Barry Render

OM in the News: Ergonomics and the “Incredible Shrinking Airline Seat”

Many carriers have been finding ways to put more, smaller seats in cabins.

Spirit Airlines, at least, is honest about the tight quarters on its planes. “We’re a cozy airline,” it says on its website. “We add extra seats to our planes so we can fly with more people. This lowers ticket prices for everyone, just like a car pool.” It’s not news that airlines have been squeezing more — and smaller — seats into the backs of their planes. The people who run revenue departments — want more seats on planes. They’re up against the marketing people, who are trying to act as their passengers’ advocates.

“To accommodate the airlines, seat manufacturers have been skimming and trimming from just about every dimension, relocating the seatback pocket, replacing padding with elastic mesh and whittling down the armrests,” writes The New York Times (Nov. 7, 2017). While low-cost airlines like Spirit have narrowed the distance between rows of seats to as little as 28 inches, most of the big carriers have kept the distance (seat pitch) at 30 inches. Anything less pushes already travelers to their limits.

“We’ve been using a lot of advanced materials, a lot of composite materials, to allow the actual physical structure to get smaller,” said the VP of a seat manufacturer. “We’ve also removed a lot of the hard points in the seat and gone to fabric suspension systems, leading to seats more akin to ergonomic desk chairs. The less size that the seat structure itself takes up, the more space that’s left over for the passenger.” Or, as the case may be, for more passengers.

Airlines contend that improved ergonomics and, in some cases, slightly wider seats make up for a tighter pitch. But passengers have been getting taller and wider, and regulations still stipulate that planes have to be able to be evacuated in just 1.5 minutes. The seats were originally designed for men who averaged 5′ 10″ and 170 pounds. Right now, the average man is just under 200 pounds.

Classroom discussion questions:
1. How is ergonomics an OM issue?

2. Make the case for more space–then for tighter seats.

OM in the News: Department Stores Keeping a Tight Lid on Inventory This Year

“With foot traffic at their stores in decline, department stores that would have stocked up for the biggest shopping season of the year months ago are still in the process of placing new orders,” writes Supply & Demand Chain Executive (Nov. 8, 2017). The strategy is aimed to keep their inventory costs down and avoid the experience of previous holiday seasons, when large piles of unsold stock led to deep markdowns that eroded profits. But these retailers risk losing sales if supplies run out at a time when many are struggling to keep up with Amazon and the shift towards online shopping.

Macy’s, J.C Penney, Kohl’s, Nordstrom, Dillard’s, Lord & Taylor are among the retailers buying in smaller batches with shorter lead times this year and relying on a more dynamic demand forecasting process than in the past. Keeping inventory levels low helps manage costs, and may also instill urgency in consumers to spend now rather than hold off on purchases in search of a better deal. But it also risks alienating customers who may end up having less choice, and is also putting strain on vendors to deliver on shorter lead times.

The high-stakes strategy takes a page from the playbook of Zara, H&M, and other “fast fashion” retailers that consistently keep low inventories of trendy clothes and try to win customers with cheap prices. Traditionally, retailers lock in most of their purchases 9-12 months in advance. This year, retailers started placing a large portion of their holiday orders 3-4 months before the holiday season, and are refreshing fast-selling items within as little as 6-8 weeks.

The risk: Department stores rely on vendors whose traditional supply chains are not built for a fast turnaround, because they handle orders for several brands. Fast-fashion chains, on the other hand, have designed their supply chain to shift on a week to week basis and work with vendors who can deliver quickly on private label items they stock. So far this year, retailers have been willing to sacrifice some orders for tighter inventory management and higher margins.

Classroom discussion questions:

What are the advantages and disadvantages of the smaller batch approach?
What strategy do fast fashion retailers use?

OM in the News: The “Last Mile” and USPS

As consumers demand ever-quicker and convenient package delivery, the US Postal Service wants to boost its business this holiday season by offering what few e-commerce retailers can provide: cheap next-day service with packages delivered Sundays to your home. Retail giant Walmart says it is considering the Sunday option, which could reshape weekend shopping trips to the mall.

The program, available in 20 major US cities, allows consumers to place online orders with participating retailers before a cutoff time Saturday. Postal carriers pick up merchandise from local stores for delivery the following day, similar to the Sunday package deliveries it now handles almost exclusively for Amazon in much of the US.

