uestion 1 Supply Chain Management a. Differentiate between Pipeline inventory an
ID: 349267 • Letter: U
Question
uestion 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
a) Pipeline inventory comprises of items that are in transit pipeline between supply chain locations, for example, en route between plant to warehouse or warehouse to distributor.
Buffer inventory comprises of items that are kept in stock for the purpose of meeting sudden surge in demand. This helps in smoothening the demand fluctuations and avoid lost sales during the lead time.
b) Annual demand, D = 52500 units
Ordering cost, S = 200
Holding cost, H = unit cost * holding rate = 20*10% = 2
Desired Cycle Service Level = 95%, Z = 2
Lead time, L = 5 days
Standard deviation of demand, s = 15 units
i) EOQ = SQRT(2*D*S/H) = SQRT(2*52500*200/2) = 3240
ii) Number of orders placed per year = D/Q = 52500/3240 = 16.2
iii) Average daily demand, d = D/350 = 52500/350 = 150
iv) Average time between orders = Q/d = 3240/150 = 21.6 days
v) ROP = d*L+ZsL = 150*5+2*15*5 = 817
vi) Inventory position = On hand inventory - Withdrawal + On order inventory = 800 - 200 + 0 = 600
Inventory position is less than ROP, therefore, it is time to order.
vii) Annual holding plus ordering cost of lot size 4000 policy = (52500/4000)*200+(4000/2)*2 = $ 6625
viii) Annual holding plus order cost of EOQ policy = (52500/3240)*200+(3240/2)*2 = 6481
Annual Cost saving by shifting to EOQ policy = 6625 - 6481 = $ 144
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