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FINAL EXAMINATION

LOGI-0001: SUPPLY CHAIN MANAGEJ.\1ENT

2 JUNE 2010, 09:00-12:00

Exercise 1: (25 points) Rolls-Royce is one of the world's largest manufacturers of the gas turbines that are

used to propel civil aircraft, military aircraft and ships, and in power generation as well as many other uses.

They are exceptionally complex products, typically with around 25,000 parts and hundreds of assemblies and

sub-assemblies. Rolls-Royce wants to determine the production plan of a part having the reference code

PWGD09 for the next 10 weeks. The initial ipventory level of item PWGD09 is 310 units. A replenishment
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order of 200 units is scheduled to be received at the beginning of week 1. The gross requirements of item

PWGT309 are given in the following MRP record:

I Item PWGD09
I
Week 1 2 3 4 5 6 7 8 9 10

Gross requirements 350 250 230 155 215 188 115 95 102 76

Scheduled receipts . .. ... . .. ... ... . .. . .. ...

...
.<::> ." . . .

Projected available inventory

ll0 loa . .. l . .
. ...

2.r.c.
Hs; ... 11.71 . .
. ...

Net requirements ..
. '). . .

...
-
.. . ( 11. . .
. .. .
Ql. i.&.
Planned receipts ... -0 ).5 .. . l'.S 3t7} ... .. . 1'-

Planned order releases .. . .. . .. ... .. .

-o )S - }v} Y, :g
..

Additional information about item PWGT309 is the following:

Lead-time: 1 week,
Fix ordering cost: Euro,
Inventory holding cost: Euro/week for each stocked unit
Lot-sizing policy: Silver-Meal heuristic

a. Determine the production orders (dates & quantities) and complete the MRP record of ittrn PWGT309.

b. Compute the total cost induced by this plan over the planning horizon, i.e. from week 1 to week 10 .

.....
c. In order to assemble one unit of item PWGT309, the company needs 3 units of component PWMC005.
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The company sells component PWMC005 also in the market. The following table summarizes the

external demands and the scheduled receipts of component PWMC005 for the next 10 weeks:

I Item PWMC005 '

I
Week 1 2 3 4 5 6 7 8 9 10

External demands 155 120 95 105 120 245 200 186 167 110

Scheduled receipts 400 0 0 0 0 0 0 0 0 0

The initial inventory level of component PWMC005 is gQQ_units. Afixed order quantitypolicy with an
order quantity of units is used for this component. The production lead-time for component

PWMC005 is _!. week. Considering the production plan of item PWGT309, determine the production '-.....-/

orders (dates & quantities) and complete the MR.P record of component PWMC005.
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Exercise 2: (20 points) King Games is a European wholesaler of board games. The company sells its game

"Mega Monopoly" at a rate of 40 units per day. It costs the company 120 each time a replenishment order
- -
.. -
is placed to the manufacturer of this model. The unit purchasing price of this item is 26 . The annual_/
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opportunity rate is calculated to be 3%. Answer the following questions supposing that we have 365 days per
- ""'"

year.

(_j?) inventory control policy assuming a lead-time of 4 weeks.

,.----- .
a. Determine the optimum t 1_ t 1
b. Determine the optimum_9'cle time (in days) and the optimum number of orders per year.

c. Determine the annual costs associated with the optimum inventory control policy.

d. Suppose now that th @ onsumption of this item is normally distributed with an average of 40 units

and a standard deviation of 15 units. The replenishment lead-time is again .a_wee. Determine the s..::f!ty
stock and the reorder point that will enable this company to maintain a 85% service level. !.?':\
1 c t
- .___

e. Suppose now that the company has decided to apply a (T, S) policy with T 1 week. The
=

average
0

consumption of the item is again normally distributed wi of 40 units and a standard

-

deviation of !1.,units. The replenishment lead-time is 1._weeks. Determine the safety stock and the order-
up-to-levelS that will enable this company to maintain a 95% service level.

