Operations Management
13th Edition
ISBN: 9781259667473
Author: William J Stevenson
Publisher: McGraw-Hill Education
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Chapter 12, Problem 1CTE
Summary Introduction
To determine: The brief memo outlining the things to be done for the given information.
Introduction: Materials requirement planning is the planning or
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A major automobile manufacturer located in Georgetown, Kentucky, has two certified vendors that produce brake pads with the information shown below. New Albany Manufacturing is located in Columbus, Ohio, and LaPlaya Manufacturing is located in Monterrey, Mexico. The automobile assembly factory is assumed to operate 250 days per year.
CertifiedSupplier
OrderSize (Q)
Price per Unit (P)
OversightCostper Unit (O)
TransportCost perUnit (Ct)
Order Cost(Co)
Cost to StoreOne UnitOne Year (Ch)
Order LeadTime inDays (L)
New Albany Mfg.
59,000
$11.74
$0.00
$0.37
$255
$1.70
51
LaPlaya Mfg.
118,000
$11.08
$0.42
$0.87
$290
$1.35
99
Use the Total Supply Chain Cost Excel template to compute the supply chain costs associated with each supplier if the annual demand is 1,180,000 brake pads. Do not round intermediate calculations. Round your answer to the nearest dollar.
Order quantity:
59,000 units
118,000 units
Total procurement cost:
$
$
Total management oversight…
Barbara Flynn's company has compiled the following
12.5
ata on a small set of products:
ITEM
A
B
C
D
E
ANNUAL DEMAND
ITEM NUMBER
E102
D23
D27
R02
R19
$107
$123
U11
U23
V75
100
75
50
200
150
Perform an ABC analysis on her data. PX
12.6 Lynn Fish opened a new beauty-products retail store.
There are numerous items in inventory, and Lynn knows that
there are costs associated with inventory. However, because her
time is limited, she cannot carefully evaluate the inventory policy
for all products. Lynn wants to classify the items according to dol-
lars invested in them. The following table provides information
about the 10 items that she carries:
UNIT COST
$300
100
50
100
65
UNIT COST
$4
$16
$8
$2
$8
$12
$1
$7
$1
$14
DEMAND (UNITS)
800
2,400
700
1,000
200
500
1,200
800
Use ABC analysis to classify these items into categories A, B,
and C. PX
1,500
2,500
Problems 12.7-12.40 relate to Inventory Models for Independent Demand
• 12.7
William Beville's computer training school, in
Richmond, stocks…
Chapter 12 Solutions
Operations Management
Ch. 12.11 - What is ERP?Ch. 12.11 - What are the three main reasons firms adopt ERP?Ch. 12.11 - What are some hidden costs of ERP?Ch. 12.11 - How does ERP fit with e-commerce and supply chain...Ch. 12 - Contrast independent and dependent demand.Ch. 12 - When is MRP appropriate?Ch. 12 - Briefly define or explain each of these terms: a....Ch. 12 - Prob. 4DRQCh. 12 - Prob. 5DRQCh. 12 - What is meant by the term safety time?
