Final Examination Semester 2/ Year 2012

Transcription

1 Final Examination Semester 2/ Year 2012 COURSE : INVENTORY MANAGEMENT COURSE CODE : LOGT 1013 TIME : 2 1/2 HOURS DEPARTMENT : MANAGEMENT LECTURER : HO SOK CHING Student s ID : Batch No : Notes to candidates: 1) The question paper consists of 2 pages and 5 questions. 2) Students are required to answer ONLY Four Questions. 3) Return the question paper with your answer booklet.

2 1 (a) List and explain 3 reasons why holding a substantial quantity of the inventory seems compulsive for many of the organizations? (3x 5 marks) (b) Explain why effective control over an inventory would possibly lead to the better profit performance of a firm? (10 marks) 2 Leelee Ltd Pte stocks and sells a particular brand of badminton racket. It costs the firm $300 each time it places and order with the manufacturer. The cost of carrying one racket in inventory for a year is $100. The store manager estimates that total annual demand for racket will be units with a constant demand rate throughout the year. Orders are received five days after placement from a local warehouse maintained by the manufacturer. The store policy is to never have stockouts. The store is open for business every day of the year. Determine the following: Optimal order quantity per order. (5 marks) Minimum total annual inventory costs (5 marks) The optimum number of orders per year (5 marks) The reorder point. (10 marks) Note: Formulas for reference, (D/Q*) d = units/year days/year = units/day _ Reorder point,r = d L 1/3

3 3(a) If the initial forecast for Quarter 1 is 2000 units, uses to Exponential smoothing with α = 0.2, & α = 0.4 to find one period ahead forecast, (15 marks) 3(b) Define the Forecasting Error when α = 0.2, & α = 0.4 (10 marks) Note: Answer to this question, students is required to draw a diagram in your answer booklet and support the answers with your workings. Quarter Demand ? 4) For production line A, material code A4792b dairy consumption is 10,000 units, materials received four times a month and receiving date fixed at every Monday, am. Note 1: Formulas for reference, Satisfaction level 90% (service factor, 1.28) Satisfaction level 93% (service factor, 1.48) Satisfaction level 95% (service factor, 1.64) Satisfaction level 97% (service factor, 1.88) Satisfaction level 99.9% (service factor, 3.09) 2/3

4 (Continue, question 4) Note 2: i) CXY Corporation production line A is running for 24 hours 5 days. ii) For production line A, material code A4792b dairy consumption is 10,000 units, material received four times a month and receiving date fixed at every Monday, am. Consideration factor 1, 7% of stock out probability, Consideration factor 2, standard deviation of dairy consumption is at 75 units per day. Calculate and answer to the questions: (a) Safety Stock level (b) Reorder Point (5 marks) (5 marks) Calculate and answer to the questions: What changes in the consideration factors has occurred? IF Consideration factor 3, 3% of stock out probability, Consideration factor 4, standard deviation of dairy consumption is at 50 units per day. Consideration factor 5, CXY Corporation implemented the JIT system and requesting supplier arranged for dairy delivery. (c) Safety Stock level (d) Reorder Point (5 marks) (5 marks) (e) Discuss, the benefits to CXY Corporation if reduce of lead time. (5 marks) 5. List and discuss any five of the demand forecasting issues. (25 marks) 3/

5 Final Examination Semester 2/ Year 2012 Marking Scheme COURSE : INVENTORY MANAGEMENT COURSE CODE : LOGT 1013 TIME : 2 1/2 HOURS DEPARTMENT : MANAGEMENT LECTURER : HO SOK CHING

