ANADOLU UNIVERSITY

DEPARTMENT OF INDUSTRIAL ENGINEERING QUESTIONS SCORE

ENM420 SERVICE SYSTEMS PART A
MIDTERM EXAM ANSWER KEY (May 5, 2010) [ 30 p.]

PART B
NAME : SIGNATURE:
[ 70 p.]
STUDENT ID :
TOTAL
SCORE

NOTES RELATED EXAM

 This is a closed book exam and will last for 100 minutes.
 You are allowed to use dictionary.
 The questions should be answered on the answer sheet.
 Good luck.… Assoc. Prof. Dr. Nil ARAS

PART A. Circle the best answer [ 30 x 1 = 30 p. ]

1. Which one of the following is TRUE?

a. The key technology of a postindustrial society is machines.
b. Division of labor is the central concept of Agrarian societies.
c. Industrial societies are agrarian and structured around tradition, routine, and authority.
d. The focus of attention in an industrial society is on making more with less. *

2. The major input into a large public hospital from a service point of view would be:
a. physicians' services.
b. patients. *
c. nursing services.
d. federal reimbursement (Medicare/Medicaid).

3. Which one of the following is FALSE?

a. The 3M experience with post-it notes is one example of pull theory of innovation process. *
b. Pull theory of innovation is service innovation that are driven by customer needs.
c. Push theory of innovation is product innovation that originate in scientific laboratories.

4. Which of the following is not a feature of the new experience economy?

a. The experience is memorable.
b. The experience is standardized. *
c. The customer is treated as a guest.
d. The experience is staged.

5. The service package consists of five features. Which one of the features listed below is not included in the
package?
a. Explicit services
b. Supporting facility
c. Information
d. Cost of service *

6. Which of the following is not true of services?

a. The customer is the input.
b. The customer takes an active part in the service.
c. A service can be inventoried. *
d. Production and consumption occur simultaneously.

7. A hospital is an example of a service processes that has

a. high degree of labor intensity and low degree of customization.
b. low degree of labor intensity and low degree of customization.
c. high degree of labor intensity and high degree of customization.
d. low degree of labor intensity and high degree of customization.*
8. Capital decisions, technological advances, and managing demand are some managerial challenges for a
a. service factory. *
b. service shop.
c. mass service.
d. professional service.

9. Which among the following strategies is used by fast-food restaurants to reduce costs?
a. Increase advertising via the Internet.
b. Allowing the customer to play an active part in the service process. *
c. Increase prices.
d. Increasing menu items to cater to varying tastes.

10. __________ and __________ are among many of the unique characteristics of services that are interrelated
a. Inventory stockout, time
b. Supply, demand
c. Customer participation, perishability *
d. Capacity, time

11. The presence of a friendly desk clerk in a budget hotel is an example of which of the four features of a service
package?
a. supporting facility
b. facilitating goods
c. explicit services
d. implicit services *

12. A difficult economic environment exists for service industries for all but one of the following reasons.
a. Relatively high overall entry barriers *
b. Product substitution
c. Minimal opportunities for economies of scale
d. Exit barriers.

13. Which of the following is not a characteristic of a production-line approach to provide a service?
a. Division of labor
b. Substitution of technology for people
c. Standardization of the process and service provided
d. High employee autonomy in task execution *

14. One advantage of reduced divergence is

a. quicker response to market demands.
b. greater efficiency. *
c. maximization of revenue per customer.
d. the ability to command higher prices.

15. Service processes can be classified according to each of the following, except
a. the degree of customer satisfaction. *
b. the degree of customer contact.
c. the object of the service activity defined as goods, information or people.
d. the degree of divergence ranging from standard to customized service.