“The next-day weekend service is part of the Postal Service’s aggressive push into the parcel business at a time when its more lucrative first-class mail is declining in the digital age,” writes the Boston Globe (Nov. 4, 2017). With Amazon continuing to raise the bar of ‘‘free shipping’’ conveniences, from 1- or 2-day package arrivals to keyless in-home delivery via couriers, the financially beleaguered post office is billing itself as the trusted, low-cost carrier already serving every US household.

Bolstered by e-commerce growth and its Sunday operations, the Postal Service will reach new highs this year in holiday package delivery, with nearly 850 million parcels delivered from Thanksgiving to New Year’s. That 13% increase from 2016 would exceed the single-digit growth for UPS and FedEx, putting the post office on track to capture 45.6% market share in peak holiday deliveries. The post office’s growth is due in large part to its established network in the ‘‘last mile,’’ the final and usually most expensive stretch of a package’s journey to a customer’s door. UPS and FedEx already subcontract a chunk of their last-mile deliveries to the post office.

Classroom discussion questions:

Why is the “last mile” an important OM issue?
What are the strengths and weaknesses of the USPS model to Sunday deliveries?

Teaching Tip: Unlocking the Promise of Digital Assessment with MyOMLab

For many profs, student assessment is one of the most labor-intensive components of teaching a class. The work continues as the tests are scored, papers read, and comments shared. Performing authentic and meaningful student assessment takes time. Consequently, some instructors construct relatively few assessments for their courses.

Unfortunately, this practice limits our ability to reliably assess student learning. If a course grade is a mosaic, then each assessment is a tile. A mosaic with just a few tiles only presents a part of the picture. “We can improve the quality of our assessment mosaic by increasing the number of performances we assess,” writes Faculty Focus (Oct. 30, 2017). These smaller and more frequently administered snapshots of student learning are called “formative assessments.” The integration of frequent formative assessments improves the validity of course assessment and has been demonstrated to have a variety of benefits, including improving student achievement and helping students develop more agency over their own learning.

Our MyOMLab assessment tool allows for automatic grade responses to algorithmic homework and test questions, to multiple choice questions, and to video and OM in the News questions. In addition to simplifying formative assessment, the use of this tool has been shown to amplify student engagement. Tech-enhanced formative assessments produce actionable data that can help students learn more efficiently. (MyOMLab also automatically calculates means and medians for every assignment and exam, and, in fact, metrics for every question are summarized, including number who attempted it, number correct, number with partial credit, number incorrect, and average time spent. Plus, that information can be retained in the MyOMLab system for several years as long as the course hasn’t expired yet).

Over 60% of our text adopters have implemented MyOMLab into their OM courses. It’s easy to do (learning takes less than an hour) and Pearson’s reps are always available for one-on-one training. Here is a link to locate your local Pearson representative: http://www.pearsonhighered.com/educator/replocator/.

OM in the News: Autonomous Cars May Not Need a Driver, But They Still Need a Good Mechanic

One of the cars being used by Waymo in the Phoenix area to test driverless technology

Waymo, one of the leading forces in self-driving technology, is enlisting the largest auto retailer in the U.S., AutoNation, to maintain and repair the growing number of driverless vehicles Waymo is testing around the country. Waymo — a unit of Google’s parent, Alphabet — is moving a step closer to putting driverless vehicles into ride-hailing fleets that would serve the general public, not just its own employees. Maintaining expensive and technology-packed self-driving vehicles is a main challenge for using them in moneymaking businesses, like ride-hailing fleets, writes The New York Times (Nov. 3, 2017).

Says AutoNation’s CEO. “In most cases, driverless vehicles in such fleets will have to be on the road almost around the clock to offset the cost of the sensors, computer chips, software and other systems that allow them to drive safely and reach their destinations without human operators. These vehicles need to be in service for hundreds of thousands of miles, much more than personal-use vehicles, to make them economically viable. To do that, you have to do much more proactive, preventative maintenance than what a normal person would do on a car.”

Because the vehicles are intended to operate without drivers, breakdowns have to be avoided and parts replaced when signs of wear first appear, not when they fail or when a warning light comes on. They need to work not 99% of the time, but 100% of the time.

Auto dealers, like AutoNation, sell cars, but a big chunk of their profits comes from servicing vehicles. They are looking for ways to become more relevant if car usage becomes more of a shared service.

Classroom discussion questions:

How is this an OM decision by Waymo?
How will the auto industry be impacted by driverless cars?

