The responses to these questions were composed by Peter Jackson (labelled "<") or Robin Roundy (labelled "<<"). Editorial comments by P. Jackson are enclosed in double square brackets ("[[]]"). Answers by one professor do not necessarily apply to teams under the supervision of the other professor. When in doubt, ask. Keep in mind that the intent of these answers is to help you resolve issues: not to keep changing the rules of engagement.
Recent questions/comments are added to the TOP of the list.
1. Where in the spreadsheet does it account for the fact that you're shipping out units for free to your customers if they were defective & returned (i.e. that it eats up your capacity for producing your real demand) & increases your costs without adding to your revenues? 2. If you reduce lead times & have a 95% fill rate, how do you reduce your expedited freight costs in the spreadsheet & how do you know by how much?
<Warranty costs in the income statement are driven by sector yields. The expedited cost is a parameter supplied in cell N68 of the cash flow sheet. That is the extent of the spreadsheet model. You are free to modify the spreadsheet and develop a more detailed model of this activity. You will have to supply an estimate of expediting costs and warranty costs as part of your final proposal. I agree that there is not much data upon which to base this estimate.
> If you eliminate type I & II errors, does that mean that your reject good is 0% and your reject bad is 100%?
<Yes.
> Do you just add the bender (proposal 10) in a separat column in the spreadsheet even though there is no specified area for it in sector 1?
<I am not sure how other teams have handled this. My idea would be to replace the assembly column with data for the bender.
> We were wondering if we need overtime, how far in advance can we schedule it.
<< Union rules limit overtime to a total of 20% on any given week. Union rules allow up to two hours of overtime at the end of a normal shift on a weekday. 36 hours of advance notice are required. On Saturdays, if overtime is to be scheduled, the amount of overtime must be between 4 and 8 hours, and 4 days of advance notice are required.
>We think that the oven load job in Sector 1 and the inpection job at the end of sector 1 could be combined into 1 job. Is this allowed? In addition, we have another question about the inspectors at the end of sector 2 and sector 3, do they only do visual inspection or do they actually use an equipment to do the inspection (in the equipment inventory list, equipments are assigned to their stations)?
<Merging oven loading and inspection is a reasonable assumption given the physical simulation you experienced. On the other hand, in the real physical plant upon which the case is based, the oven is twenty feet long. It is not physically possible for the person loading the oven to also unload and test the parts. At this late stage of feedback, I will accept either assumption. There is equipment involved in the sectors 2 and 3 testing: gauging of physical properties related to those sector activities (eg. length of final product), as well as visual inspection (correctness of assembly).
> It doesn't seem like the sales clerks do much. In our factory, the production controller assumes some of the duties of the sales clerks. We would like to get rid of three of the sales clerks. Is this possible? What do the sales clerks do?
<< The marketing people do market studies and work with the product development staff in determining future poroduct development needs. Most of what the sales people do is get out there and sell the product. The need for people of that type is outside of the domain of this project. You cannot fire them.
>-In the handout "An additional investment opportunity for velocity" you gave in class, it is said that the material cost per machining blank must increase by 26% per piece and that we do not need elbows anymore. So in the "material cost added calculation", I increased the cost of the cards-nipples and labels-elbows by 26% and entered 0$ as the cost of elbows we do not need anymore. Is that right? Or should I have also considered that the price of the cards-nipples is also 0$?
<In the physical simulation, cards correspond to blanks for nipples and stickers (labels) correspond to elbows. The one piece fitting works with larger blanks and eliminates elbows. Therefore, increase the cost of cards and eliminate the cost of labels.
>- In this same handout all the set up times, run time, mean time between failures and repair time of the bending machine are expressed in seconds , however all these times for other machines are expressed in minutes in the spreadsheets and in the case. Is there a typo in the handout or is this bending machine really incredibly fast to run,to breakdown and to repair?