....'...
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Exercise 3: (25 points) Jumbo manufactures bicycles for all ages. The company also manufacturers and sells
bicycle wheels in the market. The demand forecasts of the bicycles and the bicycle wheels for the coming

year are shown in the following table.

Biccle Demand Wheel Demand

ls1 Quarter 27000 32000

2nd Quarter 72000 45000

3rd
Quarter 59000 38000

41b Quarter 31000 26000

0
I
Bicycles are currently sold to retailers for $60 each. Jumbo has the option of not meeting all the bicycle
demand but can not ell ore than the forecasted demand amounts. On the other hand, the demand for the
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wheels has to be satisfied, either from inventory or from production, for each quarter. Backorders are )
allowed neither for the bicycles nor for the wheels. Note that the wheels that are manufactured are sold in the

market but also used to manufa

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bicycles. Jumbo use(Dvheels to assemble each bicycle.
(

Capacity at Jum o is limited with the number of employees it hires, .12_mployees are pai@ yer hour for
regular time an per hour for overtime. Each bicycle requires $ h of work while eacel requires
3 5 minutes of work. The plant operates0 days in a quarter 'and 8 hours a day of regular time. Overtime is

restricted to a maximum of 60 hours per employee per quarter.

The plant currently has 250 employees and the compa onsidering the option of chan ing workforce

size with demand. The of a new employee I

a d the cost of a layoff i $1000. t takes an

employee two quarters to reach full production capacity. That is, in his first two quarters, a new employee

provides only 70% productivity during regular time hours (productivity during overtime hours is independent
____,.
of worker experience, that is, productivity is always 100% for overtime hours). Jumbo aims to end the year

with at least 250 employees.

I

The cost of holding a bicycle in inventory is S er quarter and the cost of holding a wheel in inventory is
r ,

per quarter. The plant currently maintains 4000 bicycles and 3000 wheels in inventory. The company has
signed a service-level agreement with its retailers for wheels. With this service-level agreement, the

l\
company committed to carry safet)t_ whee inventory from one quarter to the next that equals at least 15% of

the following quarter's market demand.__/ '----':/"

,...) tn \Y\ \ l'r-\v-4 p\J .
Write the linear programming model of this problem that would determine the optimal production, hiring, and

layoff schedule of Jumbo (Give defmitions of the decision variables and mathematical expressions of the

objective function and the constraints using the given numerical values).
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Exercise 4: (15 points) Karlstad Kakes is a manufacturer of specialty cakes, which has recently obtained a

contact to supply a major supermarket chain with a specialty cake in the shape of a space rocket. It has been

decided that the volumes required by the supermarket warrant a special production line to perform the

finishing, decorating, and packing of the cake. This line would have to carry out the operations respecting the

following precedence relations:

Operation Processing Time (i Precedence Relations

f 0.12

Ji3 0.30 After A

9 0.36 After Band E

After C and F
)) 0.25

)!' 0.26 After A

1 0.04 After B

fO 0.17 After D

0.05 After D

)' 0.10 After G and H

} 0.08 After H

K 0.25 After I and J

The order from the supermarket is @c akes a week and the number of hours worked by the factory is 40 per

week.

s " ' < l I( d -)

a. Draw the precedence diagram.

b. Balance the line using the Longest Operation Time rule.

C. What is the idle time of this production line? 1 - fJ ( - Er.
d. I the minimum number of work stations achieved? Justify your answer.
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Exercise 5: (15 points)

a. What is a part standardization strategy? Explain advantages of such strategies.

b. What is a process standardization strategy? Explain advantages of such strategies.

c. What are the different strategies that we can employ to match demand and supply in supply chains?
_
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0.9974 I

2.7 0.9965 I 0.9966 I 0.9967 I 0.9968 I 0. 9969 I 0.9970 I 0.997 1 jD.9972 I 0.9973
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