Tutorial Tri3-2017/2018

INVENTORY
Question1:
A part is produced in lots of 1,000 units. It is assembled from two components worth $ 50
total. The value added in production (for labour and variable overhead) is $60 per unit; bring
total costs per completed unit to $110. The average lead time for the part is 6 weeks and
annual demand is 3800 units, based on 50 business weeks per year.
a) How many units of the part are held, on average, in cycle inventory? What is the
money value of this inventory?
b) How many units of part are held, on average, to pipeline inventory? What is the
money value of this inventory?

Question 2:
A&B Manufacturing faces demand for one of its inventoried items at a constant rate of
30,000 units per year. It costs A&B Manufacturing $10 to process an order to replenish
stock and $1 per unit per year to carry the item in stock. Stock is received 4 working days
after an order is placed. No backordering is allowed. Assume 300 working days a year.
a) What is A&B Manufacturing’s optimal order quantity?
b) What is the optimal number of orders per year?
c) What is the optimum interval (in working days) between orders?
d) What is the demand during the lead time?
e) What is the reorder point?
f) What is the inventory position immediately after an order has been placed?

Question 3:
Petromax Enterprises uses a continuous review inventory control system for one of its
inventory items. The following information is available on the item. The firm operates 50
weeks in a year.
Demand = 50,000 units/year
Ordering cost = $ 35/ order
Holding cost = $ 2/ unit/year
Average lead time = 3 weeks
Standard deviation of weekly demand = 125 units.
a) What is the economic order quantity for this item?
b) If Petromax wants to provide a 90 percent cycle- service level, what should be the
safety stock and the reorder point?

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Tutorial Tri3-2017/2018
MRP AND LEAN SYSTEM
Question 1
The BOM of products A and B are shown in Figure Q1. Data from inventory records are
shown in table Q1. The MPS calls for 85 units of product A to be started in week 3 and 100
units in week 6. The MPS for product B calls for 180 units to be started in week 5. Develop
the material requirement plan for the next 6 weeks for items C, D, E, and F.

A B

C(2) D(1) D(1) E(2)

F(2) E(1) F(2) E(1) F(1)

F(1) F(1)

Figure Q1: BOM of product A and product B

Table Q1: Inventory record data

Item
Data Catergory C D E F
Lot size rule FOQ = 220 L4L FOQ= 300 POQ (P=2)
Lead time 3 weeks 2 weeks 3 weeks 2 weeks
Scheduled 280 (week 1) None 300 (week 3) None
receipts
Beginning 25 0 150 600
inventory

Question 2
The Harvey Motorcycle Company produces three models: the tiger, a sure-footed dirt bike;
the LX2000, a nimble cage racer; and the Golden, a large interstate tourer. This month’s
master production schedule calls for the production of 54 Goldens, 42 LX2000s, and 30
Tigers per 7 hour shift.
a. What average cycle time is required for the assembly line to achieve the production
quota in 7 hours?
b. If mixed model scheduling is used, how many of each model will be produced
before the production cycle is repeated?
c. Determine the satisfactory production sequence for the ultimate in small-lot
production: one unit.

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Tutorial Tri3-2017/2018
Question 3
A fabrication cell at Spradley’s Sprockets uses the pull method to supply gears to an
assembly line. George Jitson is in charge of the assembly line, which requires 500 gears per
day. Containers typically wait 0.20 day in the fabrication cell. Each container holds 20 gears,
and one container requires 1.8 days in machine time. Setup times are negligible. If the policy
variable for unforeseen contingencies is set at 5 percent, how many containers should Jitson
authorize for the gear replenishment system?

SUPPLY CHAIN
Question 1:
A manufacturing firm and because of its specialized manufacturing process, considerable
workin-progress and raw materials are needed. The current inventory levels are $2,470,000
and $1,566,000 respectively. In addition, finished goods inventory is $1,200,000 and sales (at
a cost) for current year are expected to be about $48 million. Express the total inventory as:
(a) Weeks of supply.
(b) Inventory turns.

Question 2:
Beagle Clothiers uses a weighted score for the evaluation and selection of its suppliers of
trendy fashion garments. Each supplier is rated on a 10-point scale (10 = highest) for four
different criteria: price, quantity, delivery and flexibility). Because of the volatility of the
business in which Beagle operates, flexibility is given twice the weight of each of the other
three criteria, which are equally weighted. The table below shows the scores for three
potential suppliers for the four performance criteria. Based on the highest weighted score,
which supplier should be selected?
Criteria Supplier A Supplier B Supplier C
Price 8 6 6
Quality 9 7 7
Delivery 7 9 6
Flexibility 5 8 9

Question 3:
Prince Electronics, a manufacturer of consumer electronic goods, has five distribution centers
in different regions of the country. For one of its products, a high-speed modem priced at
$350 per unit, the average weekly demand at each distribution center is 75 units. Average
shipment size to each distribution center is 400 units, and average lead time for delivery is 2
weeks. Each distribution center carries 2 weeks’ supply as safety stock but holds no
anticipation inventory.
(a) On average, how many dollars of pipeline inventory will be transit to each
distribution center?
(b) How much total inventory (cycle, safety, and pipeline) does the company hold for all
five distribution centers?
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