<No. The handouts I am looking at (Table 4, for example) express times in seconds. The spreadsheet should also be in seconds. Everything should be in seconds. Remember that a shift is 720 seconds (12 minutes).
> You indicated that the holding cost was 15% of inventory value. Don't we have to include the capital cost of 11.6% as indicated on page 5 of the project description?
<< You are right and I am wrong. The true cost is 26.6%.
> Referring to your answer about 'destructive testing': If visual inspection is performed by workers in addition to the testing, what is the proportion of bad parts that get removed from plain visual inspection?
<<There is no data on that. But it appears to be very small. The people on the shop floor say that almost all of the scrap is detected at the testing stations.
>Useful life of equipments:is it used for accounting purpose only or is it a real useful life, i.e. can't use it anymore after the useful life ends ?
<< The 10 years is for accounting purposes. All equipment that you currently have will continue to function properly for more than 5 years.
>Bending machine set up: is the set up done for every piece or every type ?
<<The bending machine is set up for every type of elbow, i.e., for 90 degree and for 45 degree bends..Straight end fittings do not need to be bent. The shape of the end fitting that the lathe cut is not important.
> Marketing staff: want 1 day manufacturing lead time In Projected Growth in Unit Sales: 1 shift manufacturing lead time. If we have 2 shifts but 1 day production lead time, will the projected growth in unit sales stay the same ?
<< The days in which lead times are measured are 24 hour, calendar days. If you run two shifts per day, you can ship at the end of the second shift and consider it to be same-day delivery.
< Prof. Roundy counts anything by end of second shift as same-day. Prof. Jackson does not.
> New lathe: if we add a new lathe, do we have to add a new employee ?
<< Yes. One lathe per operator.
> Inspection machine: can we add a new improved (less breakdown) inspection machine ?
<<The only types of machinery that can be purchased are the ones that are listed in the Velocity materials, and other machines that are identical to the ones that you currently have.
> CNC Lathe: Can proposal 3 (reduce hours of breakdown and repair on current equipment) be applied to CNC lathes ? Can proposal 4a (adding a new $70,000 control) be applied to CNC lathes ?
<< Proposals 3 and 4 can be applied to the CNC lathe. Note that the CNC lathe only fails half as often as the current lathe to start with, so a 75% reduction in the frequency of breakdowns has less of an impact on a CNC lathe than it has on the existing lathes.
> In my obsession to understand the spreadsheet, we are investigating the scrap rate in Sector 4. Is the high rate (4.0% from historical data- Velohist.xls) due to distructive testing? There are no machining or assembly steps in that sector to Cause defects- only testing to detect them, and those numbers are included in the test quality.
<<The sector 4 test machine is non-destructive. They connect the hose, put it under water, and high-pressure air inside of it, and look for bubbles. The new tester is also a non-desctrctive, functional test. Obviously, if the tester sees a visible defect they will scrap the part, but the intent is that it be a functional test and that visual inspection should be done in-line, by all workers in the facility.
>Another question, revisiting the issue of holding costs: Dollars Per Item Per Day: what is this for Raw Materials and Finished Goods? ie, what is the actual $ value? We're ok on the concepts, but cannot find this value in the spread sheet. We are using this in our inventory calculations (we are OK with the models we're using, btw). If we should ignore this cost of ordering our materials and storing FG, then great! If not, we need to weigh this against lead times (and production capacity for FG).
<<The inventory holding cost in the spreadsheet is hidden. It is equal to 15%. [[See correction above.]]
>What are the setup costs? We've located some costs on the spreadsheet, which indicate that holding cost is calculated as 15% of the value of the inventory. On a daily basis, its' .15/365 However, there is procurement cost, which I am assuming to be ordering cost. Its listed as 42,000 /year, under fixed manufacturing costs. The formula is this (cell E14, Income Statement Sheet):=SUM(OFFSET('Income Statement'!procurement,0,5*(E$2-'Balance Sheet'!$E$2),1,2))This formula is very bizarre- it returns the sum of a series of cells 0 rows high and 5*(number of years after 1997)... huh?
