Homework 8
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School
Stevens Institute Of Technology *
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Course
674
Subject
Industrial Engineering
Date
Jan 9, 2024
Type
docx
Pages
7
Uploaded by SuperHumanStrawSalmon29
Name- Dhruv Moradiya
Supply chain analytics Q.1 What is the annual cost of MoonChem’s strategy of sending full truckloads
to each customer in the Peoria region to replenish consignment inventory?
Ans. MODE OF CALCULATION 1: WITH COST PER UNIT INCLUDED IN THE CALCULATION OF THE TOTAL COST.
1.
Small truck :
Elements:
Calculations Total
Demand:
12000
Ordering cost:
$400
Cost:
$1
h:
0,25
Holding cost:
$0,25
TC= 1x 12000+ 12000 x 400/ 40000 + 40000 x 0,25 /2 = 12 000 + 120 + 5 000 = $17 120
= $17 120 x 12 = $205 440
2.
Medium truck
Elements:
Calculations Total
Demand:
5000x12
60000
Ordering cost:
$400
Cost:
$1
h:
0,25
Holding cost:
$0,25
TC= 1x 60000+ 60000 x 400 /40000 + 40000 x0,25 /2 = 60 000 + 600 + 5 000 = $65 600
= $65 600 x 6 = $393 600
3.
Large Truck :
Elements:
Calculations Total
Demand:
12000x12
144000
Ordering cost:
$400
Cost:
$1
h:
0,25
Holding cost:
$0,25
TC= 1x 144 000+ 144000 x 400 /40000 + 40000 x0,25 /2 = 144 000 + 1 440 + 5 000 = $150 440
=150 440 x 2 = $300 800
So, the annual cost of MoonChem’s strategy is $233,160 if the group decide to send full truckloads to each customer in the Peoria region to replenish consignment inventory.
MODE OF CALCULATION 2: WITH COST PER UNIT NOT INCLUDED IN THE CALCULATION OF THE TOTAL COST.
1.
Small truck
Elements:
Calculations Total
Demand:
1000x12
12000
Ordering cost:
$400
Cost:
$1
h:
0,25
Holding cost:
$0,25
TC= 12000 x 400 /40000 + 40000 x 0,25/ 2 = 120 + 5 000 =
$5 120
$5 120 x 12 = $61 440
2.
Medium truck :
Elements:
Calculations Total
Demand:
5000x12
60000
Ordering cost:
$400
Cost:
$1
h:
0,25
Holding cost:
$0,25
TC= 60000 x 400 /40000 + 40000 x 0,25/ 2 = 600 + 5 000 = $5 600
= $5 600 x 6 = $33 600
3.
Large Truck :
Elements:
Calculations Total
Demand:
12000x12
144000
Ordering cost:
$400
Cost:
$1
h:
0,25
Holding cost:
$0,25
TC= 144000 x 400 /40000 + 40000 x 0,25 /2 = 1440 + 5 000 = $6 440
= 6 640 x 2 = $13 280
So, if MoonChem decides to transport full truckloads to each client in the Peroia region to refill consignment inventory, the annual cost of the plan is $17 160.
Q.2 Consider different delivery options and evaluate the cost of each. What delivery option do you recommend for MoonChem?
Ans.
One possible option to using the aggregation model, which is a type of analysis, a collection of previous purchase data in order to build a trend line. The objective is to optimize earnings while also determining the appropriate levels of capacity, output, inventory, and so on. However, this model has some flaws. For example, you must anticipate demand for each time and be extremely exact because any error might result in large expenses.
Now that we have calculated the overall cost of this alternative and written the specifics of the calculations, we will write the calculations for small-sized consumers as an example:
1.
First option:
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So we did the same calculations for the Medium and large customers.
Now, regarding the findings, we receive a final total of $10 379,86, which is the sum of the three total expenses
of the three client groups, a result that is rather expensive in contrast to the other possibilities.
2.
Second option : Aggregation model :
3.
Third option: Tailored aggregation:
Products are delivered jointly for a selected subset of type of customers. Products are delivered in accordance with their order frequency.
STEP 1: Identify the customer who has the higher order frequency.
The type of customer who has the higher order frequency is large truck customer with 6,71.
STEP 2: Calculate relative order frequency of other customers.
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Q.3 How does your recommendation impact consignment inventory for MoonChem
?
The table above was created by combining the results in total (annual) cost in $ and cycle inventory in pounds:
As a result, I would propose selecting combination 2 in order to reduce the average amount of the company (it is expensive to hold merchandise for a firm). Furthermore, the overall cost of this combination 2 is the lowest; the corporation will earn more than with the other combinations while satisfying demand. MoonChem is therefore both cost-effective and responsive through the use of combination.
2. In reality, selecting combination 2 is the best plan. According to question 1, the total yearly cost of the second technique is $17 160, and its cycle inventory is (40 000 * 3 / 2 =) 60 000 pounds. So the overall yearly cost is reduced by (1-(7348.47/ 17 160 *100 =) 57%. Similarly, 76% of the cycle inventory has been reduced. In
the long term, combination 2 will result in a greater average inventory turn than the present two turns each year.