Design for Quality and Product Excellence 37
29. MegaMart, a large department store, has a very successful and profitable package
wrapping department. The department uses two very complex bow-making machines that
work inline to make the bows for the packages. Bow-making Machine #1 has a reliability of
0.97. Machine #2 is old, and has a reliability of only 0.85. There is one skilled operator who
knows how to operate the machines. She had been very reliable, but recently has had
increasing health problems which caused her to miss work about 10 percent of the time.
a. What is the current reliability of the system, including the operator?
b. Management is considering either scrapping Machine #2 and replacing it with a new
machine which has a reliability of 0.98 at a cost of $5,000, or training another operator to fill in
when the first operator is absent, at a cost of $5,100. Management estimates that profits from
the department would increase by $6,000 per year, if the bow-making line operated at 100
percent of capacity. If management wants to pay off its investment in the first year, determine
the expected net profit for each alternative, and recommend which one will be the most
profitable to management.
b) Alternatives
1) Replace machine: (0.97)(0.98)(0.90) = 0.8555
30. National Partamiento installs and maintains thousands of refrigerators and other
appliances in rental apartments across the country. They have conducted a short study of
failure rates based on following the performance of 25,440 refrigerators that were installed
during one month a year ago. The data can be found in the C07 Problem Data workbook. The
data show the number of failures of these 25,440 refrigerators each month over the past year.
a. Compute the average failure rate, . Is the failure rate relatively constant each month?
b. Use regression analysis to predict future failures. What is the predicted number of failures
each month for the next two years (that is, through month 36)?
c. If the refrigerators are typically under a 36-month warranty, how many cumulative failures
would be predicted in 36 months? What percentage of the total does this represent?
d. What are the strengths and limitations of using regression analysis for such reliability
predictions in this setting?
See the Excel file Problem 7.30 in the instructor materials.