Ch. 12 - Prob. 7DRQCh. 12 - Briefly discuss the requirements for effective...Ch. 12 - Prob. 9DRQCh. 12 - How can the use of MRP contribute to productivity?Ch. 12 - Prob. 11DRQCh. 12 - What is lot sizing. what is its goal, and why is...Ch. 12 - Contrast planned-order receipts and scheduled...Ch. 12 - If seasonal variations are present, is their...Ch. 12 - Prob. 15DRQCh. 12 - What are some unforeseen costs of ERP?Ch. 12 - What trade-offs are involved in the decision to...Ch. 12 - Who in the organization needs to be involved in...Ch. 12 - Prob. 3TSCh. 12 - Prob. 1CTECh. 12 - Give one example of unethical behavior involving...Ch. 12 - a. Given the following diagram for a product,...Ch. 12 - Prob. 2PCh. 12 - Prob. 3PCh. 12 - Eighty units of end item E are needed at the...Ch. 12 - a. One hundred twenty units of end item Z are...Ch. 12 - A table is assembled using three components, as...Ch. 12 - Eighty units of end item X are needed at the...Ch. 12 - Oh No!, Inc., sells three models of radar detector...Ch. 12 - Assume that you are the manager of a shop that...Ch. 12 - Assume that you are the manager of Assembly, Inc....Ch. 12 - Determine material requirements plans for pans N...Ch. 12 - A firm that produces electric golf carts has just...Ch. 12 - Refer to Problem 12. Assume that unusually mild...Ch. 12 - Using the accompanying diagram, do the following:...Ch. 12 - A company that manufactures paving material for...Ch. 12 - Prob. 16PCh. 12 - The MRP Department has a problem. Its computer...Ch. 12 - Develop a material requirements plan for component...Ch. 12 - How many wheels sets should the manager order?Ch. 12 - When should the wheel sets be ordered?Ch. 12 - Prob. 2.1CQCh. 12 - Prob. 1OTQCh. 12 - Prob. 2OTQCh. 12 - Suppose the company has just received an order for...Ch. 12 - Prob. 4OTQCh. 12 - Prob. 5OTQ
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- Ergonomics Inc. sells ergonomically designed office chairs. The company has the following information: Average demand = 36 units per day Average lead time = 50 days Item unit cost = $70 for orders of less than 400 units Item unit cost = $68 for orders of 400 units or more Ordering cost = $45 Inventory carrying cost = 25% The business year is 250 days Assume there is no uncertainty at all about the demand or the lead time. Calculate EOQ if unit cost is $70 and $68. (Note: These EOQs do not need to be feasible in theirprice range.) (Round up your answers to the next whole number.) EOQ Unit cost at $70 units Unit cost at $68 units Calculate annual ordering costs for each alternative? (For the first value, use your rounded EOQ from Part a. For the second value, use the lowest feasible order quantity needed to qualify for that price level. Round your answers to 2 decimal places.) Annual Ordering Cost Unit cost at $70 Unit…arrow_forwardXYZ has developed the following data from its Material A Safety stock 280 Average (normally) daily use 200 Maximum daily use 240 Minimum daily use 180 EOQ 1,000 Cost of placing an order P20 Working days per year 250 days Lead time 6 days What is the reorder point? What is the absolute maximum inventory? What is the normal maximum inventory? What is the cost of carrying an inventory per unit per year? What is the cost of carrying an inventory per unit per year?arrow_forwardA store uses an EOQ system for one of its most popular product. The product has a daily demand of 49 units. The store purchases the product from a supplier. The supplier has an order lead time of 6 days. The store uses an order quantity of 1617 units. A shipment of the supplier always at the beginning of day and the store always place a new order at the end of day. The store also monitors its inventory continuously. Assume that a shipment arrives at the beginning of day 1 and the beginning inventory becomes 1617 units. What is the inventory level at the end of day 12?arrow_forward
- Fisk Corporation is trying to improve its inventory control system and has installed an online system at its retail stores. Fisk anticipates sales of 58,800 units per year, an ordering cost of $4 per order, and carrying costs of $1.50 per unit. In the second year, Fisk Corporation finds that it can reduce ordering costs to $1 per order, but carrying costs will stay the same at $1.50 per unit. a-1. What is the economic ordering quantity for the second year? Economic ordering quantity (EOQ) a-2. How many orders will be placed during the second year? Number of orders a-3. What will the average inventory be for the second year? Average inventory Total costs units units a-4. What is the total cost of ordering and carrying inventory for second year? LAarrow_forwardA large bakery buys flour in 25-pound bags. The bakery uses an average of 1,215 bags a year. Preparing an order and receiving a shipment of flour involves a cost of $10 per order. Annual carrying costs are $75 per bag. a. Determine the economic order quantity. (Round your final answer to the nearest whole number.) Economic order quantity bags b. What is the average number of bags on hand? (Round your final answer to the nearest whole number.) Average number of bags c. How many orders per year will there be? (Round your final answer to the nearest whole number.) Number of orders per year d. Compute the total cost of ordering and carrying