solve 4a
table 2 (given)
10:13 PM Thu Apr 4 63% Case 2-sp19-Ollies Oil Change.docx Team-Based CASE Assignment 2: Ollies Oil Change Ollies Oil Change is a thriving, independently owned and operated firm located in Springfield. It was founded in 1999 by Ollie Besmer. Ollie was born and raised in Springfield, OH. Ollie is well-known and trusted by the residents of the town. As a teenager, he was a star football player for the high school team. In his spare time, he enjoyed working on cars and had a special talent when it came to cars. After college this hobby led Ollie to start his own business- Ollies Oil Change Ollie does a wide variety of work on vehicles of all makes and models as over the years the business has expanded beyond oil changes alone. The shop also offers a variety of parts and supplies at retail. Ollie spends a great deal of time conversing with customers most of whom he has known his whole life. His reputation for honest and reliale work has earned him many repeat customers, with the positive word of mouth helping him to expand his business His wife, Mabel, runs the office, and takes special care to acknowledge customers on their birthdays with hand-written cards that include coupons for discounted services Customers often reflect that Ollie offers the kind of service you can only find from a small-town mechanic. While Ollie is slightly more expensive than the chain establishments that have recently moved into town, customers testify that the friendly environment and quality service are worth the price Operational details Ollie's shop has grown steadily over the years. Originally, Ollie maintained a modest three automobile bays at his shop, and he and his long-time buddy, Al, conducted most of the work except oil changes which were handled by a part-time apprentice. Currently Ollie's shop has six bays (the layout of the shop is shown in Figure 1) and seven mechanics (as not all of the service activities require a bay). Each of the bays is identical so that any employee can work at any station Four of the employees (including Ollie and Al) are full-time (work at least 40 hours per week), and three are interns who work part-time (work fewer than 40 hours per week). Ollie and Al are the only two mechanics permitted to do work beyond the basics, and so more involved car services can take some time getting through the shop. Most mechanics at Ollies Oil Change Service were trained at the area vocational school, and those with particular skill are taken on as apprentices who work under Ollie and Al on the more involved projects. Cooper provides all the tooling necessary, and is respected as a fair and caring boss. In return, Ollie' employees are loyal and hard-workers; seldom is absenteeism a problem, and turnover is rare One of the high-potential apprentices Marvin is gradually being involved in more demanding repair work. Recently, he was asked to replace the gasket cover on an engine after the more complex parts were installed. This requires a carefully calibrated torque wrench to ensure just the right tension. For the Camry just being prepped for customer pick-up, this spec is 60 foot-pounds + or-3% Typical industry practice requires shop mechanics to provide their own tools (though not the heavier shop equipment). Since Marvin was a recent hire and still paying off his trade school loan, he tried to save money where he could. So, his Pittsburgh Pro torque wrench purchased at Harbor Freight came with a warranty promising a standard deviation no higher than 0.5 foot-pounds from the tool's readout. (By contrast, the higher quality tool that Al uses from Napa has a standard deviation of 0.25 foot-pounds.) The employee schedule for a typical week is shown in Table 1. The numbers shown in Table 1 are all devoted to working on vehicles. The shop closes for one week in the winter Inventory Although the shop is primarily a service provider, all of the services require materials in addition to labor, and so there are inventory considerations that Ollie must manage A variety of other parts and supplies (for example, oil filters and oil) must be kept available due to the regularity of use; it would be difficult to meet the high expectations of customers if these items are not available. This has become a particularly high priority ever since national service chains moved into town, as the speed of their services such as oil changes is already far superior to that of Ollies Oil Change. As a result of these competitive pressures, Ollie sets a 98% target service level Ollie is dedicated to using a high-quality brand of parts and supplies, most of which are available from a single supplier. Note that these parts and supplies are not only used to support services but also sold as retail transactions to customers who wish to perform their own repair work. Currently, a continuous review policy is used for all car parts and supplies, but Ollie believes this system may require too much time to maintain for all inventory items. A sample of some of the items offered, the volumes used in services and sold at retail, and the associated costs are shown in Table 2. Ollie has determined that to call the supplier, pay for transportation, and put a shipment away costs approximately $50. The stockroom is relatively small and does not require special equipment or personnel There is virtually no theft of product, so the annual holding costs are approximately 25% of unit cost. Delivery of orders takes about one week from the local supplier Your Mission Your team has been hired as consultants to analyze the Ollies Oil Change business and to provide Ollie Cooper with recommendations to consider. 4. Inventory policy (Please refer to your applicable exhibit; no discussion needed) a. Create a spreadsheet for ALL parts listed in Table 2. The format must include, in this sequence: EOQ, Safety Stock levels, Reorder points, and- separately-the annual Inventory costs (Ordering and Holding inventory including Safety Stock) using the continuous review system. Separate from the Summary Table please provide a calculation breakdown for OIL FILTERS only for each measure requested. (NOTE: The evaluation of your work will assume EACH similar calculation by item followed the same steps.) Table 2: Sample of Parts and Supplies Volume used in Volume sold thru Retail Sales Price shop per week retail per week (in $)* 15.00 6.50 15.00 55.00 10.00 17.50 (in units)* 86 430 86 (in units)*" 23 60 24 Products Oil filter High performance motor oil Brake Pads Battery ntifreeze Spark Plugs 40 10 * Purchase cost from supplier is 50% of Retail Sales Price ** Standard deviation of periodic demand is 10% of total weekly demand HINT: Inventory calculations are indifferent as to the ultimate use of a part (i.e. retail