International University – VNUHCM Logistics Engineering and Supply Chain Design

School of Industrial Engineering and Management Year: 2024-2025

HOMEWORK 5

Question 1:

Luminary Cruise, a company based in Amsterdam, plans its capacity based on "cruise-days."
The company has predicted an average annual demand for the next five years, with 700,000
full-day passengers and 1,450,000 half-day passengers expected to be served. The company
owns 9 cruises, each with an effective capacity of 350 passengers per day, operating for 300
days per year. However, due to unforeseen circumstances such as breakdowns, the efficiency
of the cruises is reduced to 90%. Luminary Cruise employs 14 captains, who operate and
navigate the cruises. They work an average of 220 days per year, but their efficiency is
reduced to 80% due to illness and other absences. If there is a shortage of cruises, the
company can either purchase additional cruises for $500,000 or rent them for $2,000 per day.
Similarly, if there is a shortage of captains, the company can recruit extra ones at a cost of
$135,000 per year or hire them from an agency for $300 per day.

a. Can Luminary Cruise satisfy the annual demand with its own resources (cruises and
captains)?

(Hint: Compare the need for resources and the actual available resources that company have)

b. Ms. Rinnie now is planning to fulfill the demand requirement of the company. She
considers the three options:

1. Buying all the shortage cruises and recruiting all the shortage captains.

2. Renting all the shortage cruises and hiring all the shortage captains. (All the shortage
cruises and captains must be rounded up to the nearest integer one. For instance: 4.1
rounded to 5)

3. Buying 50% the shortage cruises and recruiting 50% the shortage captains; Renting 50%
the shortage cruises and hiring 50 the shortage captains.

Calculating all three option costs and helping Ms. Rinnie make an optimal decision.

Solution:
700,00 full-day passengers are equivalent to 700,000/350 = 2,000 cruises days per year; or
2,000/300 = 6.67 cruises per day.
International University – VNUHCM Logistics Engineering and Supply Chain Design
School of Industrial Engineering and Management Year: 2024-2025

1,450,000 half-day passengers are equivalent to 1,450,000 / (350 x 300 x 2) = 6.90 cruises
a day
Adding these two gives the total demands as 13.57 cruises. Each cruise needs 300/220
captains, so the company needs a total of 13.57 x 300/220 = 18.50 captains.
The company has 9 cruises, but the efficiency of 90% gives an availability of 9 x 0.9 = 8.1
cruises.
The company has 14 captains, but the efficiency of 80% gives an availability of 14 x 0.8 =
11.2 captains.
Therefore, the company cannot satisfy the annual demand with its own resources.

Without details of the timing. There is a total shortage of:

13.57– 8.1 = 5.49 cruises = 6 cruises and 18.50 – 11.2 = 7.3 captains = 8 captains.
Option 1:
To buy 6 cruises would cost 6 x $500,000 = $3,000,000.
To recruit 8 captains would cost 8 x $135,000 = $1,080,000 a year
 Total cost = $4,080,000
Option 2:
To rent 6 cruises would cost 6 × 300 × $2,000 = $3,600,000 a year.
To hire 8 captains would cost 8 x 220 x $300 = $528,000 a year
 Total cost = $4,128,000
Option 3:
To buy 3 cruises would cost 3 x $500,000 = $1,500,000.
To recruit 4 captains would cost 4 x $135,000 = $540,000 a year
To rent 3 cruises would cost 3 × 300 × $2,000 = $1,800,000 a year.
To hire 4 captains would cost 4 x 220 x $300 = $264,000 a year
 Total cost = $4,104,000
Comparing the three options, Ms. Rinnie should choose option 1 for the smallest cost.
International University – VNUHCM Logistics Engineering and Supply Chain Design
School of Industrial Engineering and Management Year: 2024-2025

Question 2:

Melanie is the manager of the Clean Machine car wash and has gathered the following
information. Customers arrive at a rate of eight per hour according to a Poisson distribution.
The car washer can service an average of ten cars per hour with service times described by an
exponential distribution. Melanie is concerned about the server’s performance, and she has
asked you to calculate the following system characteristics:

a. Average system utilization

b. Average number of customers in the system

c. Average number of customers waiting in line

d. The average time a customer spends on the system

e. The average time a customer spends waiting in line

f. The probability of having more than three customers in the system

g. The probability of having more than four customers in the system

Solution:λ=8 ; μ=10

a. Average system utilization:

p = = 810 = 0.80

b. Average number of customers in the system:

