A component used in a manufacturing facility is ordered from an outside supplier

Question

A component used in a manufacturing facility is ordered from an outside supplier. The time-phased requirements for the component over the next 7 weeks are 15, 20, 16, 10, 20, 14, and 18. Current inventory of this item is 8, and the ending inventory should be 7. Assume a holding cost of $2 per week and a setup cost of $40.

1) Determine the order policy for this item over the next 7 weeks based on Silver-Meal heuristic.

2) Assume there is capacity constraint to the lot sizing

a. Suppose that the maximum order size is 10 per week. Does there exist a feasible solution?

b. Suppose that the maximum order size is 20 per week. Use lot-shifting technique to obtain a feasible solution (without using holding and setup cost).

c. Suppose that the maximum order size is 20 per week. Improve the solution obtained in Part (b)

Explanation / Answer

(1)

Net Requirement
(considering the inventories)

Silver Meal iterations

(2)

(a)

Foe Q <= 10, it is not possible to find any feasible solution as it is shown below -

* Ending Inventory becomes negative in the second week itself.

(b)

(c)

Entire lot shifting (with improvement) has only one chance i.e. the order of week 4 can be shifted to week 1 but the holding cost becomes = 3 x 10 x 2 = 60 which is more than $40. So, no further improvement is possible now.

Wk1 Wk2 Wk3 Wk4 Wk5 Wk6 Wk7 Gross Req 15 20 16 10 20 14 18

Net Requirement
(considering the inventories)

15 - 8=7 20 16 10 20 14 18 + 7 = 25

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