SCM-Assignment 4- F23
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University of Windsor *
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MSCI2020
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Industrial Engineering
Date
Dec 6, 2023
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docx
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Uploaded by EarlGalaxyGuineaPig5
Assignment 4
Instruction:
All solutions, explanations, and answers must be typed using Microsoft Word. The assignment
should only include your responses and solutions. Ensure that your submitted assignment does not
contain any questions.
Scanned hand-written calculations are not acceptable.
Assignments submitted in formats other than Microsoft Word will not be graded.
The Turnitin similarity score for your assignment must be below 35. Assignments with scores
exceeding 50 will not be graded.
Assignments with scores between 35 and 50 will be subject to a
thorough review and may result in a grade deduction or additional scrutiny.
Answers to all questions must be included in a single document.
Late assignments will not be accepted.
By submitting this assignment, you confirm that the work is your own and that you have not received
any unauthorized assistance, including any form of AI-based tools, in completing this assignment.
Any violation of academic integrity will result in consequences as outlined in the course policy.
You can use Excel’s NORMDIST, NORMINV or NORMSINV functions.
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1)
Weekly demand for electric motors at a motor manufacturer is normally distributed, with a mean of
1,000 and a standard deviation of 900. Motors are currently assembled and delivered in China at a
cost of $20,000 per motor. The supplier takes six weeks to supply an order. A local supplier has
offered to deliver motors with a lead time of one week at a cost of $20,400 per motor. The motor
manufacturer is targeting a CSL of 95 percent and monitors its inventory continuously. The
manufacturer incurs an annual holding cost of 25 percent. Should the manufacturer accept the local
supplier’s offer?
2)
Weekly demand for private label washing machines at a department store chain, is normally
distributed with a mean of 450 and a standard deviation of 250. The store chain currently has a
supply source in China that delivers machines at a cost of 190 euro. The lead time required by the
supplier is normally distributed with a mean of nine weeks and a standard deviation of five weeks. A
European supplier has offered to deliver washing machines with a guaranteed lead time of one week
at a cost of 210 euro. The store chain has an
annual holding cost of 25 percent and targets a cycle
-
service
level of 99 percent. Should the store chain accept the local
supplier’s offer?
3)
Amorc is an Indian retail chain for consumer electronics. The company currently has 36 stores
located in major metropolitan areas. Weekly demand for smartphones at each store is normally
distributed, with a mean of 300 and a standard deviation of 360. The supplier currently takes four
weeks to fulfill a replenishment order, which is placed separately by each store. Amorc is targeting a
CSL of 95 percent and monitors its inventory continuously. How much safety inventory of
smartphones should Amorc carry at each retail store? Amorc is considering moving smartphones to
the online channel, where they would be stocked in a single national warehouse. Assume that Amorc
can move smartphones to the online channel without losing demand (the online demand is a sum of
demand at each retail store). How much saving in safety inventory can Amorc expect from going
online if demand across stores is independent? How much saving in safety inventory can Amorc
expect from going online if demand across stores has a correlation coefficient of
ρ=0.5?
Assignment 4
4)
Grape, a clothing retailer, has started selling through its online channel along with its retail stores.
Management has to decide which products to carry at the retail stores and which products to carry at
a central warehouse to be sold only via the online channel. Grape currently has 900 retail stores in
the United States. Weekly demand for size large khaki pants at each store is normally distributed,
with a mean of 800 and a standard deviation of 90. Each pair of pants costs $30. Weekly demand for
purple cashmere sweaters at each store is normally distributed, with a mean of 50 and a standard
deviation of 50. Each sweater costs $100. Grape has an annual holding cost of 25 percent. Grape
manages all inventories using a continuous review policy, and the supply lead time for both products
is five weeks. The targeted CSL is 95 percent. How much reduction in holding cost per unit sold can
Grape expect on moving each of the two products from the stores to the online channel? Which of
the two products should Grape carry at the stores, and which should it carry at the central warehouse
for the online channel? Why? Assume demand across stores and from one week to the next to be
independent.
5)
Alorotom obtains cell phones from its contract manufacturer located in China to supply the U.S.
market. Daily demand at the U.S. warehouse is normally distributed, with a mean of 5,000 and a
standard deviation of 4,900. The warehouse aims for a CSL of 90%. The company is debating
whether to use sea or air transportation from China. Sea transportation results in a lead time of 36
days and costs $0.50 per phone. Air transportation results in a lead time of 4 days and costs $1.50 per
phone. Each phone costs $100, and Alorotom incurs an annual holding cost of 20 percent. Given the
minimum lot sizes, Alorotom would order 100,000 phones at a time (on average, once every 20 days)
if using sea transport and 5,000 phones at a time (on average, daily) if using air transport. To begin
with, assume that Alorotom takes ownership of the inventory on delivery.
a.
Assuming that Alorotom follows a continuous review policy, what reorder point and safety inventory
should the warehouse aim for when using sea or air transportation? How many days of safety
inventory will Alorotom carry under each policy?
b.
How many days of cycle inventory does Alorotom carry under each policy?
c.
Under a continuous review policy, do you recommend sea or air transportation if Alorotom does not
own the inventory while it is in transit?
6)
Weekly demand for handbags at Pool-Pool, a Mexican department store chain, is normally
distributed with a mean of 3,000 and a standard deviation of 900. The replenishment lead time from
the supplier is 4 weeks. Pool-Pool uses a periodic review policy under which it reorders handbags
every 10 weeks. It currently uses an order-up-to level of 50,000. What is the average order size? How
much safety inventory of handbags does Pool-Pool carry? What CSL does it achieve? What order up
to level should it use if it wants a CSL of 90%?
7)
Noiro is a global company that sells copiers. Noiro currently sells ten variants of a copier, with all
inventory kept in finished-goods form. The primary component that differentiates the copiers is the
printing subassembly. An idea being discussed is to introduce commonality in the printing
subassembly so that final assembly can be postponed and inventories kept in component form.
Currently, each copier costs $1,000 in terms of components. Introducing commonality in the print
subassembly will increase component costs to $1,025. One of the ten variants represents 80 percent
of the total demand. Weekly demand for this variant is normally distributed, with a mean of 1,000
and a standard deviation of 200. Each of the remaining nine variants has a weekly demand of 28 with
Assignment 4
a standard deviation of 20. Noiro aims to provide a 95 percent level of service. Replenishment lead
time for components is four weeks. Copier assembly can be completed in a matter of hours. Noiro
manages all inventories using a continuous review policy and incurs an annual holding cost of 20
percent.
a.
How much safety inventory of each variant must Noiro keep without component commonality? What
is the annual holding cost?
b.
How much safety inventory must be kept in component form if Noiro uses common components for
all variants? What is the annual holding cost? What is the increase in component cost using
commonality? Is commonality justified across all variants?
c.
At what cost of commonality will complete commonality be justified?
d.
Now consider the case in which Noiro uses component commonality for only the nine low-demand
variants. How much reduction in safety inventory does Noiro achieve in this case? What are the
savings in terms of annual holding cost? Is this more restricted form of commonality justified?
e.
At what cost of commonality will commonality across the low-volume variants be justified?
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