Tutorial 10 - Inventory Management and MRP (25 PDF

Preview

Summary

Download Tutorial 10 - Inventory Management and MRP (25 PDF

Description

MME40001 Engineering Management 2 Tutorial 10: Inventory management and MRP

Topic: Operations Management Chapter- 12 & 14

Problem 1: Southeastern Bell stocks a certain switch connector at its central warehouse for supplying field service offices. The yearly demand for these connectors is 15,000 units. Southeastern estimates its annual holding cost for this item to be $25 per unit. The cost to place and process an order from the supplier is $75. The company operates 300 days per year, and the lead time to receive an order from the supplier is 2 working days. a) b) c) d)

Find the economic order quantity. Find the annual holding costs. Find the annual ordering costs. What is the reorder point?

Problem 2: Joe Henry’s machine shop uses 2,500 brackets during the course of a year. These brackets are purchased from a supplier 90 miles away. The following information is known about the brackets: Annual demand: Holding cost per bracket per year: Order cost per order: Lead time: Working days per year:

2,500 $1.50 $18.75 2 days 250

a) Given the above information, what would be the economic order quantity (EOQ)? b) Given the EOQ, what would be the average inventory? What would be the annual inventory holding cost? c) Given the EOQ, how many orders should be made each year? What would be the annual order cost? d) Given the EOQ, what is the total annual cost of managing the inventory? e) What is the time between orders? f) What is the reorder point (ROP)? Problem 3: Arther Meiners is the production manager of Wheel-Rite, a small producer of metal parts. Wheel-Rite supplies to Cal-Tex, a larger assembly company, with 10,000 wheel bearings each year. This order has been stable for some time. Setup cost for Wheel-Rite is $40, and holding cost is $0.60 per wheel bearing per year. Wheel-Rite can produce 500 wheel bearings per day. Cal-Tex is a just-in-time manufacturer and requires that 50 bearings be shipped to it each business day. (a) (b) (c) (d)

What is the optimal production order quantity? What is the maximum number of wheel bearings that will be in inventory? How many production runs of wheel bearings will Wheel-Rite have in a year? What is the total setup + holding cost for Wheel-Rite?

Problem 4: The annual demand for item A is 40,000 units. The ordering cost for each order is $40 and the annual inventory holding cost is $3 per item per year. Given the following price breaks for purchasing the item, answer the questions below:-

Abstracted from Heizer, J., and Render, B,. Operations Management, 8e, 2006. Pearson.

1

Range 1 2

Quantity 1-1,499 1,500 or more

Price $2.50 per unit $2.40 per unit

a) Calculate optimal order quantity Q*. b) The company manager would like to know if the company could take advantage of the discounts given by the supplier. Hence, calculate the annual setup cost, annual holding cost and total cost for each range of price. Organize your answer in the table provided. c) What are the best quantity and price to be ordered each time? Range 1

Range 2

Order Quantity Annual holding cost Annual setup cost Annual product cost Total Problem 5: Emery Pharmaceutical uses an unstable chemical compound that must be kept in an environment where both temperature and humidity can be controlled. Emery uses 800 pounds per month of the chemical, estimates the holding cost to be 50% of the purchase price (because of spoilage), and estimates order costs to be $50 per order. The cost schedules of two suppliers are as follows: Vendor 1 Vendor 2 Quantity Price / lb Quantity Price / lb 1-499 $17.00 1-399 $17.10 500-999 16.75 400-799 16.85 1,000+ 16.50 800-1,199 16.60 1,200+ 16.25 (a) (b) (c) (d)

What is the economic order quantity for each supplier? What quantity should be ordered, and which supplier should be used? What is the cost for the most economic order size? What factor(s) should be considered besides total cost?

Problem 6: Authentic Thai rattan chairs are delivered to Gary Schwartz’s chain of retail stores, called The Kathmandu Shop, once a year. The reorder point, without safety stock, is 200 chairs. Carrying cost is $30 per unit per year, and the cost of a stockout if $70 per chair per year. Given the following demand probabilities during lead time, how much safety stock should be carried? Demand during lead time (kilos) 0 100 200 300 400

Probability 0.2 0.2 0.2 0.2 0.2

Abstracted from Heizer, J., and Render, B,. Operations Management, 8e, 2006. Pearson.

