Question 1 Supply Chain Management a. Differentiate between Pipeline inventory a

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Question 1 Supply Chain Management a. Differentiate between Pipeline inventory and buffer inventory. [5 marks] b. A local corner store sells paper towels to people in the surrounding communities. The demand for the towels has been increasing and management needs to ensure that enough towels are available to meet the increasing demand. The annual demand for the towels is 52,500 towels. The store operates 350 days per year. The following information is also available about the product. The cost of each towel …………………….....$20 Ordering costs…………………………….......…$200 per order Annual holding costs per unit…….………..10% of the costs per unit Desired cycle service level ...……………….. 95% Lead time:………………………………….........… 5 days Daily demand is normally distributed with a standard deviation of 15 units. 95% service level is equivalent to 2 standard deviations i.e. Z = 2 Current on-hand inventory is 800 units, with no open orders or backorders. i. Calculate the EOQ? [3 marks] ii. Calculate the number of order placed per year? [2 marks] iii. Calculate the average daily demand. [2 marks] iv. Calculate the average time between orders [2 marks] v. Calculate the ROP? [4 marks] vi. An inventory withdrawal of 200 units was just made. Is it time to reorder given the reorder point? [2 marks] vii. If the store currently uses a lot size of 4000 units, determine the annual holding cost and the annual ordering cost of this policy? [2 marks] viii. What would be the annual cost saved, if any, by shifting from the 4000-unit lot size to the EOQ? [3 mark Question 2 Materials Requirements Planning An MRP exercise is being implemented over an 8-week period and the following relevant information is provided: One (1) unit of A is made of two (2) units of B and three (3) units of C. One (1) unit of B is made up of three (3) units of D and two (2) units of E. One(1) unit of C is made up of two (2) units of B and two (2) units of D. Items A, C and E have one (1) week lead time. Items B and D have lead times of two (2) weeks. Assume that lot-forlot (L4L) lot sizing is used for Items A, C and E and a lot size of 100 is used for items B and D. Items A and D have beginning inventories of twenty (20) and forty ( 40) units respectively; all other items have zero beginning inventory. We are scheduled to receive ten (10) units of item B in week two (2) and twenty (20) units of item D in week one (1). There are no other scheduled receipts. a. Draw the product structure tree with low level coding. [5 marks] b. Draw the corresponding time-phased diagram showing lead times to scale. [5 marks] c. If fifty (50) units of A are required in Week eight (8), determine the necessary planned order releases for all components {five(5) schedules} Question 3 Assignment LP Model The Operations Manager of Pelican Ltd. has five (5) employees to be assigned to five (5) projects. He wishes to assign the employees so that the total time to complete the projects is minimized. The average number of days, based on past performances for each employee to complete each project is as follows:- EMPLOYEES PROJECTS A B C D E 1 10 6 8 17 9 2 15 8 7 18 11 3 8 15 6 15 13 4 9 12 9 7 14 5 7 13 10 6 15 a. Using the Hungarian (manual) method, determine the optimal assignment of employees to projects in order to minimize the total time for completion of projects. Indicate this overall time. [12 marks] b. Write an LP formulation that could be used to solve this problem with the relevant LP software packages like excel "solver".

Explanation / Answer

Answer 1) Difference between pipeline inventory and buffer inventory.

In a company, when a shipping order takes place, it is not necessary that once the order is placed the product is removed from the company listing; however the units of the product are stored at the companies warehouse till the time it is shipped to its customers. Such inventory status is called as pipeline inventory.

Whereas Buffer inventory is an extra stock that company keeps supplying for its future/ forecasted demand. This is done to mitigate the risk in case of high demand.

Answer 2) Calculate EOQ

Demand = d

Ordering cost = c

Handling cost = h

D = 52,500

C = 20 per unit

H = 10% of ordering cost = 10%*$200 per unit = $20.0 per unit

EOQ = Square root of [(2*52500*20)/20] = square root of 105000 = 324

So the company should order 324 units.

Answer 3) number of orders per year = Demand /order = 52500/324

= 162 orders per year

Answer 4) average daily demand = orders per year * ordering cost

= 162* 20 = 3240

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