<<The fixed order cost is given as $200 per order in the report. I do not understand the spreadsheet formula any better than you do. However there is nothing in the spreadsheet that allows you to account for the fixed orddering costs that are incurred in raw material acquisition. So you should do the right thing for the company in your raw material inventory management scheme, account for the amount of raw material in storage correctly, and allow the accounting system to account for the fixed costs incurred in raw material acquisition incorrectly.
<Let me try to decode the formula. From the income statement, if you Edit Go To "procurement", it takes you to cell G13 in the staffing sheet. The Offset arguments are (cell, rows, cols,height,width). So starting from G13 we go down 0 rows and over 5 columns for every year since 1997 and pick up two cells: one high by two wide. Sum those two cells. That would result in the total salaries plus overtime paid to procurement employees in the appropriate year. Fun, huh?
> do we have to worry about thing s like inflation (in cost of raw materials, etc.) 2)what is the purity of vendor b? 3)do testers operate like lathes. specifically, after the setup period, does the operator have time to be doing other things during the run time? 4)we know we have 50% 1 day delivery, 50% 2 day delivery. Does this mean we must ship our goods at the same point in the day, 24 or 48 hours later, respectively? Say we had a one day delivery, and we run two shifts per day, do we have 720*2=1440 seconds of manufacturing time to deal with? Can we deliver at the end of the 2nd shift and consider it same day delivery?
<<1) The cost of raw materials, etc., should be treated as constant over time. 2) There is not data on the purity of vendor b. Your guess is as good as mine. Vendor B says that they are over 99.8% pure. So does Vendor A. 3) No. The operators of the testers, and of all other machines in the factory, are fully occupied whenever their machine is being set up or being operated. The lathe operators usually have some extra time, but often things need to be looked into or adjusted, so that time is some-what variable. The bending operation is very quick, so that is not a problem. 4) If you run two shifts per day, you can ship at the end of the second shift and consider it to be same-day delivery. Keep in mind that what customers are expecting is changing with time. That is why the marketing group is adamantly saying that we must prodive same-day delivery for everything.
< The above answer is by Prof. Roundy for his teams. I have been telling my teams that you must ship by the end of the FIRST shift to consider it to be same-day delivery. My rationale is that we would collect customer orders over the course of the day. At 5 oclock we would begin to plan production and issue work releases for all orders received prior to 5pm. This is too late to have releases ready for shift that starts at 4pm. Next available shift shows up at 8:00 next morning and works till 4pm. Production from first shift could be shipped by 5 pm and we would count that as 24 hour shipment.
> In the handout, the scrap rate for Sector 4 is 4% but since the test proofing is the first thing done in Sector 4, I'm wondering where does the 4% (highest among all sectors) come from? Since Sector 4 only performs proof testing, shouldn't it reject the parts made bad by other sectors. Another question is can we choose a reasonable scrap rate for all sectors by implementing some quality control plans. Because certain things could be the result of human errors, so if we manage to change the attitudes of the workers. We might improve the scrap rate.
<< Sector 4 scrap is product that is damaged by the testing process. The new tester would virtually eliminate that type of damage. 4% is high, but the current thinking is that damaging 4% of the parts in the tester is much better than shipping bad product.
>There are two table 9 (Marketing Plan) in the handouts given to us. However, the data for years 2-5 is different. I am wondering which one should we use.
<< 1) Use the one between pages 10 and 11 of the Cornell Technical Report called "Velocity Manufacturing Company".
>From the explanation of Proposal 9, for example if you reduce the price by 5% in the first year with 95% on time delivery. Your market share should increase by 32% in the 1st year and 12% for years 2-5 without further reduction in prices. However, from our T.A. had told us is that the growth for years 2-5 will be 8% (read off from the column with 0% price change). So I just want to clarify if we should follow what the handout say.
