

        (5 points) Is the process centered and capable? Why or why not?

Yes, the process is centered and capable.


c. (4 points) What is the probability that a plane will have a turnaround time of greater than 25 minutes?

Part II: Inventory Management (11 points)

2. Southside restaurant uses a fixed quantity (continuous replenishment) system. Daily demand for bags of coffee is normally distributed with a mean of 36 and standard deviation of 8. The lead time is constant at 5 days. The management wants to have a 92 percent service level and the restaurant is open 365 days per year. Holding costs are $0.50 per year and the ordering costs are $2.5 per order. .

a. (3 points) Determine the order quantity at which the total inventory costs would be minimized?

b. (4 points) What is the reorder point and the time between orders?

c. (4 points) Illustrate the order quantity, re-order point, safety stock and lead time on a diagram where the Y-axis represents the number of coffee bags and the x-axis represents the time? What is the maximum possible inventory in the system at any point of time?

Part V –Multiple Choice and True/False (25 points)

Multiple choice (16 points, 2 points each): Please highlight (in yellow) the correct answer.

1. Animal shelters tend to order Sodium Barbipentathol in large batches (e.g., enough to last 6 months or more). Smaller quantities would be ordered (e.g., a couple of weeks worth) except government regulations require extensive and detailed paperwork to be submitted with each order. This example is most closely related to the following managerial insight:

a. the order quantity increases as the holding cost rate decreases

b. the order quantity increases as the cost per order increases

c. the order quantity increases as the shortage cost rate decreases

d. the order quantity increases as the trade balance decreases

2. Which one of the following does not exemplify JIT/Lean used for competitive advantage?

a. Acme Foods decides to decrease the number of its suppliers to just a few.

b. Cajun Contractors has reduced the amount of space for inventory.

c. Cheramie Trucking trains workers to specialize and become very efficient in one job.

d. Ardoyne Builders has a scheduled preventive maintenance program.

e. Ajax, Inc. is proud to announce that incoming goods are delivered directly to the point of use.

    A tennis ball manufacturer has identified several causes of variability in the bounce and has collected data on the number of times those causes have led to high variability over the past month. They now need to decide which causes to try to eliminate first. Which tool should they use?

a. 5S

b. Pareto diagram

c. ABC Analysis

d. R-chart


4. Which of the following offers a potential for reducing inventory costs in a supply chain?

a. sharing POS data across the supply chain

b. sharing components across different products

c. having more warehouses

d. a and b

e. a and c

f. b and c

5. Another term for a postponement strategy is

a. Speculation

b. delayed differentiation

c. mass customization

d. decreased differentiation

e. None of the above

6. Which of the following phrases describes the chart below about the reasons for unsatisfying hotel stays?

a. H is the most important problem

b. 80% of the reasons cause 20% of the dissatisfaction.

c. A is the most important problem

d. 20% of the reasons cause 60% of the dissatisfaction

e. None of the above.


7. Which of the following statements is not a characteristic of pull supply chains?

a. Inventory levels are typically low

b. Ordering decisions are based on long-term forecasts

c. Firms respond to specific customer orders

d. Allows faster response to changing markets

8. If a production process is in statistical control , which of the following statements is incorrect

a. There are no special causes of variation in the process

b. The process will always be capable of meeting the customer specifications

c. There are common causes of variation in the process

d. The range of the process is in statistical control

True/False (1 point each, 9 points)

1. ________ Variation in production systems that is caused by factors that can be clearly identified and possibly even managed is called assignable variation.

2. ________ EOQ balances purchase cost and ordering cost.

The balance inventory order costs and carrying costs.

3. ____ Your supplier’s supplier is a third tier supplier.

4. ______ Under the assumptions of the Basic EOQ model, if one increases the order quantity, then the length of the order cycle decreases (with demand and cost parameters remaining the same).

5. ___ A high-end, customized furniture manufacturer, would most likely employ an assembly-line type of process.

6. ________ Productivity is the total value of outputs produced divided by the total value of all inputs to the transformation process.

7. _____ Under constant lead time, the key drivers of safety stock are lead time, standard deviation of demand, and the safety factor (or service level).

8. ________ The idea behind Pareto charts is that working with the majorityof possible causes is needed to significantly improve quality.

9. _____ Under the assumptions of EOQ model, if the total optimal cost (fixed ordering cost + holding cost) is $10,000, then the holding cost part is $5,000.

That’s the end!