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Operations Management: Balancing Process Capacity - Simulation Exercise

The document discusses budget allocation for the three stages of a car wash process: vacuum, machine wash, and hand dry. It determines that allocating $1M to vacuum, $0.5M to machine wash, and $1.5M to hand dry will optimize capacity utilization and maximize profit to $825. This solution is calculated based on flow rate, with the goal of minimizing blocked cars between stages by making the capacity and time per car equal across all stages.

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khushi kumari
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1K views3 pages

Operations Management: Balancing Process Capacity - Simulation Exercise

The document discusses budget allocation for the three stages of a car wash process: vacuum, machine wash, and hand dry. It determines that allocating $1M to vacuum, $0.5M to machine wash, and $1.5M to hand dry will optimize capacity utilization and maximize profit to $825. This solution is calculated based on flow rate, with the goal of minimizing blocked cars between stages by making the capacity and time per car equal across all stages.

Uploaded by

khushi kumari
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Operations Management: Balancing Process Capacity – Simulation Exercise

Approach for the recommended budget allocation

The three stages of the car wash operation: vacuum, machine wash, and hand dry stations need

an allocation of the budget of total $3M. Given the constraint and operational efficiency of each

stage, the allocation of $1M, $0.5M and $1.5M in the respective stages will improve operations

and maximize the overall profitability to $825 with 100% capacity utilization at each stage.

The above solution is calculated taking the flow rate as the main parameter for optimizing the

entire process. Hence the flow rate is considered the most relevant metric. Given we must meet

the constant demand of the car wash at each station, the number of blocked cars in between any

stations needs to minimize, which can be achieved when the capacity flow rate of the all the

machines processed at each stage is same and maximum. The total time per unit car at each stage

are:

Machine Initial Capacity The time required for each car

Vacuum and Trash Control 36 Cars per hour 1.67 Minutes

Machine Wash 30 Cars per hour 2 Minutes

Hand dry 24 Cars per hour 2.5 Minutes

“Hand Dry” has an initial capacity of 24 cars per hour hence contributing to the maximum time

per car, leading hand dry to a bottleneck. Thus, to improve efficiency and profitability, a larger

proportion of investment is required in this step of the process.


Simulation output:

The above graph has been created based on different combination of budget allocation and their

respective profit generated. Exploring various alternate options and their profit trend, we could

say that the budget that provided the optimal maximum profit of $825 was $1M in Vacuum,

$0.5M in Wash and $1.5M in Dry. Rest any other combination led to a lower profit than $825.

The same can also be derived from mathematical calculation discussed below

Calculations for budget allocation

As mentioned above, for maximizing the efficiency, the capacity should be maximized and equal

at each stage. Let this final capacity at which each stage is operating be “x”. Since the rate at

which capacity can be increased is different at each stage, the detailed working for the budget

allocation is summarized below :


Machine Capacity rate from Change in capacity The budget needed for

$1M investment from the initial set up the increased capacity

Vacuum and Trash 1.5 cars per hour x-36 (x-36)/1.5

Machine Wash 15 cars per hour x-30 (x-30/15

Hand dry 9 cars per hour x-24 (x-24)/9

Now, the sum of the budget needed for the increased capacity at each stage should amount to

$3M. Hence,

(𝑥 − 36) (𝑥 − 30) (𝑥 − 24)


+ + =3
1.5 15 9

Solving this equation gives x = 37.5 cars per hour. The allocated budget for hand dry can be

calculated by substituting the value of x in the table, hence (37.5-24)/9 = $1.5 M. Similarly, the

budget required for the other steps in the process also get calculated: Vacuum machine gets $1M

and Machine wash gets $0.5 M.

The profit from this budget distribution gives the optimal profit of $825

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