16. Which one of the following is not an example of a high customer contact service?
a. Dry cleaning *
b. Banking
c. School
d. Hotel

17. Which one of the following is TRUE?

a. In the past 100 years we have witnessed a shift in emphasis from services to agriculture and industry.
b. Labor force movement is generally from low productivity sectors to high productivity sectors.
c. Colin Clark argues that as nations become industrialized, there is an inevitable shift of employment
from one sector of the economy to another. *

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18. The term "customer contact" refers to
a. the handling of the product by the customer.
b. the influence the customer has on service design.
c. the amount of time spent waiting in the system.
d. the physical presence of the customer in the system.*

19. A service blueprint can be used for all but one of the following:
a. Educate customers.
b. Identify areas of service improvement.
c. Maintain the level of service complexity and divergence. *
d. Identify points where moments of truth will occur.

20. Which of the following is not an increase in service complexity?

a. A supermarket adds a florist shop.
b. A supper club opens for Sunday brunch. *
c. A restaurant switches from “house salad” to a salad bar with 40 items.
d. A health spa hires a massage therapist.

21. Which of the following is not an advantage of reducing the divergence of a service process?
a. Improved productivity
b. Uniformity
c. Greater flexibility *
d. Reduced costs

22. For companies offering customized services, which one of the following is true?
a. A comprehensive employee hiring process is very important. *
b. Employee tasks are low on divergence.
c. A production-line approach to service is desirable.
d. Information processing plays a minor role.

23. A service blueprint with a large number of intricate steps is considered to have a
a. high degree of divergence.
b. low degree of complexity.
c. high degree of complexity.*
d. low degree of divergence.

24. Which of the following features does not illustrate a contribution that the customer can make in the delivery of
services?
a. Substitution of customer labor for provider labor
b. Smoothing service demand
c. Service standardization *
d. None of the above

25. _________ is not a source of technology-driven service innovation.

a. Power/energy
b. Material
c. Location *
d. Facility design

26. Check processing is an example of a process with

a. indirect customer contact and low divergence.
b. direct customer contact and low divergence.
c. no customer contact and high divergence.
d. no customer and low divergence. *

27. In the context of the service encounter triad, the trade-off between the service organization and the contact
personnel is one of
a. efficiency versus satisfaction.
b. efficiency versus autonomy. *
c. perceived control.
d. autonomy versus satisfaction.
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28. ____________ is not an example of unethical customer-contact behavior.
a. Creating a need for service *
b. Performing unnecessary services
c. Sharing customer information with third parties
d. Giving away a guaranteed reservation

29. Which of the following is not an essential feature of a queuing system?

a. Calling population
b. Queue configuration
c. Service process
d. Customer *

30. Empirical studies have suggested that the distribution of inter-arrival times is:
a. Poisson
b. Exponential *
c. Uniform
d. FCFS

PART B. Answer the following 5 questions [70 p.]

1. The Dell Factory Outlet has the following daily demand distribution for laptop computer carrying cases.

Demand Probability
0 0.1
1 0.2
2 0.3
3 0.25
4 0.15
5 or more 0
Simulate five days of retail sales using the following inventory policy. If the ending inventory of cases is 0 or
1, order enough units such that the starting inventory on the next day will be 5 cases. Orders units arrive
the next morning and are stocked before the store opens for business. If a stock-out occurs, the sale is lost.
The cost structure is as follows:
Storage cost = $ 0.10 /unit/day
Shortage cost = $ 5/ unit
Order cost = $ 3/order
Fill in the following simulation table using the random numbers provided. [10 p.]