<<The T.A. got it wrong. If you reduce the price by 5% in the first year with 95% on time delivery, and do not make any further reduction in prices, your market share should increase by 32% in the 1st year and 12% for years 2-5. without further reduction in prices.
>I don't really understand how the raw material prices for 1996 works out. We used the breakdown of 26 weeks demand to calculate the raw material prices for blanks (nipples) it is approx $230. There is no way I could get $202. This is very important as raw materials is like the major cost incurred and if I use this cost, then all the performance measurements in 1996 will not be the same.
<< Do not worry about not being able to duplicate the raw material costs in the spreadsheet. I do not know where they came from. It should be averaged over the different types of products and the different vendors, based on the fraction of useage.
>I have a quick question about "one piece fitting" proposal. What is the lot size that the bending machine operate? And also for the blank machining part, after we invest $190,000 on the lathe, the batch size should be the same as the unmodified lathe? And finally is the $190,000 for only one machine?
< You determine lot sizes (number of pieces before a setup). The process batch size is one (ie. it bends one unit at a time). The modification to the lathe also reduces setup time so you could run smaller batch sizes if you saw any advantage to that. The $190,000 improves only one lathe. You would need to spend as much on the second lathe to achieve these benefits.
> We were unsure as to what exactly the two members of the 'maintenance staff' are responsible for (are they janitorial or machine maintenance?). And if they are in charge of equipment, are they the ones who perform preventative maintenance?
< Their function is machine maintenance. They take care of major breakdowns, machine calibration, preventative maintenance, and installation and test of new equipment. I would not recommend eliminating those two positions.
> How can we verify that we are indeed going to meet a 95% fill rate (purely from average daily demands)?
< Not an easy question to answer. The purpose of lectures and assignments was to get you to point where you could tackle questions such as these. Let me suggest some different approaches:
First, suppose demand is generated by a Poisson process. That means that the only parameter you need to estimate for each part number is the average daily rate of demand. You have data sufficient to get at least this. Look at graphs of historical demand to see if this is a reasonable assumption. You could use a spreadsheet to generate some random Poisson time series and see if the variability is comparable to the historical plots.
The simplest model is simply to operate on a Order up to R basis (base stock policy) assuming all products can be replenished within one day. You then set R so that there is a 95% fill rate, assuming demand over a one day lead time is Poisson.
If you apply this model to all 68 part numbers, then you will have exactly the policy that the company is currently using to set finished goods inventory levels. The company is failing to achieve 95% fill because it is not in fact using an Order up to R policy but instead is using a kanban system. The kanban system does not take backorders into account. Also, the lead time is not one day in the current system: it can be much worse because of the kanban system and other factors. If you could redesign the system to nearly guarantee a one day lead time and you used an Order up to R policy, then it would be reasonable to predict that the values of R you compute using this method will drive the company towards achieving 95% fill.
The problem with this approach is that it creates inventory in all 68 part numbers. This is unnecessary. As indicated in lecture, you need only carry inventory in a few part numbers. The reason for carrying any finished goods inventory is because you may not have enough capacity to produce everything demanded by the customers in one day. So it becomes a question of how much total inventory is required to buffer you from the situation that total demand exceeds total capacity. Then, you can decide in which items to concentrate that inventory. So think of it as a single item problem: total demand in one day, in units, has a Poisson distribution. Choose a base stock inventory level R, in total units, so that the probability that demand exceeds R plus total production capacity for one day is less than 5%. Now choose values of R for each item that you want to stock (the high volume items) so that the sum of these Rs is at least as large as the R computed for total inventory. One idea is to split R among the high volume items in proportion to their demand rate. This approach is crude but it should be in the right ball park.
There are problems with this approach that take you to more advanced models. For example,it is possible to have several days in a row of high demand. The above approach assumes you will have at most one day of high demand and that you will get back to normal on the next day. So the above approach underestimates the amount of inventory you really need. The lectures by Prof. Roundy give the more advanced techniques that you need.
