Case 8- Jon at the LOVE Vending Machine Company

LOVE Vending Machine Company delivers the refreshment and coffee refill each morning to vending
machine in downtown. Workers work through the night to prepare the refreshment for morning
delivery. A worker normally prepares several kinds of refreshments. In the refreshment assigned to the
worker, there were three elements. The manager wanted to observe Jon the new recruit for the next 14
days and recorded his performance. The first element has a 5 minutes standard; second element has 3
minutes; the third element has 9 minutes.

5 mins. 3 mins. 9 mins.

Element1 Element2 Element3
Day1 6.0 2.5 9.3
Day2 6.0 2.8 9.4
Day3 6.3 3.0 9.1
Day4 4.9 2.9 9.4
Day5 5.0 2.7 9.5
Day6 4.8 2.2 9.2
Day7 6.0 3.0 9.2
Day8 6.6 3.1 9.4
Day9 7.0 2.7 9.7
Day10 5.0 2.8 9.1
Day11 4.8 3.0 9.2
Day12 4.9 2.2 9.2
Day13 6.9 2.5 9.3
Day14 7.0 2.6 9.4
Mean 5.80 2.71 9.31

A. Compute Jon Job normal process time

B. Compute Jon Job Standard time
C. Comment on the performance of Jon.

The following week Jon was transferred to the confectionary department. He was assigned to place the
cupcake inside a plastic and dozen cupcakes in a box. For the next 28 days, his performance was
recorded.

Day Minutes Day Minutes Day Minutes Day Minutes

1 4 8 4 15 3 22 2
2 3 9 3 16 5 23 1
3 5 10 1 17 3 24 1
4 5 11 3 18 4 25 5
5 2 12 5 19 5 26 2
6 4 13 1 20 3 27 1
7 1 14 2 21 5 28 1
D. How many sample size do they need?
Answer:
Analysis:
 Case 9- Rich Dad Chocolate Company

Rich Dad Chocolate Company manufactures several varieties of chocolates in three factories in
Mindanao. The company’s product is highly seasonal, with highest demand during the fourth quarter
(for the Holiday Season) and the first quarter (Valentine’s Day). Given the following cost and quarterly
demand, the first quarter there are 22,000 units; second quarter are 11,000 units; third quarter are
13,551 units and fourth quarter 23,112 units. Production at regular time is P80 per unit and at times
when overtime is required the cost is 92 per unit. Often Rich Dad subcontracts their production to Choco
Unlimited at P87 per unit. The holding cost for each unit is 0.23; every unit increase from the previous
period is 0.11 and if a decrease is 0.09. Rich Dad during the regular time production are 10,000 units in
the first quarter and forth quarter; 9,000 units in the second quarter and third quarter. Overtime
production in the first quarter is 2,000 units; third quarter is 1,000 units and fourth quarter is 2,500
units. They subcontract 2,000 units in the first quarter, 1,000 units in the third quarter and 2,000 units in
the fourth quarter. Initial inventory is 22,000 units and 10,000 units are produced before the first
period.

Do you think they need to improve their aggregate planning? Why? Why not?

Answer:

Analysis:
 Case 10- Eden Block and Mortars

Tim the Operations Manager of Eden Blocks and Mortars ordered a shipment of 3,000 Lots of third class
blocks from Bukidnon and presently stationed at the warehouse. Before accepting the shipment he
asked his people to conduct a random sample of 70 boxes to check damage or broken blocks. Based on
his experience contractor-buyers are willing to accept lots that contain small percentage of defective
blocks as “good” especially the cost of each block is only P0.5 to P1,000 per lot. Defects cannot be totally
avoided and contractor-buyers understood it. The percentage of defect is within one (1) to two (2)
percent defective. In addition, because it is impossible to unmistakably identify lots that contain more
than this specified percentage of defective blocks, contractor-buyers recognize that some lots contain
more than 5 percent is still acceptable. However, Tim recognizes that contractor-buyers have an upper
limit on percentage also known as lot tolerance percent defective (LTPD) at around 15 percent.
Therefore, contractor-buyers really wanted the blocks quality equal or better than the AQL. Tim is also
aware that the probability that the contractor-buyers accepting defective lot known as the consumer’s
risk is only five (5) percent. Tim is also aware that their producers risk is 10 percent.

1. Is the random sample size of 70 boxes enough?

2. Tim decides that if there are more than seven (7) boxes with broken or damage block the entire lot is
not accepted. Is he correct?
3. How much is the probability of actual producer’s and consumer’s risk?
4. Present an OC and AOQ table and explain
5. Draw the OC and AOQ curve.

Answer:
Analysis:
 Case 11- Hans the Livestock Dealer

Hans is a livestock dealer of chevon (goat’s meat) and buys directly from a cooperative farms. Lately, he
is implementing a quality control on the livestock and he is only willing to buy goats (20 goats in a herd)
from whose mean weight is 60 kilos but reject if the weight mean is 75 kilos. The standard deviation is 8
kilos. He is using 5% and 10% for alpha and beta respectively.

1. How many goats will Hans sample?

2. What will be the weight of one of the goats for Hans to reject the entire herd?
 Case 12- Jet Shirt Company

The Jet shirt company produces cotton shirts. Management wanted to monitor the production process
and maintain high quality. They believe that approximately (three sigma limit, Z= 3.00) 99.74% is random
and should be within the control limits, while 0.26% of the process is not random and suggest that the
process is out of control.

Taking 20 samples (one sample per day for 20 days), each containing 100 t- shirts and inspected for
defects. The result shows that:

Sample Number of
Defectives
1 6
2 0
3 4
4 10
5 6
6 4
7 12
8 10
9 8
10 10
11 12
12 10
13 14
14 8
15 6
16 16
17 12
18 14
19 20
20 18

Is production within their control?