2

Problem 7: Heather Adams, production manager for a Colorado exercise equipment manufacturer, needs to schedule an order for 50 UltimaSteppers, which are to be shipped in week 8. Subscripts indicate quantity required for each parent. Assume lot-for-lot ordering. Below is information about the steppers: Item

Lead time Stepper 2 A 1 2 B 3 C 1 D 2 E 2 F a) b) c) d)

On-hand Inventory 20 10 30 10 15 5 20

Components A(1), B(3), C(2) D(1), F(2), E(1), F(3), D(2), E(3),

Develop a product structure for Heather. Develop a time-phased product structure Develop a gross material requirements plan Develop a net material requirement plan

Problem 8: The Hunicut and Hallock Corporation makes two versions of the same basic file cabinet, the TOL (Top-of-the-line) five drawer file cabinet and the HQ (High-quality) five drawer filing cabinet. The TOL and HQ use the same cabinet frame and locking mechanism. The drawer assemblies are different although both use the same drawer frame assembly. The drawer assemblies for the TOL cabinet use a sliding assembly that requires four bearings per side whereas the HQ sliding assembly requires only two bearings per side. (These bearings are identical for both cabinet types.) 100 TOL and 300 HQ file cabinets need to be assembled in week #10. No current stock exists. a) Develop a material structure tree for the TOL and the HQ file cabinets. b) Develop a gross material requirements plan for the TOL and HQ cabinets c) Develop a net material requirements plan for the TOL and HQ file cabinets assuming a current onhand finished goods inventory of 100 TOL cabinets. The lead times are given below. Painting and final assembly of both HQ and TOL requires 2 weeks. Both cabinet frames and lock assembly require 1 week for manufacturing. Both drawer assemblies require 2 weeks for assembly. Both sliding assemblies require 2 weeks for manufacturing. Bearings require 2 week to arrive from the supplier. Problem 9: The product structure (not using lowlevel coding) for an assembly product Alpha is given. The quantities of each component needed for each assembly are noted in parenthesis.

Alpha B (1)

C (1)

a) Determine the low-level coding b) Determine the quantity of each component necessary to produce 10 units of Alpha.

D (2)

Abstracted from Heizer, J., and Render, B,. Operations Management, 8e, 2006. Pearson.

C (2)

E (1)

F (1)

3

c) Develop a time-phased product structure and material requirement plan (net MRP) for Alphas given the following lead times, quantity on hand, and master production schedule. Item

Lead Time 1 2 3 1 1 1

Alpha B C D E F

Quantity on Hand 10 20 0 100 10 50

Master Production Schedule for Alpha Period 6 7 Gross requirements

8

9

10

50

11 50

12

13 100

Problem 10: A product has the following gross requirements. Which is cheaper, lot-for-lot or EOQ lotsizing? Week 1 Requirements 50

2 30

3 40

4 80

Other data for this scenario include: setup cost = $1000, inventory holding cost $1 per unit per week. There is no beginning inventory; there are no scheduled receipts. The usage pattern is expected to continue for the remainder of the year. Problem 11: A company is trying to implement MRP but is having trouble determining which order sizing method will minimize costs. Setup cost is $200 and holding cost is $2/period. If each period is 1 week, gross requirements are 270 units per 10 weeks, and there are 6 planned order releases for every 10 weeks, calculate the cost for lot-for-lot compared to EOQ for an entire year. Assume that EOQ and lot-for-lot are computed as though the usage will occur continually throughout the year. Problem 12:

Week 1 2 3 4 5 6 7 8 Gross 30 40 30 60 20 10 0 50 requirement Holding cost = $2.50/unit/week; setup cost = $150; lead time = 1 week; beginning inventory = 40 Based on the data given in the table above, develop a lot-for-lot, EOQ and PPB solution and calculate total relevant costs to find the cheapest lot-sizing method.

Abstracted from Heizer, J., and Render, B,. Operations Management, 8e, 2006. Pearson.

4

Problem 13: A product has the following gross requirements. Which is cheaper? lot-for-lot, part period balance, or EOQ lot sizing? Week 1 Requirements 50

2 80

3 90

4 50

5 30

6 60

Other data for this scenario include: setup cost = $250, inventory holding cost $2 per unit per week. There is no beginning inventory; there are no scheduled receipts. The usage pattern is expected to continue for the remainder of the year.

Abstracted from Heizer, J., and Render, B,. Operations Management, 8e, 2006. Pearson.

5...