I hope this helps you at least to get oriented and also to provide you with some simple models if you can't master something better in the limited time you have.
> Do we have any options as to how to get rid of obsolete parts (from a materials standpoint, there must certainly be a means of re-working at least some of the parts, like metals).
< In general, it is not worth the labor cost to rework the parts. The best you could hope for is sell them to a scrap agent who will try to recover some of the material. The revenue would be a small fraction of the original material cost, say, 5% for the sake of analysis.
>I have some questions on one-piece fitting proposal. In the note of this proposal, it says an increase of 46% in process time or increase of smaller 13%, are we suppose to see both options and what process time does the above refer to? ( operation 110 or 120 ?) And all the breakdown, setup and repair mentioned here refer to operation 110 or 120 ?
<This all refers to operation 110, the initial turning operation. There are currently two lathes with a process time of 11.05 minutes per piece, setup time of 29 min. per lot, MTBF of 30 min. and MTTR of 5 min. To machine the one piece fitting, the process time will increase by 46% per piece. That may force you to purchase another lathe to keep up with demand. However, by investing $190,000 per lathe the process time would increase only by 13% (ie. not by 46%). Which do you prefer to do? It is up to you. There are additional benefits in upgrading the lathes: reduced setup time and more infrequent failures. The essential question, if you decided to implement the one piece fitting idea, is how are you going to meet the increased machining requirements (use extra equipment, extra shifts, or upgraded equipment)?
>How did you calculate the Raw material cost (weighted cost) for the blanks of $202? No matter how many times I try, I get $221. I am trying to analyze Vendor C cost.
<Several people report $220 or $221 as the weighted cost of blanks even when I provide them with the weights I thought were used in the calculation. Conclusion: use the number you can compute ($221) and replace the number in the spreadsheet. This is one more item for correction in the next edition. Sorry that it caused so many iterations for you.
Roundy 1) The $1.01 "Miscellaneous" cost in the materials cost spreadsheet: This cost has to do with the administrative and handling costs associated with purchasing and receiving materials. These functions are outside of the domain of our current analysis, so you cannot reduce these costs.
Roundy 2) Compounding market share growth: There is an increase in market share that you get if you switch to the 1-piece end fitting. This causes demand to go up once, when the switch is made, but demand does not go back down thereafter. In adddion, there are annual changes in demand that come from the marketing plan. All of these changes to the demand rates are compounded, based on the current demand rate.
Roundy 3) Customer Lead Times: Currently, half of your incoming orders are for a one-day lead time (24 hours). The other half are currently for a 2-day lead time.
Roundy 4) Impact of second shift on maintenance costs: If a second shift is added, you should assume that all maintenance costs that are accounted for by the spreadsheet are properly computed.
Roundy 5) Option 3 includes an additional $5000 per year per lathe. In the interest of simplicity, we will make the questionable assumption that this cost is fixed, regardless of the number of shifts being run.
> Some of the data that we have indicates that the current scrap rate for sectors 1,2,3,and 4 are 2%,1%,2%,and 4%. Other data that we have indicates that the scrap rates are 6% 1% 1% and .1%. Which data should we use? In another case, some of the data gives varying testing error rates. For example, sector 1 "reject bad" % = 33%. Yet other data says this value is 65%. Again, which data do we use?
> There does appear to be a discrepancy between the Velocity History spreadsheet (years 1994-1996) and the Velocity Planning spreadsheet (years 1997-2001) in the yields table. We will correct this in the next edition. Sorry for the confusion. Use the Planning spreadsheet (Veloci97.xlw) for your base case figures.
>My group was wondering if we had any kind of space restrictions for the actual plant (we're redesigning the layout of the floorplan).
< You should not require more than the square footage available in Rhodes 280 + Rhodes 282 + Rhodes 253, since the current factory is accomodated in that space. You may assume that the space is contiguous and roughly square in shape.