L = λ /(μ – λ) = 8/(10 – 8) = 4 (customers)

c. Average number of customers waiting in line:

LQ = pL = 0.80*4 = 3.2 (customers)

d. The average time a customer spends in the system:

W = 1/(μ – λ) = 1/(10 – 8) = 0.5 (hour)

e. The average time a customer spends waiting in line:

WQ = pW = 0.80*0.5 = 0.4 (hour)

International University – VNUHCM Logistics Engineering and Supply Chain Design
School of Industrial Engineering and Management Year: 2024-2025

f. The probability of having more than three customers in the system:

= 1 – 0.2*(1 + 0.8 + 0.82 + 0.83) = 0.4096

g. The probability of having more than four customers in the system:

= 1 – 0.2*(1 + 0.8 + 0.82 + 0.83 + 0.84) = 0.32768

Question 3:

If Melanie adds an additional server at Clean Machine car wash, the service rate changes to
an average of 16 cars per hour. The customer arrival rate is 10 cars per hour. Melanie has
asked you to calculate the following system characteristics:

a. Average system utilization

b. The probability that no customers are in the system

c. Average number of customers waiting in line

d. The average time a customer spends waiting in line

e. The average time a customer spends on the system

f. Average number of customers in the system

g. The probability of having more than three customers in the system

h. The probability of having more than four customers in the system

For this question, many students may be confused about the line “the service rate changes to an
average of 16 cars per hour” if the “average” here is for each server or for the whole system, so I
have developed 1 more solution for this Question, both ways will be accepted for this
assignment, but the examination will be more detailed to avoid your misunderstanding.
International University – VNUHCM Logistics Engineering and Supply Chain Design
School of Industrial Engineering and Management Year: 2024-2025

Solution 1:
λ=10 ; μ=16 ; s=2
s! = 2! = 2
a. Average system utilization:

b. The probability that no customers are in the system:

c. Average number of customers waiting in line:

d. The average time a customer spends waiting in line:

e. The average time a customer spends in the system:

f. Average number of customers in the system:

L = λW = 10*0.069264 = 0.692641
g. The probability of having more than three customers in the system:

h. The probability of having more than four customers in the system:

International University – VNUHCM Logistics Engineering and Supply Chain Design
School of Industrial Engineering and Management Year: 2024-2025

Solution 2:
λ=10 ; s=2; sμ=16→ μ=8
s! = 2! = 2
a. Average system utilization:

b. The probability that no customers are in the system:

c. Average number of customers waiting in line:

d. The average time a customer spends waiting in line:

e. The average time a customer spends in the system:

f. Average number of customers in the system:

L = λW = 10*0.205128 = 2.05128
g. The probability of having more than three customers in the system:

h. The probability of having more than four customers in the system:

International University – VNUHCM Logistics Engineering and Supply Chain Design
School of Industrial Engineering and Management Year: 2024-2025

Question 4:

Bob Greer operates Bob's Garage and Manhole Cover Recycling Center at
the corner of Lookout Highway and Ruff Road. Bob's Garage has one bay dedicated to wheel
alignments. Although the recycling center is open at night, the garage normally is open only
on weekdays from 7 A.M to 7 P.M and on Saturdays from 7 A.M to noon. An alignment
takes an average of 60 minutes to complete, although Bob charges customers for two hours
according to a nationally published mechanic’s labor-standard manual. During March, the
height of the pothole season, Bob’s Garage is open from 6 A.M to 10 P.M on weekdays and
from 6 A.M to 6 P.M on Saturdays.

a. What are the garage’s peak and effective capacities, in alignments per week?

b. During the second week in March, Bob’s Garage completed 90 alignments.

c. What is the utilization as a percentage of peak capacity?

d. What is the utilization as a percentage of effective capacity?

e. Then, what is the capacity cushion as a percent of peak capacity?

f. What is the capacity cushion as a percent of effective capacity?

Solution:

a. Peak capacity = [(22-6)*5+(18-6)*1]/(60/60) = 92 alignments/week

Effective capacity = [(19-7)*5+(12-7)*1]/(60/60) = 65 alignments/week

b. Utilization, peak capacity = 90/92 = 97.83%

Utilization, effective capacity = 90/65 = 138.46%

c. Capacity cushion, peak capacity = 1- 97.83% = 2.17%

Capacity cushion, effective capacity = 1 – 138.46% = -38.46%