Assignment 1 OM Group 20
Operation Management
lecture number semester
0886 - WS 2014/15
Assignment 1 – Application of Little’s Law
Date: 15/12/14
Handed in by:
Tomova, Veselina (h1451173)
Cavagoglu, Deniz (…………..)
Handed in for:
Univ. Prof. Werner Jammernegg
Contents
1. Problem – Z Car Rental 3
2. Solution 3
1. Problem - Z Car rental
Z Car Rental rents an average of 100 cars per day. Its customers keep a car for an average of 2 days for €70/day.Z Car rental keeps an average of 6 days of demand at the ready-for-rent parking lot. For simplicity, let us consider one rental location.
When customers return a car, they drop it off at the returns area, which has an average of 100 cars. A quick check at the returns area determines whether the car needs repairs or not. On average, 20% of the cars need repairs while 80% do not. Cars needing repairs are taken to the repairs area, which has an average inventory of 100 cars. All cars are taken to the cleaning area either directly or after being repaired, which has an average inventory of 200 cars. After cleaning and/or repairs, cars are returned to the ready-for-rent parking lot. Each repair costs €100 per car while each cleaning costs €5 per car. Z Car Rental leases its cars at €200 per month per car. It has 10 employees on the payroll: it runs two 8 hour shifts per day of 5 employees (1 customer facing, 1 cleaning, 1 repair, 1 receive& check, 1 supervisor). Average fully loaded wage is €15/hour. Z Car Rental pays about €12,000 per month in facility rent, including utilities. Assume that one month has 30 days.
1. Draw the process flow diagram and identify throughput, inventory and flow time at each stage.
2. What profit does Z earn per week with the current system?
3. Z is comparing two possible improvements:
Decrease average inventory in the cleaning area from 200 to 100.
Decreasing the repair rate to 10%.
Assume that the effort that is required in each case is the
lecture number semester
0886 - WS 2014/15
Assignment 1 – Application of Little’s Law
Date: 15/12/14
Handed in by:
Tomova, Veselina (h1451173)
Cavagoglu, Deniz (…………..)
Handed in for:
Univ. Prof. Werner Jammernegg
Contents
1. Problem – Z Car Rental 3
2. Solution 3
1. Problem - Z Car rental
Z Car Rental rents an average of 100 cars per day. Its customers keep a car for an average of 2 days for €70/day.Z Car rental keeps an average of 6 days of demand at the ready-for-rent parking lot. For simplicity, let us consider one rental location.
When customers return a car, they drop it off at the returns area, which has an average of 100 cars. A quick check at the returns area determines whether the car needs repairs or not. On average, 20% of the cars need repairs while 80% do not. Cars needing repairs are taken to the repairs area, which has an average inventory of 100 cars. All cars are taken to the cleaning area either directly or after being repaired, which has an average inventory of 200 cars. After cleaning and/or repairs, cars are returned to the ready-for-rent parking lot. Each repair costs €100 per car while each cleaning costs €5 per car. Z Car Rental leases its cars at €200 per month per car. It has 10 employees on the payroll: it runs two 8 hour shifts per day of 5 employees (1 customer facing, 1 cleaning, 1 repair, 1 receive& check, 1 supervisor). Average fully loaded wage is €15/hour. Z Car Rental pays about €12,000 per month in facility rent, including utilities. Assume that one month has 30 days.
1. Draw the process flow diagram and identify throughput, inventory and flow time at each stage.
2. What profit does Z earn per week with the current system?
3. Z is comparing two possible improvements:
Decrease average inventory in the cleaning area from 200 to 100.
Decreasing the repair rate to 10%.
Assume that the effort that is required in each case is the