Question

A car Rental rents cars using a two-step process as seen below:

Step 1. Find reservation and check documents 3 employees 6.5 Step 2. Inspect car and complete paperwork 2 employees Staffing Processing time (minutes/car)

1) Suppose the Car Rental is supply constrained. What is the cycle time (in minutes) of this process?

2) Suppose the Car Rental is demand constrained and rents 20 cars per hour. What is the Car Rental's labor utilization (%)?

3) Suppose the Car Rental is demand constrained and now rents 15 cars per hour. Once a new shift begins in the morning, how long (in hours) will it take to complete the process of renting 50 cars?

Answer 1

1)

Capacity of each step = Number of employees * 60 / processing time in minutes

Capacity of step 1 = 3*60/6.5 = 27.7 cars per hour

Capacity of step 2 = 2*60/3 = 40 cars per hour

Capacity of step 1 is lower. Therefore, it is the bottleneck

Cycle time = 1 / Capacity of bottleneck

= 1/27.7 hours

= 2.17 minutes (this can also be computed as processing time / number of employees = 6.5/3 = 2.17 minutes)

2)

Demand rate = 20 cars per hour

Flow rate = Minimum of demand rate or bottleneck capacity

= Minimum of 20 or 27.7

= 20 cars per hour

Labor utilization = Total work content per hour / (Number of employees * 60 minutes per hour)

= (6.5+3)*20/(5*60)

= 63.3 %

3)

Given demand rate = 15 cars per hour

Demand rate is lesser than capacity

Therefore, total time in hours to complete the process of renting 50 cars

= 50/15

= 3.33 hours