Video Tip: Why UPS Drivers Don’t Turn Left And You Probably Shouldn’t Either

Vehicle routing problems involve finding the best route between points

It might seem strange, but UPS delivery vans don’t always take the shortest route between stops. The company gives each driver a specific route to follow and that includes a policy that drivers should never turn through oncoming traffic unless absolutely necessary. This means that routes are sometimes longer than they have to be. So, why do they do it?

Every day, along with thousands of other companies, UPS solves versions of the vehicle routing problem (see Online Tutorial 5). In these mathematical problems, you are given a set of points and the distances between them, and you have to find the best route(s) to travel through all of them. Best is usually defined as the route with the shortest overall distance. Vehicle routing problems are used to organize many things, from coping with more delivery trucks in cities and hailing taxis to catching chickens on a farm.

UPS has designed its vehicle routing software to eliminate as many left-hand turns as possible. Typically, only 10% of the turns are left turns. As a result, the company uses 10 million gallons less fuel, emits 20,000 tons less carbon dioxide and delivers 350,000 more packages every year. The efficiency of planning routes this way has even helped the firm cut the number of trucks it uses by 1,100, bringing down the company’s total distance travelled by 28.5 million miles – despite the longer routes. The TV series Mythbusters tested this idea and confirmed that, despite many more turns, the policy of only turning right does save fuel.

Here is an entertaining 1 minute video illustrating the point. You could show it when discussing sustainability (Supp.5) or process analysis (Ch.7).

OM in the News: Robots as Job Saviors?

When the robots came to online retailer Boxed, dread came too: The fear that the machines would take over, leaving a trail of unemployed humans. Yet this did not come to pass. When the new warehouse opened this spring, workers found that their jobs were less physically demanding than at the previous, manual warehouse in Edison, NJ. And rather than cutting jobs, the company added a 3rd shift to keep up with rapidly growing demand.

“What happened at Boxed – and elsewhere – suggests that widespread fears about automation and job loss are often misplaced,” reports The Orlando Sentinel (Oct. 31, 2017, page A9). Automation has actually helped create jobs in e-commerce, rather than eliminate them. By accelerating delivery times, robotics and software have made online shopping an increasingly viable alternative to bricks-and-mortar stores, and sales have ballooned at online retailers.

The surge in e-commerce has required the rapid build-out of a vast network of warehouses and delivery systems that include both robots and human workers. Even if the robots replace some people in each warehouse, the proliferation of new warehouses should still generate hiring for years to come. Jobs have been lost at storefront retailers, which have suffered under the e-commerce onslaught.

But worries about a “retail apocalypse” wiping out many of the nation’s 16 million retail jobs have missed a more important trend: E-commerce leads to more jobs, by paying people to do things we used to do ourselves. Amazon accounts for much of the additional employment. Yet it’s also at the vanguard of automation. Since 2014, Amazon has deployed 100,000 robots in 25 warehouses worldwide. It’s tripled its hourly workforce, from 45,000 to 125,000. At Amazon’s Baltimore warehouse, employees called “stowers” are needed to stock the shelves that are carried by robots. And that requires human judgment: Software suggests to workers where each item should be placed. But it’s an employee’s responsibility to make sure the shelves, which are tall and narrow, remain balanced.

The explosion of online commerce is also building demand for higher-paying jobs in software and robotics, with 14% of software job listings are now posted by retailers.

Classroom discussion questions:
1. Why can’t warehouse such as these be totally automated?

2. What is the future of storefront retailers?

OM in the News: Is Fanuc the Most Important Manufacturing Company in the World?

Businessweek thinks there is one clear winner in the manufacturing world: the $50 Japanese billion company that controls most of the world’s market for factory automation and industrial robotics. “In fact,” writes Businessweek (Oct. 23, 2017), “Fanuc might just be the single most important manufacturing company in the world right now, because everything Fanuc does is designed to make it part of what every other manufacturing company is doing”.

At Fanuc’s Mt. Fuji plant, hundreds of bright yellow Fanuc robots are working around the clock to build other Fanuc robots. Some robots will be shipped elsewhere in Japan, where strict immigration policies and a declining birthrate have left manufacturers of all sizes more dependent on factory automation. But most are bound for China.

Automation has been rising in China over the past decade, partly because, as wages and living standards have risen, workers have proved less willing to perform dangerous, monotonous tasks, and partly because Chinese manufacturers are seeking the same efficiencies as their overseas counterparts. More and more, it’s Fanuc’s industrial robots that assemble and paint automobiles in China, construct complex motors, and make injection-molded parts and electrical components.