>I am in charge of Proposal 9. Is there anyway we can incerase our marketshare? I understand through the financial presentation you gave in classthat we want to double the sales and increase our RONA to 32%. If we launchproposal 9, our sales increase to 32%. Would this double our sales? Inother words, if we do proposal 9 and increase the sales to 32% and 12% forthe remaining years, will this be attractive enough? Or do I want to makeit 100% sales growth in order to double our present sales? I got veryconfused on this part. Please help me clarify some of this part. I interpreted that our target will be to append our manufacturing style inorder to reach the RONA of 32% and be able to double the sales. And inorder to do that we have to do sometime thing about the %on time deliveryand price change. Please let me know if I am on the right track.
<Lecture by Peter Jackson (external financial consultant) suggested that something like doubling sales volume is needed for Velocity to become an attractive investment. That doesn't have to happen in one year, and the factor of two was only a rough guess at what would be needed to make things look good. The marketing plan of proposal 9 would more than double sales within five years. You should be able to tell from spreadsheet whether your proposal looks good (check rate of return on shareholder equity). You are on the right track.
>proposal #4:where do we put the cost for additional training for our operator?there is nothing for training on the staff and salaries spreadsheet.
<Treat the $5000 training as an equipment purchase but give it only a one year life. That way it will be expensed in one year.
>proposal #5:part a) how do we put in the tooling cost ($2.30/unit)?
<Adjust the weighted material cost (currently at $202 in the spreadsheet) to reflect this tooling savings.
>proposal #5:in proposed cnc lathe what is average piece per lot?
<You should decide lot sizes. Refer to cyclic scheduling lectures. In sector 1, you will likely want to produce lots roughly equal to one day's demand. Knowing demand for each blank type, allocate this demand to the two or three lathes that you have to balance the workload. Then, compute an average lot size for use in the spreadsheet.
>proposal #5:c) is this proposal still include the old tester or does it replace the old tester with the new one?
<I see your confusion. Proposal 5 is phrased as "Add additional equipment" but option (c) really seems like it means "replace test station." I would interpret (c) to mean "replace old tester with new". That means you could sell the old one and get cash for it.
>How can we get access to the book of templates that show how each part number is configured?
<Velocity template file is on reserve at the Carpenter library.
>The maintenance costs don't seem to affect the cash flow. Why is that?
<I was surprised to find a maintenance cost section. I went through a detailed explanation of how to modify the spreadsheet to input changes in maintenance cost (see below) and then you point out that it already exists. Egg on my face. So there it is, on the Equipment page there is a column in which to enter maintenance cost for new and old equipment. As you say it doesn't work, so my fix described below is still the best solution going.
> How do we find/change the number of customer returns?
<These show up on the income statement as Expedited Freight and Liability/Warantee costs. The formuls for Expedited freight traces it back to cell N68 on the cash flow sheet. Feel free to change that number. For example, set it to zero if you can argue convincingly that it will be zero. The formula for Liability/Warantee traces it back to Purity (K35) on the sector yields sheet. So the only way to reduce Liability/Warantee costs is to improve the purity of the finished product. Makes sense.
>Proposal 5a states that tooling costs decrease by $2.30/unit, where can tooling costs be found on the spreadsheet? I was unable to locate this data.
<I cannot find it either. I would adjust the weighted material cost (currently at $202 in the spreadsheet) to reflect this tooling savings.
> In sector 1, when production speed of the lathes are increased a different bottle neck occurs in the sector, which will limit the production increase that can be generated by proposal #1. How do you account for that?
< If the bottleneck moves, then the proposal will not look as advantageous as it could. You may need to combine proposals to get the full benefit of the individual proposals.
> Where does tooling cost fit in on the financial statements? In maintanence?
< That is answered below.
> Are the costs of the blanks averaged on the materials cost added statement?
< Yes.
> How do we make changes in cost, when switching from vendor A to C?
< Change the material price in Materials cost added statement.