 Case 13- KYM Mills

KYM Mills manufactures the garments that are used by Jet shirt manufacturing company to manufacture
shirts. As the cloth is woven by from thread on a waving machine, it occasionally breaks and is repaired
and is repaired by the operator, this sometimes causes blemish. The operator inspects the cloth on the
daily basis as they come out of the production area and count the number of blemish. Following are the
result from inspecting 15 rolls of cloth during a three week period.

Sample Number of
Defects
1 12
2 8
3 16
4 14
5 10
6 11
7 9
8 14
9 13
10 15
11 12
12 10
13 14
14 17
15 15

Is production within their control?

 Case 14- Hercules Tool Company

Hercules Tool Company has taken 10 samples (during a 10-day period) of five high tension spring (n = 5).
The individual observations from each sample are shown in the table below.

Observation High -Tension

Spring)
Sample k 1 2 3 4 5 Mean Range (H-L)
1 5.02 5.01 4.94 4.99 4.96
2 5.01 5.03 5.07 4.95 4.96
3 4.99 5.00 4.93 4.92 4.99
4 5.03 4.91 5.01 4.98 4.89
5 4.95 4.92 5.03 5.05 5.01
6 4.97 5.06 5.06 4.96 5.03
7 5.05 5.01 5.10 4.96 4.99
8 5.09 5.10 5.00 4.99 5.08
9 5.14 5.10 4.99 5.08 5.09
10 5.01 4.98 5.08 5.07 4.99

Discuss the result.

Observation High -Tension Spring)

Sample Range
1 2 3 4 5 Mean
k (H-L)
1 5.02 5.01 4.94 4.99 4.96 4.984 0.08
2 5.01 5.03 5.07 4.95 4.96 5.004 0.12
3 4.99 5 4.93 4.92 4.99 4.966 0.08
4 5.03 4.91 5.01 4.98 4.89 4.964 0.14
5 4.95 4.92 5.03 5.05 5.01 4.992 0.13
6 4.97 5.06 5.06 4.96 5.03 5.016 0.1
7 5.05 5.01 5.1 4.96 4.99 5.022 0.14
8 5.09 5.1 5 4.99 5.08 5.052 0.11
9 5.14 5.1 4.99 5.08 5.09 5.08 0.15
10 5.01 4.98 5.08 5.07 4.99 5.026 0.1
 Case 15- Fresh Water Bottling Company

Fresh Water Bottling Company is a large distributor of bottled and canned beverage in Southern
Mindanao. Fred, the operations manager wanted to minimize their inventory cost. They order their
beverage from the two large bottling company located in Northern Mindanao. They have an ordering
cost of P5,500 and a holding cost of P18,500 the annual demand is 550,000 units. After placing an order,
it takes three (3) days for their order to arrive. Using an order quantity of 50,000, answer the following:

1. How much is the maximum inventory level.

2. Average inventory
3. Order per year
4. Annual set up cost
5. Annual holding cost
6. Total cost

If the unit cost is P8, how much is the total cost?

Fresh Water Bottling ventured into wholesaling mineral water. Initially, they launched their product in
an experimental market with an annual demand of 50,000 bottles and a 20 percent holding cost. The
management decided to offer their customers discounts shown below

Discount From To Price

1 1 9999 8.00
2 10000 29999 7.75
3 30000 49999 7.50

The management wanted to find the following data:

1. Optimal order quantity

2. Average inventory
3. Orders per period
4. Total Cost
 Case 16- Fresh Mineral Water

In order to prioritize the operations of the Fresh Mineral Water, the sister company of Fresh Water
Bottling, the management hired Rob a MBA graduate. The first agenda of Rob is to classify their
inventory items that are substantial to the daily operations and believed that these items have an
impact on the overall success of the operations. Rob noticed that there was a poor inventory
management within purchased items. He initially breakdown the inventories which are not the same
value and need a different inventory control. He categorized the inventories based on its projected
value displayed on the table below

Item name Demand Unit Price

Plastic caps 50,150 0.3
Bottles 5,050 1.8
Mineral Water 25,000 5.0
consumables 25 500

He instructed his people that items classified as “A,” are very important in their operations because of
its high value. These are the items that their company spend 80 to 90 percent. These are the items that
matters in their operations. The “B,” items are the supplies that they spend 10 to 15 percent of their
budget. Although, these are not high priority but also need attention. Category “C,” are items with very
low spend, with 75 to 80 percent of items falls under category “C.”

1. Produce an ABC Inventory Result

2. Which items do you think need to pass through a cost and price analysis to save more.

In one of the Fresh Mineral Water small outlet, Rob instructed the store manager to submit the average
daily sales of the store. He wanted to design an ordering system for the store.

Days Bottles sold Lead time

Monday 220 0.3
Tuesday 300 0.33
Wednesday 450 0.5
Thursday 670 0.75
Friday 550 0.45
Saturday 380 0.3
Sunday 180 0.25
Average
Standard deviation

1. How many bottles left for the store manager to place an order?
2. If the safety stock has a negative value, what does it mean?
3. Interpret the inventory results.
 Case 17 – Jul at Fresh Organic Water Bottling

Jul works for eight hours in the organic beverage department at Fresh Water Bottling Company, labelling
and sorting filled bottles. In an hour she can process 20 bottles. If one kanban to every case and a case
can hold eight bottles, it take 15 minutes to receive filled up bottles from the previous workstation and
the operation uses a safety stock of 15 percent.

How many kanbans are needed for the bottling process?

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