Each day, a FedEx competitor processes approximately 60,000 shipments. Suppose that they use the same Service Quality Index as FedEx and identified the following numbers of errors during a 5-day week (see the “FedEx: Measuring Service Performance” box). These values are hypothetical and do not reflect any real company’s actual performance.
| Description | Weight | Number of Errors |
| Complaints reopened | 3 | 105 |
| Damaged packages | 10 | 20 |
| International | 1 | 106 |
| Invoice adjustments | 1 | 276 |
| Late pickup stops | 3 | 208 |
| Lost packages | 10 | 2 |
| Missed proof of delivery | 1 | 22 |
| Right date late | 1 | 750 |
| Traces | 3 | 113 |
| Wrong day late | 5 | 17 |
Compute the Service Quality Indicator by finding the weighted sum of errors as a percentage of total shipments. Do not round intermediate calculations. Round your answer to three decimal places.
Service Quality Indicator (SQI): %
2.
A hamburger factory produces 75,000 hamburgers each week. The equipment used costs $8,000 and will remain productive for three years. The labor cost per year is $13,500.
a. What is the productivity measure of “units of output per dollar of input” averaged over the three-year period? Assume that there are 52 weeks per year. Round your answer to one decimal place.
Productivity: hamburgers/dollar
b. We have the option of $10,000 equipment, with an operating life of four years. It would reduce labor costs to $11,000 per year. Should we consider purchasing this equipment (using productivity arguments alone)? Assume that there are 52 weeks per year. Round your answer for productivity to one decimal place.
For the expensive machine, productivity hamburgers/dollar input. Because the productivity of the expensive machine is (higher or lower) , it would be a (good or bad) investment based on this single criterion.
3.
Estimate the value of a loyal customer of a loyal Volvo automobile owner. Assume the contribution margin is 0.25, the purchase price is $66,000, the repurchase frequency is every four years, and the customer defection rate is 29 percent. Do not round intermediate calculations. Round your answer to the nearest dollar.
$
4.
What is the average value of a loyal customer (VLC) in a target market segment if the average purchase price is $65 per visit, the frequency of repurchase is every month, the contribution margin is 29%, and the average customer defection rate is 26%? If a continuous improvement goal is set of a 23% defection rate next year and 18% two years from now, what are the revised VLCs over their average buying life? Do not round intermediate calculations. Round your answers to the nearest dollar.
For defection rate = 26%, VLC = $
For defection rate = 23%, VLC = $
For defection rate = 18%, VLC = $
5.
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