And as China goes, so goes the rest of the industrial world. Multinationals that are reshoring operations from Asia to N. America and Europe are doing so in part because automation promises sophisticated production methods and labor savings; they are spending more than ever on industrial robots– 32% more than a year earlier, with many of them are ending up in Midwestern steel and auto manufacturing centers. Orders from the U.S., though, are dwarfed by those from China—some 90,000 units, 1/3 of the world’s total industrial robot orders last year. (Researchers estimate that each new industrial robot displaces 5 human workers).

The key to Fanuc’s success may lie in AI. In the past, the selection of a single part from a bin full of similar parts required skilled programmers to “teach” the robots how to perform the task. Now, Fanuc’s robots are teaching themselves. “After 1,000 attempts, the robot has a success rate of 60%,” the company said. “After 5,000 attempts it can already pick up 90% of all parts—without a single line of program code having to be written.”

Classroom discussion questions:

What is the role of artificial intelligence in robotics?
What will be the impact of robotics on U.S. manufacturing?

Guest Post: Odd Quantity Discounts

Our Guest Post today comes from Howard Weiss, who is Professor of Operations Management at Temple University.

Several of the models in OM assume proportionality, so when I get to break-even analysis (Supp.7), I explain that one of the assumptions is that the cost/unit for each unit is identical and the revenue/unit is identical for each unit. I like to ask the students to give me examples where it would not be the case that revenue is directly proportional to the number of units sold. The bulk of the examples the students cite are due to quantity discounts. I explain that our basic breakeven, transportation and LP models (Modules C and B) do not allow for quantity discounts but that when examining inventory (Chapter 12) we will see models that include quantity discounts.
What I like to bring into class though, for amusement, are odd instances of quantity “discounts”. Very recently I was in a Houligan’s restaurant and saw the cost per wing was more for 10 wings than for 6 wings. Jack’s Restaurant and Bar in NYC currently has what I think is an interesting pricing option for Tapas when comparing 3, 4, and 5 tapas. Lancer’s is a very nice diner near Philadelphia. It has what I think is an interesting pricing strategy when you compare the price of 12 oz. for two products with the same cost for 8 oz. glasses.

I usually delay the next example until I teach LP. Stroehmann’s bread is interesting. The picture below is from a loaf of bread from a few years back. Stroehman’s used to report nutrition for both 1 and 2 slices. The newer packages only report the calories in one slice. Two slices of bread have 110 calories whereas one slice has 50 calories. Of course, the calories should be proportional.

Best Buy once ran a sale where buying 100 DVDs was less expensive than buying 50 DVDs. Not less expensive per DVD but rather less expensive in total cost! I always encourage my students to be alert for these odd quantity discounts.

OM in the News: Tesla’s Model 3 “Production Hell”

When Elon Musk talks about the future of factory automation at Tesla, he envisions new breeds of robots and smart machines compressed in dense factories with little room for human operators, guided by self-learning software. “But so far, the manufacturing of Tesla’s new all-electric compact sedan, the Model 3, at its Fremont, Calif., factory is moving at a more earthbound pace,” reports The Los Angeles Times (Oct. 20, 2017).

Tesla was anticipating a production rate of 20,000 Model 3s a month by the end of December. Over 3 months through September, though, Tesla had produced only 260 — about 3 cars a day. That’s well behind a normal auto-industry production pace of 1 car per minute. The company blamed unnamed manufacturing “bottlenecks,” and promised a quick fix. But the assembly line remained incomplete by early September with some body parts normally installed by robots being employee-assembled by hand.

The “production hell” that Musk acknowledged raises questions about whether the Silicon Valley model he has followed — beta testing with early adopters and launching updates via software — can be adapted for Tesla’s first mass-market product. “Automobile manufacturing is very hard,” said an OM prof at UCLA. “It’s amazing that Tesla has been able to build cars at all.” He meant it as a compliment.

Tesla took the Model S from design to full production faster than traditional manufacturers would consider. Tesla’s breakthrough over-the-air technology made software fixes a snap. Code to fix battery issues, add self-drive features, or simply tweak the music system can be downloaded via the car’s Wi-Fi system. Still, many owners complained that there were more quality problems than they expected in a $90,000 car. In July, Tesla turned the first 30 Model 3s over to paying customers — all Tesla employees. Some of those first 30 cars were returned to Tesla with battery problems.

