Should management consider the expansion opportunity

Assignment Help Management Theories

Reference no: EM131177675

Sea Dock, a private firm, operates an unloading facility in the Gulf of Mexico for supertankers delivering crude oil for refineries in the Port Arthur area of Texas. Records show that, on average, 2 tankers arrive per day, with a Poisson distribution. Supertankers are unloaded one at a time on a first-come, first-served (FCFS) basis. Unloading requires approximately 8 hours of a 24-hour working day, and unloading times have a negative exponential distribution.

a. Sea Dock has provided mooring space for 3 tankers. Is this sufficient to meet the U.S. Coast Guard requirement that at least 19 of 20 arrivals should find mooring space available?

b. Sea Dock can increase its unloading capacity to a rate of 4 ships per day through additional labor at a cost of $480 per day. Considering the $1,000- per-day demurrage fee charged to Sea Dock for keeping a supertanker idle (this includes unloading time as well as time spent waiting in queue), should management consider this expansion opportunity?

Reference no: EM131177675

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