versus in shop) 10:13 PM Thu Apr 4 63% Case 2-sp19-Ollies Oil Change.docx Team-Based CASE Assignment 2: Ollies Oil Change Ollies Oil Change is a thriving, independently owned and operated firm located in Springfield. It was founded in 1999 by Ollie Besmer. Ollie was born and raised in Springfield, OH. Ollie is well-known and trusted by the residents of the town. As a teenager, he was a star football player for the high school team. In his spare time, he enjoyed working on cars and had a special talent when it came to cars. After college this hobby led Ollie to start his own business- Ollies Oil Change Ollie does a wide variety of work on vehicles of all makes and models as over the years the business has expanded beyond oil changes alone. The shop also offers a variety of parts and supplies at retail. Ollie spends a great deal of time conversing with customers most of whom he has known his whole life. His reputation for honest and reliale work has earned him many repeat customers, with the positive word of mouth helping him to expand his business His wife, Mabel, runs the office, and takes special care to acknowledge customers on their birthdays with hand-written cards that include coupons for discounted services Customers often reflect that Ollie offers the kind of service you can only find from a small-town mechanic. While Ollie is slightly more expensive than the chain establishments that have recently moved into town, customers testify that the friendly environment and quality service are worth the price Operational details Ollie's shop has grown steadily over the years. Originally, Ollie maintained a modest three automobile bays at his shop, and he and his long-time buddy, Al, conducted most of the work except oil changes which were handled by a part-time apprentice. Currently Ollie's shop has six bays (the layout of the shop is shown in Figure 1) and seven mechanics (as not all of the service activities require a bay). Each of the bays is identical so that any employee can work at any station Four of the employees (including Ollie and Al) are full-time (work at least 40 hours per week), and three are interns who work part-time (work fewer than 40 hours per week). Ollie and Al are the only two mechanics permitted to do work beyond the basics, and so more involved car services can take some time getting through the shop. Most mechanics at Ollies Oil Change Service were trained at the area vocational school, and those with particular skill are taken on as apprentices who work under Ollie and Al on the more involved projects. Cooper provides all the tooling necessary, and is respected as a fair and caring boss. In return, Ollie' employees are loyal and hard-workers; seldom is absenteeism a problem, and turnover is rare One of the high-potential apprentices Marvin is gradually being involved in more demanding repair work. Recently, he was asked to replace the gasket cover on an engine after the more complex parts were installed. This requires a carefully calibrated torque wrench to ensure just the right tension. For the Camry just being prepped for customer pick-up, this spec is 60 foot-pounds + or-3% Typical industry practice requires shop mechanics to provide their own tools (though not the heavier shop equipment). Since Marvin was a recent hire and still paying off his trade school loan, he tried to save money where he could. So, his Pittsburgh Pro torque wrench purchased at Harbor Freight came with a warranty promising a standard deviation no higher than 0.5 foot-pounds from the tool's readout. (By contrast, the higher quality tool that Al uses from Napa has a standard deviation of 0.25 foot-pounds.) The employee schedule for a typical week is shown in Table 1. The numbers shown in Table 1 are all devoted to working on vehicles. The shop closes for one week in the winter Inventory Although the shop is primarily a service provider, all of the services require materials in addition to labor, and so there are inventory considerations that Ollie must manage A variety of other parts and supplies (for example, oil filters and oil) must be kept available due to the regularity of use; it would be difficult to meet the high expectations of customers if these items are not available. This has become a particularly high priority ever since national service chains moved into town, as the speed of their services such as oil changes is already far superior to that of Ollies Oil Change. As a result of these competitive pressures, Ollie sets a 98% target service level Ollie is dedicated to using a high-quality brand of parts and supplies, most of which are available from a single supplier. Note that these parts and supplies are not only used to support services but also sold as retail transactions to customers who wish to perform their own repair work. Currently, a continuous review policy is used for all car parts and supplies, but Ollie believes this system may require too much time to maintain for all inventory items. A sample of some of the items offered, the volumes used in services and sold at retail, and the associated costs are shown in Table 2. Ollie has determined that to call the supplier, pay for transportation, and put a shipment away costs approximately $50. The stockroom is relatively small and does not require special equipment or personnel There is virtually no theft of product, so the annual holding costs are approximately 25% of unit cost. Delivery of orders takes about one week from the local supplier Your Mission Your team has been hired as consultants to analyze the Ollies Oil Change business and to provide Ollie Cooper with recommendations to consider. 4. Inventory policy (Please refer to your applicable exhibit; no discussion needed) a. Create a spreadsheet for ALL parts listed in Table 2. The format must include, in this sequence: EOQ, Safety Stock levels, Reorder points, and- separately-the annual Inventory costs (Ordering and Holding inventory including Safety Stock) using the continuous review system. Separate from the Summary Table please provide a calculation breakdown for OIL FILTERS only for each measure requested. (NOTE: The evaluation of your work will assume EACH similar calculation by item followed the same steps.) Table 2: Sample of Parts and Supplies Volume used in Volume sold thru Retail Sales Price shop per week retail per week (in $)* 15.00 6.50 15.00 55.00 10.00 17.50 (in units)* 86 430 86 (in units)*" 23 60 24 Products Oil filter High performance motor oil Brake Pads Battery ntifreeze Spark Plugs 40 10 * Purchase cost from supplier is 50% of Retail Sales Price ** Standard deviation of periodic demand is 10% of total weekly demand HINT: Inventory calculations are indifferent as to the ultimate use of a part (i.e. retail versus in shop)