Classroom discussion questions:

How does Tesla’s approach differ from traditional automakers?
Are such delays to be expected?

OM in the News: Where to Locate the Next 1,000 Dollar General Stores

There are 14,000 one-story cinder block Dollar Generals in the U.S.—outnumbering by a few hundred even Starbuck’s domestic footprint. (Fold in the second-biggest dollar chain, Dollar Tree, and the number of stores, 27,465, exceeds the 22,375 outlets of CVS, Rite Aid, and Walgreens combined). And, writes Businessweek (Oct. 16, 2017), 1,000 Dollar Generals are opening this year as part of the $22 billion chain’s plan to expand rapidly in poor, rural communities where it has come to represent not decline but economic resurgence.

As retail stores were going under across the nation, the commercial real estate company, Cushman & Wakefield, was searching for bright spots in the industry. For 5 years running, Cushman realized, a dollar store had opened once every 4.5 hours, an average of more than 5 a day. “They see a need and are aggressively racing to meet that need for low-cost goods in places that are food deserts,” the firm says.

Dollar General’s sales per square foot have risen steadily in recent years, to $229– less than half of Walmart’s. Their gross profit margins were 31%, though, compared with 25% at Walmart. A Dollar General store also has lower startup costs; it spends about $250,000 for a new store, vs. the more than $15 million Walmart puts into a new Supercenter. The dollar chain thrives mostly on selling low-ticket items and basics, such as toilet paper, that help shoppers on tight budgets get through the week. (Dollar General hasn’t technically been a dollar store for decades, and only a quarter of its products sell for that amount today.)

In 2016, the firm detailed a site-selection strategy focused on small towns, dubbed “Anytown, USA.” It defined the core customer as: “Our Best Friends Forever”—an extremely cash-strapped demographic, with a household income less than $35,000, and reliant on government assistance, that shops at Dollar General to “stretch budgets.” These BFFs represented 43% of its sales. The company’s map shows 13,000 green dots as “remaining opportunities” for new stores—some in low-income urban neighborhoods, but most in small and very small towns.

Classroom discussion questions:
1. How does Dollar General’s location strategy differ from that of Walmart?

2. Are Walmart and Amazon threats to Dollar General?

OM in the News: How Tyson’s Chicken Plant Became a $320 Million Turkey

On Sept. 5, executives from Tyson Foods, the nation’s largest meat processor, traveled to the small Kansas town of Tonganoxie with what they figured would be welcome news for the locals. Joined by Governor Brownback and other politicians, Tyson unveiled plans to build a huge chicken complex outside of town. The $320 million project, Tyson’s first new plant in 20 years, would be home to a hatchery, feed mill, and processing plant—employing about 1,600 workers to package 1.25 million birds a week.

“To many small communities, that would have been cause for celebration,” writes Businessweek (Oct. 16, 2017). But for residents of Tonganoxie, the news—which they complain had been kept from them because of nondisclosure agreements that officials had signed during Tyson’s site search—drew a far different response. They objected to the stress on roads and waterways, the plant’s proximity to local schools, and the dozens of chicken barns (often odoriferous operations.)

White-and-red signs demanding “No Tyson in Tongie” sprouted up on lawns. A mid-September rally organized drew thousands of locals, many concerned about the lack of transparency leading up to the Tyson deal. Not long after, the county’s board of commissioners—which 5 days before Tyson’s announcement approved the intent to issue $500 million in industrial revenue bonds for facilities, without naming an operator—revoked its decision. Tyson then said it was putting its plans on hold while it investigates other plant locations.

The backlash serves as the latest example of grassroots opposition to industrialized food plants, which stoke concern among residents about everything from environmental impact to animal welfare issues and fears of a potential influx of new workers. This is a good example to use in class when covering location decisions in Chapter 8. Not every community is willing to offer huge incentives to attract new jobs. (The median wage of poultry workers is $11.77 an hour– $24,490 annually.)

Classroom discussion questions:

What were the plusses and minuses of Tyson’s offer to this Kansas town?
Describe the main incentive offered to Tyson.

OM in the News: Reliabilty and Maintenance Secrets of the Airlines

“Airlines are pouring lots of time and money into understanding fleet reliability,” reports The Wall Street Journal (Oct. 12, 2017). Delta put together a team of mechanics, engineers and data geeks to find ways to make specific types of planes less prone to breakdowns. American has renewed efforts to schedule flights so each type of plane performs better.