flour. (Round your final answer to the nearest whole number. Omit the "$" sign in your response.) Total cost $ e. If annual holding costs were to increase by $9 per bag, how much would that affect the minimum total annual cost? (Round your intermediate calculations to 2 decimal places and final…arrow_forwardSaché, Incorporated, expects to sell 2,030 of its designer suits every week. The store is open seven days a week and expects to sell the same number of suits every day. The company has an EOQ of 1,450 suits and a safety stock of 290 suits. Once an order is placed, it takes three days for Saché to get the suits in. How many orders does the company place per year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Assume that it is Monday morning before the store opens, and a shipment of suits has just arrived. When will Saché place its next order? multiple choice Monday Tuesday Wednesday Thursday Friday Saturday Sundayarrow_forward
- 1 Annual Demand (D) = 168,000 cases Daily Demand (d) = 380 cases COGS (C) = {c} cases Sd (Standard Deviation of Daily Demand) = 11 cases Stotal =550 cases Logistics Service Level = 93.32 % Lead Time =5 days What is the Safety Stock level at Logistics Service Level of the Golden Best ? What is the full ROP of the Golden Best at the Logistics Service Level ?arrow_forwardA spice retailer has a lead time of 4 weeks from its supplier of a particular item and the retailer orders every week. Average weekly demand is normally distributed with a mean of 40 units and standard deviation of 30 units. a) If it uses an order-up-to level of 301 units, what is its expected ON-HAND inventory? b) If it uses an order-up-to level of 250 units, what is its expected ON-ORDER inventory? c) If it uses an order-up-to-level of 368 units, what is its in-stock probability? d) For a .96 in-stock probability, what should its order=up-to level be?arrow_forwardYour firm uses a periodic review system for all SKUS classified, using ABC analysis, as B or C items. Further, it uses a continuous review system for all SKUS classified as A items. The demand for a specific SKU, currently classified as an A item, has been dropping. You have been asked to evaluate the impact of moving the item from continuous review to periodic review. Assume your firm operates 52 weeks per year; the item's current characteristics are: Demand (D) = 15,080 units/year Ordering cost (S) = $125.00/order Holding cost (H) = $3.00/unit/year Lead time (L) = 5 weeks Cycle service level = 95 percent Demand is normally distributed, with a standard deviation of weekly demand of 64 units. -Calculate the item's EOQ. - Use the EOQ to define the parameters of an appropriate continuous review and periodie review system for this item. -Which system requires more safety stock and by how much? -How do you think each system can affect your procurement procedures/methods?arrow_forward
- Your firm uses a periodic review system for all SKUS classified, using ABC analysis, as B or C items. Further, it uses a continuous review system for all SKUS classified as A items. The demand for a specific SKU, currently classified as an A item, has been dropping. You have been asked to evaluate the impact of moving the item from continuous review to periodic review. Assume your firm operates 52 weeks per year; the item's current characteristics are: Demand (D) = 15,080 units/year Ordering cost (S) = $125.00/order Holding cost (H) = $3.00/unit/year Lead time (L) = 5 weeks Cycle service level = 95 percent Demand is normally distributed, with a standard deviation of weekly demand of 64 units. 1- How do you think each system can affect your procurement procedures/methods?arrow_forwardWholemark is an Internet order business that sells one popular New Year's greeting card. The cost of the paper on which the card is printed is $0.10 per card, and the cost of printing is $0.42 per card. The company receives $2.40 per card sold. Since the cards have the current year printed on them, unsold cards have no salvage value. Based on past data, the number of customers from Los Angeles is normally distributed with a mean of 2,500 and a standard deviation of 600. What is the optimal production quantity for the card for Los Angeles, if Wholemark only makes a one-time production for this area? Round to the nearest integer.arrow_forwardUniversity of Florida football programs are printed 1 week prior to each home game. Attendance averages 90,000 screaming and loyal Gators fans, of whom two-thirds usually buy the program, following a normal distribution, for $5 each. Unsold programs are sent to a recycling center that pays only 10 cents per program. The standard deviation is 5,000 programs, and the cost to print each program is $1. Refer to the standard normal table for z-values. a) What is the cost of underestimating demand for each program? Cs = $ (round your response to two decimal places). b) What is the overage cost per program? = $ (round your response to two decimal places). c) How many programs should be ordered per game? programs should be ordered per game (round your response to the nearest whole number). d) What is the stockout risk for this order size? Stockout risk = (round your response to four decimal places).arrow_forward
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