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Management Science Coursework MS1203 Spring 2017 Administration • Coursework set: Friday, 17 February 2017. • Submission deadline is Monday 20th March 2017 at 20:00. • Feedback on the coursework will be available by Monday 10th April 2017. • Worth 30% of the total module mark. • To be done in groups of up to four people. You can chose who you work with. Group allocations will be done on Moodle shortly. Marks are deducted for late submission according to standard Cass undergraduate regulations. Submission Requirements By the deadline please submit the following to Moodle 1. PDF version of the report (one submission per group). Name of the file must be Coursework.pdf Maximum number of pages is 10. You should use an 11 or 12 point font size and line spacing of 1.5 with blank line between paragraphs. Default margins must not be changed. Use Harvard system for referencing. 2. Excel spreadsheet containing all calculations (one submission per group). Name of the file must be Coursework.xlsx 3. Individual contribution questionnaire (one submission per person). Each group member will outline their contribution to the project and their perspective on the contribution of the other group members. I anticipate a single group mark for each contribution. However, if I deem your contribution to be significantly less than others do, then I reserve the right to amend the marks to reflect contribution. Marks will be deducted for any deviation from the above. Each submission made should be entirely independent of any other submission. There are severe penalties for plagiarism. General Guidance In the answer to each question, be sure to explain clearly which model you have decided to use and why. Grading criteria will be the same for each case and based upon: • Correct model choice and calculations • Managerial interpretation of results • Discussion of assumptions underlying analysis • Appropriate presentation of report and spreadsheet. Extra emphasis should be placed on conciseness and clarity of both. Page 2 of 3 Case 1: Italia Ltd (50%) Italia Ltd is a company that produces pasta sauce and other food products for Italian fast-foods restaurants in the United Kingdom. It operates a plant in Cookham, which is in the Royal borough of Windsor and Maidenhead. The pasta sauce is prepared (manufactured) using an authentic 100- year-old family recipe, which requires, peppers, tomato paste and mushrooms that Italia purchases from various suppliers. Once prepared the sauce is poured into sterile 1-litre glass bottles and sent to fast food restaurants. The plant operates 365 days a year and Italia uses an annual holding cost rate of 15%. Peppers Italia uses an estimated 1,050 Kg of peppers daily. The peppers cost £0.35 per Kg. Order cost, including transportation, is £1,500. Lead-time is normally two weeks but may vary somewhat. Because of this variability, the company estimates that the lead-time demand for peppers follows approximately a normal distribution with mean of 18,100 Kg and a standard deviation of 200kg. Italia management wants to determine the optimal ordering policy for peppers to meet a desired service level of 99%. Tomato Paste Buyers at Italia Ltd purchase the tomato paste from Organic Farms. The company requires 2,540 litres of concentrate per day to manufacture the pasta sauce. Organic Farms offers customers the following all units price discount schedule: Number of Litres Ordered Price per Litre (£) 1-9,999 2.24 10,000 – 49,999 2.16 50,000 – 124,999 2.04 125,000 – 249,999 2.00 250,000 or more 1.95 The shelf life of the concentrate is 70 days and the ordering cost is £750. Orders must be placed in 1200-litres increments. The lead-time for delivery is 10 days. Italia Management wishes to determine the optimal ordering policy for the Tomato paste. Mushrooms In the recipe the weight of mushrooms required weekly followed a normal distribution with mean 16,210 Kg and standard deviation 4,100 Kg. Mushrooms cost £1.25 per Kg. If any remain at the end of the week, they are unusable and thrown away. If the chefs at Italia Ltd finds themselves running short of mushrooms, they would need to make an emergency purchase from a local supermarket. They would have to pay the retail cost of mushroom at £2.50 per Kg. Management wants to determine the optimal order policy for ordering mushrooms. Glass Bottles Italia Ltd’s packaging department packages the sauce in 1litre glass bottles. These are bought from Maidenhead Glass works at £0.10 per unit. The ordering cost is £130. Italia is considering leasing a machine to make the bottles. The yearly lease cost of the machine is £45,000, and the production setup cost of the machine is £250. The machine can produce 1.1 million bottles per day at a cost per unit of £0.005 (excluding leasing, inventory holding and production setup costs). The company estimates that it requires 453,000 bottles per day. Management wants to determine whether it should continue purchasing bottles from Maidenhead Glass works or begin in-house production and what the optimal policy should be. Page 3 of 3 Case 2: Aspen Estate Agency (50%) Having run a successful estate agency in Aspen, Oxford, David King has decided to open a branch in Cambridge. David must decide where to locate his office and which and how many employees to hire. David has narrowed his choice of office to two locations. The one on Bond Street is a large office with space for virtually any number of employees and customers. David estimates that the agency can attract an average of 12 customers per day at this location. Rent for this office is £1,200 per month. Utilities, insurance and other expenses should average an additional £520 per month. The second choice for an office is on James Street, approximately two Kilometres from Bond Street. This is a much smaller office that can effectively only hold one worker and at most four customers (including the one being served). It rents for£400 per month. Utilities, insurance, and other expenses should average an additional £200 per month. The location would reduce the number of potential customers by 20% and any arriving customer finding the office full will presumably take his or her business to the other estate agency in Oxford. David has decided that if he opens the Bond Street office, he will hire one or more local employees to staff the office. If he opens the James Street office, however, he will hire either Windy Day, an experienced estate agent form the Cambridge area, or a local employee to staff the office. David would have to pay Windy a monthly salary (including benefits) of £2,100, whereas she could hire local employees for £1,200 per month (including benefits). Because of her experience, Windy’s average, customer service time is approximately 20 minutes, compared to 48 minutes for local employees. David estimates that each customer served by the Aspen Estate Agency will result in an average commission of £35. He also estimates a goodwill cost to the firm of £15 per hour for the time a customer spends waiting in the office for service to begin. In addition, goodwill costs of £50 are associated with any customers who find the James Street location full and leave to go to another estate agency. The estate agency will be open an average of 20 days per month, eight hours each day. Customers arrive according to a Poisson process, and customer service times follow an exponential distribution. Determine the most cost effective option for Aspen Estate Agency.