“It’s not necessarily the airplane itself. It’s how we’re operating it,” says American’s VP. If no planes are reserved as spares, fleets become less reliable. Small fleets spread out among multiple hub airports often suffer higher cancellation rates because there aren’t opportunities to swap planes. Time scheduled for routine maintenance can get crimped if the planes get to mechanics late day after day. In 2016 American had 6 different kinds of wide-body jets flying international trips from Chicago. Reliability suffered. When glitches hit, the airline had little ability to swap planes.

Summer reliability is critical for airlines. Among the worst-performing planes were United 747s, which arrived on-time an average 63% of flights during the past 2 summers. United says it has worked the last several years on improving the reliability of the wide-bodies to achieve better on-time performance. Wide-body cancellations are down 60% since 2014.

Delta’s technical data team can not only predict which parts are liable to break, but also redesign some parts to make them more reliable and add monitors to track the health of parts on older jets. Suspect parts get replaced proactively ahead of manufacturers’ recommended replacement schedules, dramatically cutting cancellations. In 2010, Delta had 5,600 flights canceled by maintenance problems. Last year breakdowns caused only 303 cancellations, and the airline has suffered only 70 so far in 2017. Delta also loads seven 40-foot trailers each summer and sends mechanics out with the equipment to small cities to create temporary maintenance bases for specific types of planes. Last summer they were positioned in 7 spoke cities to do preventive maintenance on planes parked overnight there.

Classroom discussion questions:

Why do reliability figures differ dramatically among airlines and plane models?
What is the “secret” to picking an on-time flight?

OM in the News: GM Wrestles With Excess Capacity

Despite its drastic downsizing a decade ago under a federally funded bailout and bankruptcy restructuring, General Motors again finds itself with too many U.S. factories that can turn out too many vehicles. GM’s factory-utilization rate in North America averaged 95.1% over the past two years, below Ford’s 111.9% and Toyota ’s 101.4%. (Rates can exceed 100% when factories work a 3rd shift or schedule overtime work on weekends.) The auto industry often runs its factories dawn-till-dusk or even around the clock to boost their efficiency, writes The Wall Street Journal (Oct.10. 2017).

Factory-utilization rates typically measure how much production capacity a plant uses based on a 16-hour workday. GM says its utilization rate is 100% on average when its round-the-clock truck and SUV lines are figured in with the relatively sleepy factories making cars. GM said it is working to “drive further improvements” in its plant utilization, including adding crossover SUVs to more factory lines. A plant in the Kansas City area that now makes only the Malibu is scheduled to begin assembling a small Cadillac SUV by late 2018. But such a switch-over typically takes car makers several years of lead time, to order and install new assembly-line equipment and tooling.

GM operates 17 vehicle-assembly plants in North America, after closing several during its bankruptcy. Most, except for 5 that operate around the clock to build trucks and SUVs, have ample unused capacity.

Classroom discussion questions:

How is capacity computed in the auto industry?
What can GM do to bring capacity in line with demand?

Guest Post: A Breakeven Analysis Using Real Data

Our Guest Post today comes from Howard Weiss, who is Professor of Operations Management at Temple University. Howard has developed both POM for Windows and Excel OM for our text.

I like to direct my students to real data whenever possible in my Operations Management course. The Philadelphia Inquirer (http://www.philly.com/philly/blogs/inq-phillydeals/grateford-phoenix-prison-400-million-new-20170915.html) has an article about a new prison, Phoenix, that is being built in Pennsylvania to replace the old prison, Graterford. Phoenix is expected to open in July, 2018. The article gives data that makes it very easy to formulate a break-even example for the students.

According to the article, Phoenix cost $400 million to build, will cost $90 per day to house an inmate and will have 4055 beds. Currently at Graterford it costs $123 per day per inmate.

I have asked my students to determine the following:
1. What is the total savings per year assuming the prison operates at 100% capacity?
2. Why is this different from the $48 million dollars reported in the article? Assume the costs given above are correct.
3. How many years will it take until the Phoenix project breaks even based on the $48 million reported in the article?

I expect my students to:
1. compute the savings per inmate per day ($33); the savings per inmate per year ($12,045); the total savings per year? $48,842,475
2. realize that the prison does not operate at full capacity and hopefully to report that the effective capacity is 98%.
3. compute the break-even point in years (8.33 years).