Day Starting Random Daily Ending Storage Shortage Order Total

Inventory Number Demand Inventory Cost Cost Cost Daily Cost
1 4 0.153 1 3 0.3 - - 0.3
2 3 0.379 2 1 0.1 - 3.0 3.1
3 5 0.821 3 2 0.2 - - 0.2
4 2 0.962 4 0 - 10.0 3.0 13.0
5 5 0.731 3 2 0.2 - - 0.2

Cumulative RN
Demand Probability Distribution Assignment
0 0.1 0.1 0.00 RN 0.10
1 0.2 0.3 0.10 RN 0.30
2 0.3 0.6 0.30 RN 0.60
3 0.25 0.85 0.60 RN 0.85
4 0.15 1.0 0.85 RN 1.0

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2. The administrator of the Life-Time Insurance Company HMO, Ms. Taylor, was anxious to solve potential
problems before their new clinic opened in Austin, Texas. In Buffalo, New York, where the original clinic is
located, the pharmacy had been extremely busy from the beginning, and long waiting times for prescriptions to
be filled presented a very real problem. The Buffalo HMO pharmacy was modern, spacious, and well designed.
The peak time for prescriptions was between 10 AM and 3 PM. During this period, prescriptions would back up,
and the waiting time would increase. After 5 PM, the staff would be reduced to one pharmacist and one
technician, but the two had no trouble providing very timely service throughout the evening. Ms. Taylor
became acutely aware of the long waiting times after several complaints had been lodged. Each stated that the
waiting time had exceeded 1 hour. The pharmacy is staffed with five persons on duty until 5 PM. Ms. Taylor
personally studied the tasks of all the pharmacy personnel. She noted the time required to accomplish each
task, and her results are listed below. The prescriptions were filled in an assembly-line fashion in order of two
technicians and three pharmacists, and each person performed only one task.

Activity Time in Seconds

Receive prescriptions 24
Type labels 120
Fill prescriptions 60
Check prescriptions 40
Dispense prescriptions 30

a. Identify the bottleneck activity, and show how capacity can be increased by using only two pharmacists and
two technicians. [10 p.]

Flow capacity is 30
patients/hour

Flow capacity is 50 patients/hour

Staff: 2 clerks, 2 pharmacists

b. Calculate the balance delay both available and recommended process lines. [10 p.]

Balance delay (available process) = (5x120 274) / (5x120) = % 54.33

Balance delay (recommended process) = (2x144 274) / (2x144) = % 4.86

c. In addition to savings on personnel costs, what benefits does this arrangement have? [5 p.]

This solution allows the pharmacy to be staffed at half capacity by assigning only one team of
clerk/pharmacist during low demand periods. During high demand periods another clerk/pharmacist team
can be scheduled and paid on a part-time basis.

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3. A locally owned department store samples two customers in each of five geographic areas to estimate
consumer spending in its home appliances department. It is estimated that these customers are a good sample
of the 10,000 customers the store serves. The number of customers in each area is C 1=1,500, C2=2,500,
C3=1,000, C4=3,000, and C5=2,000. It is found that the two consumers have the following budgets in dollars for
home appliances per year: B11=100, B12=150; B21=75, B22=100; B31=125, B32=125; B41=100, B42=120; and B51=120,
B52=125.
a. Using the Huff retail location model, estimate annual home appliance sales for the store. [5 p.]

Customers Areas
1 2 3 4 5
1 $ 100 $ 75 $ 125 $ 100 $ 120
2 $ 150 $ 100 $ 125 $ 120 $ 125
Avg. budget (Bi) $ 125 $ 87.50 $ 125 $ 110 $ 122.50
No. customers (Ci) 1500 2500 1000 3000 2000

Annual home appliance sales (in thousands)

5
T Ci Bi 187.5 218.75 125 330 245 $1106 .25
i 1

b. Bull’s Eye, a chain department store, opens a branch in a shopping complex near the store mentioned
above. The Bull’s Eye branch is three times larger than the locally owned store. The travel times in
minutes from the five areas to the two stores (j=1 for the locally owned store, j=2 for Bull’s Eye) are
T11=20, T12=15; T21=35, T22=20; T31=30, T32=25; T41=20, T42=25; and T51=25, T52=25. Use the Huff retail
location model to estimate the annual consumer expenditures in the home appliance section of each
store assuming that λ=1. [10 p.]