>We have a quick question about the Sector 1 quality report. In the report given out in lecture, the scrap rate for sector 1 is given to be 3.53%. However, the default value in the spreadsheet was 6%. Are we to go by the quality report, or was there some reason for changing the scrap rate to 6% ?
<Look down further in the Sector Yields sheet and you will see a line labelled "Yield Loss" which is computed to be 3.52%, consistent with the quality report. The true scrap rate is taken to be 6% but only 33% of parts that are bad are detected by the test in sector 1. The Sector Yields sheet computes the interaction of purity, scrap rate and test accuracy to arrive at a final yield loss.
> We really don't know how to implement the "bending machine" alternative into the spreadsheet.
< That's too broad a question. You are expected to study the spreadsheet, figure out how it works, and then use it creatively. Please give me a more specific question. The next question is an example of a more specific question.
> The "one piece fitting" alternative states that "tooling, fixturing, energy and maintenance costs are expected to be reduced by $9,000 per year." We don't see any "blue" cells in the spreadsheet that would let us enter this data. How can we model it?
<That's a good question. I am still looking for a good answer. Will let you know when I find something that works. Got something. In step form, modify as you wish:
1. Select author mode
2. Insert Worksheet
3. Right click worksheet tab and select Rename...
4. Enter "Mystuff" or a name of your choosing.
5. Enter -9000 in cell A1.
6. Go to Income Statement Sheet.
7. Select cell in row "Maintenance" and column "1996". It is cell E19. In the Excell formula bar, click on the formula and add "+Mystuff!A1" to the end of the formula.
8. Check: Formula now reads: "=SUM(OFFSET('Income Statement'!maint,0,5*(E$2-'Balance Sheet'!$E$2),1,2))+DSUM('Income Statement'!Database,8,'Income Statement'!criteria1)-DSUM('Income Statement'!Database,8,'Income Statement'!criteria1Sale)+Mystuff!A1"
9. Maintenance cost is reduced by $9000 in every year.
10. Observe this is way to add other changes to spreadsheet. You should spend some extra time and make the sheet "Mystuff" look nice: add labels.
>What is the scrap rate for the new bending operation?
<The only data available are in the handout describing the "one piece fitting" alternative. It does not indicate scrap rates of individual operations but makes estimates of sector-level impacts.
>What impact does the "one piece fitting" alternative have on the number of different pieces produced on the lathes?
<None. We must still produce the same number of different types of fittings (blanks).
>The spreadsheet doesn't mention salvage values. How can we show the cash inflow for selling an existing machine?
<In the sheet called Equipment Inventory is a column called "Revenue from Sale". You would type in the salvage value in this column. It indicates the cash you actually receive for selling the equipment. The spreadsheet will then automatically compute the tax and depreciation effects of the transaction. The spreadsheet called Velohist.xlw has a report showing salvage values. You can get velohist.xlw from m:\or515\velocity in the ORIE network.
>How would we modify the yields for something like option 1A?
<Option 1A adjusts turning feeds and speeds to increase production rates by 10% but has the negative effect of decreasing yield by 3%. I would adjust the Sector 1 scrap rate until I had increased the sector 1 yield loss by 3%. Looks like it is somewhere between 16 and 17%. With a little effort, you could solve for the exact value analytically.
>Option 2 doesn't make sense. How can having an additional fixture reduce setup time?
<The text is overusing the phrase "setup time." Option 2 has no effect on setup time at the lathes. What option 2 does is reduce the processing time per unit of the lathe by allowing the operator to position the next piece to be machined in a second jig or fixture and then quickly swap the current fixture out and the second fixture in. Otherwise (with only one fixture) the time to position the part in the fixture must take place while the lathe sits idle.
>The spreadsheet shows a batch size of 1.9 in sector 4 test. Can the test machine operate on more than one piece at a time? Other handouts show the batch size to be 1.
< Test machine operates on one piece at a time. Ie. Process batch size is 1. Batch size in spreadsheet refers to average production lot size: the units to process before changing to a different part number. You are expected to change this number.