Determine whether management should make the investment

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Reference no: EM131324108

The Atlantic Coast Shipping Company has a warehouse terminal in Spartanburg, South Carolina. The capactiy of each terminal dock is three trucks. As trucks enter the terminal, the drivers receive numbers; and when one of the tree dock spaces becomes available, the truck with the lowest number enters the vacant dock. Truck arrivals are Poisson distributed, and the unloading and loading times (service times) are exponentially distriubted. The average arrival rate at the terminal is five trucks per hour, and the average service rate per dock is two trucks per hour (30 minutes per truck).

Compute L, Lq, W, and Wq

The management of the shipping company is considering adding extrra employees and equipment to improve the average service time per terminal dock to 25 minutes per truck. It would cost the company $18,000 per year to achieve this improved service. Management estimates that it will increase its profit by $750 per year for each minute it is able to reduce a truck's waiting time. Determine whether management should make the investment.

Now suppose that the managers of the shipping company ahve decided that truck wating time from part (a) is excessive and they want to reduce the waiting time. They have determined that there are two alternatives available for reducing the wating time. They can add a fourth dock, or they can add extra exmployees and equipment at the existing docks, which will reuduce the average service time per location from the original 30 minutes per truck to 23 minutes per tuck. The costs of these alternatives are approximately equal. Managemnt desires to implement the alternative that reduces waitng time by the greatest amount. Which alternative should be selected?

Reference no: EM131324108

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