For store 1 (existing locally owned store) assume that S1 1 and for store 2 (Bull's Eye new store)
assume that S2 3 (three times the size) and = 1.

Sj
First calculate: Aij
Tij
Area 1 2 3 4 5
Local (S=1) 1/20 =0 .05 1 /35 = 0.0286 1/30 =0 .0333 1/20 = 0.05 1/25 = 0.04
Bull's Eye (S=3) 3/15 = 0.20 3/20 = 0.15 3/25 = 0.12 3/25 =0.12 3/25 = 0.12

Aij 0.25 0.1786 0.1533 0.17 0.16

Aij
Second, calculate: Pij
Aij

Sales
Store Customer Area
(1000s)
1 2 3 4 5
1 Local 0.2 0.16 0.217 0.29 0.25 $ 257.98
2 Bull's Eye 0.8 0.84 0.783 0.71 0.75 $ 848.27
Sales (1000s) $187.5 $218.75 $125 $330 $245 $1106.25

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4. Walmark Stores is in the process of expansion in the western United States. During the next year, walmark is
planning to construct new stores that will serve 10 geographically dispersed communities. Past experience
indicates that a community must be within 25 miles of a store to attract customers. In addition, the population
of a community plays an important role in where a store is located, in the sense that bigger communities
generate more participating customers. The following tables provide the populations as well as the distances (in
miles) between the communities:

Miles from community i to community j

j
1 2 3 4 5 6 7 8 9 10 Population
i
1 20 40 35 17 24 50 58 33 12 10,000
2 20 23 68 40 30 20 19 70 40 15,000
3 40 23 36 70 22 45 30 21 80 28,000
4 35 68 36 70 80 24 20 40 10 30,000
5 17 40 70 70 23 70 40 13 40 40,000
6 24 30 22 80 23 12 14 50 50 30,000
7 50 20 45 24 70 12 26 40 30 20,000
8 58 19 30 20 40 14 26 20 50 15,000
9 33 70 21 40 13 50 40 20 22 60,000
10 12 40 80 10 40 50 30 50 22 12,000

The idea is to construct the least number of stores, taking into account the distance restriction and the
concentration of populations. Formulate the problem as an integer linear programming whose solution will
specify the communities where the stores should be located. (Note: Write the constraints and objective
function in an open form) [10 p.]

Answer:

Decision varibale xj=1,0 ; if community j is selected xj=1; otherwise xj=0

Pj: population of community j
Ci: set of communities within 25 miles from community i

The idea of the model is that the larger the population of a community, the higher should be its preference for
acquiring a new store. At the same time, we need to minimize the total number of new stores. Thus, using 1/P j
as a weight for xj is an appropriate way for modeling the objective function.

i Ci
1 1,2,5,6,10
10 1
2 1,2,3,7,8 Minimize Z x
j
j 1 Pj
3 2,3,6,9
s.t.
4 4,7,8,10
x 1 , i 1,2,...,10
j
5 1,5,6,9 j C
i
6 1,3,5,6,7,8
7 2,4,6,7 x 0,1 , j 1,2,...,10
j
8 2,4,6,8,9
9 3,5,8,9,10
10 1,4,9,10

(NOTE: It can be used alternative decision models which have been developed for maximal covering problem.)

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5. The multi-site service units in the following table have two outputs, loans and deposits, and one input. Which of
the service units would be called efficient by DEA (data envelopment analysis)? (This problem can be solved
using pen and paper only !) [10 p.]

Branch Inputs Loans ($) Deposits ($)

A 100 10 31
B 100 15 25
C 100 20 30
D 100 23 23
E 100 30 20

Answer:

The efficiency frontier defines the maximum combinations

of outputs that can be produced for a given set of inputs
(input=100 for all units) in this problem.
The line segment connecting A, C, and E forms the
efficiency frontier.
The service units A, C, and E are efficient units because
they are on the efficiency frontier.
Since B and D lies below the efficiency frontier, they are
inefficient units.

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