6 1(a) List and explain 3 reasons why holding a substantial quantity of the inventory seems compulsive for many of the organizations? (3 x 5 marks) Meet variations in customer demand: Meet unexpected demand Smooth seasonal or cyclical demand Pricing related: Temporary price discounts Hedge against price increases Take advantage of quantity discounts Process & supply surprises Internal upsets in parts of or our own processes External delays in incoming goods (b) Explains why effective control over an inventory would possibly lead to the better profit performance of a firm? (10 marks) A truly effective inventory management system will minimize the complexities involved in planning, executing and controlling a supply chain network which is critical to business success. The opportunities available by improving a company s inventory management can significantly improve bottom line business performance 2. Leelee Ltd Pte stocks and sells a particular brand of badminton racket. It costs the firm $300 each time it places and order with the manufacturer. The cost of carrying one racket in inventory for a year is $100. The store manager estimates that total annual demand for racket will be units with a constant demand rate throughout the year. Orders are received five days after placement from a local warehouse maintained by the manufacturer. The store policy is to never have stockouts. The store is open for business every day of the year. Determine the following: Optimal order quantity per order. (5 marks) Minimum total annual inventory costs (5 marks) The optimum number of orders per year (D/Q*) (5 marks) The reorder point. (10 marks) 1/5

7 answer for Q2 Demand Ordering Cost 300 Carrying Cost 100 Lead Time 5 Rounding up Q* Ordering + Carrying= $ 24, $ 24, Orders/year = 40.8 Reorder Point ,000 units/year d = 365 days/year = 27.4 units/day 6/6 _ Reorder point,r = d L Q* / 2 x 10,000 x 300 = Inv cost= (Q* x H) + N x S = (244.9 x 100 ( x 300) 2 2 N = D = 10,000 Q* = Q3 (a) If the initial forecast for Quarter 1 is 2000 units, uses to Exponential smoothing with α = 0.2, & α = 0.4 to find one period ahead forecast, (15 marks) (b) Define the Forecasting Error for α = 0.2, & α = 0.4 ( 10 marks) Note: Answer to this question, students is required to draw a diagram in your answer booklet and support the answers with your workings. Quarter Demand ? 2/5

8 Q3 Demand Forecast α = 0.2 Forecast α = 0.4 Error α = 0.2 (D F) Error α = 0.4 (D-F) Q Q Q Q Q (15 marks) Forecast α = 0.2 Q2 = (0.2) (2000) + (0.8) (2000) = = 2000 Q3 = (0.2) (3500) + (0.8) (2000) = = 2300 Q3 = (0.2) (2750) + (0.8) (2300) = = 2390 Q4 = (0.2) (3250) + (0.8) (2390) = = 2562 Forecast α = 0.4 Q2 = (0.4) (2000) + (0.6) (2000) = = 2000 Q3 = (0.4) (3500) + (0.6) (2000) = = 2600 Q3 = (0.4) (2750) + (0.6) (2600) = = 2660 Q4 = (0.4) (3250) + (0.6) (2660) = = ) ABC Corporation production line running for 24 hours 5 days. 2) For production line A, material code 1245-A dairy consumption is 10,000 units, material received four times a month and receiving date fixed at every Monday, am. Consideration factor 1, 7% of stock out probability, Consideration factor2, standard deviation of dairy consumption is at 75 units per day. 3/5

9 Calculate and answer to the questions: a) Safety Stock level (answer: ) (5 marks) b) Reorder Point (answer: ) (5 marks) 10,000 (5) + (1.48) (75) (2.236) = 50, = Calculate and answer to the questions: What changes in the consideration factors has occurred? IF Consideration factor 3, 3% of stock out probability, Consideration factor 4, standard deviation of dairy consumption is at 50 units per day. Consideration factor 5, CXY Corporation implemented the JIT system and requesting supplier arranged for dairy delivery. c) Safety Stock level (94) (5 marks) d) Reorder Point (10,940) (5 marks) 10,000 (1) + (1.88) (50) (1) = 10, = 10,940 e) Discuss, the benefits to ABC Corporation if reduce of lead time. (5 marks) 1. JIT system the philosophy is to minimize the waste of materials. 2. Reduced stock holding cost. 3. Better control over the materials. 4/5

10 5. List and discuss any five of the demand forecasting issues. (25 marks) Demand forecasting issues include the situation at hand, forecasting costs in terms of time and money, and the accuracy of various forecasting techniques. With respect to the situation at hand, judgmental forecasting is appropriate when there is little or no historical data. As for time and money, survey research, for example, can cost a great deal of money and/or also take a great deal of time depending on the media. Forecasting accuracy refers to the relationship between actual and forecasted demand, and accurate forecasts have allowed some companies to reduce transportation costs because fewer shipments need to be expedited. 5/