problems scm mica

7
1 Problems solved in the class

Upload: charuchopra3237

Post on 14-Oct-2014

126 views

Category:

Documents


10 download

TRANSCRIPT

Page 1: Problems SCM Mica

1

Problems solved in the class

Page 2: Problems SCM Mica

2

GLOBAL

Problem - 1• HighMed. Inc is a manufacturer of medical equipment used in heart procedures and

located in Wisconsin and cardiologist all over North America uses its equipments. HighMed has currently divided the United States into 24 territories, each with its own sales force. HighMed maintains sufficient safety inventories in each territory to provide a CSL (Cycle Service Level) of 0.997 for each product. It’s products fall into two categories – Highval and Lowval. Highval products weigh 0.1 lbs and cost $200 each. Lowval products weigh 0.04 lbs and cost $ 30 each. Weekly demand for Highval products in each territory is normally distributed with a mean of µH = 2 and a standard deviation of H

= 5. Weekly demand for Lowval products in each territory is normally distributed with a mean of µL = 20 and a standard deviation of L =5. Holding cost of inventory is 25%. Currently, the company follows replenishment model where it replenishes all the 24 stocking points once a week as per the weekly demand. It’s replenishment lead time is 1 week and the reorder interval is 1 week. The transportation cost to serve ship each of it’s location is $0.66 + 0.26 x, (where x is the quantity shipped in pounds).

The company is looking at the option of aggregating the inventory at a single location. It want to eliminate inventories at all the 24 stocking points and would like to serve the customer directly from a single location. It’s average customer order is for 1 unit of HighVal and 10 units of Lowval. It’s transportation cost, if the customer orders are shipped from a single location would be $5.53 + 0.53x, (where x is the quantity shipped in pounds). Calculate the inventory carrying cost and transportation cost in both the scenarios. Which scenario result in the least total cost. (Normsinv(0.997) = 2.75). Ignore the in-transit inventory cost and last mile customer delivery transportation cost in the first case as it is very low.

Page 3: Problems SCM Mica

3

GLOBAL

Problem - 2

• Eastern Electric (EE) is an appliance manufacturing company in Calcutta. It purchases all the motors for its appliances from Northern motors located in New Delhi. EE purchases 120,000 motors each year from Northern motors at an average price of Rs. 120 per motor. Demand has been relatively constant for several years and is expected to stay that way. Each motor averages 10 kgs in weight. Northern motors ships each EE order within a day of receiving it. At its assembly plant, EE carries a safety inventory equal to 50% of the average demand for motors during the delivery lead time. EE traditionally purchased motors from Golden carrier in the lot of 500 units at the transportation rate of Rs. 0.08 per kg. Golden carrier’s transit time is 3 days. You are the supply chain manager and has got a new offer from Indian Railways which offers you a transportation rate of Rs. 0.065 per kg, transit time of 5 days but the minimum lot size should be 2,000 units. Perform the transportation and Inventory cost trade-off in both the cases and determine the total inventory cost. Assume ordering cost as nil and EE purchases all its consignment on FOB, Factory basis on cash payment. Consider Inventory Carrying Cost as 20%

Page 4: Problems SCM Mica

4

GLOBAL

An appliance manufacturer located in Pittsburg purchases 3,000 cases of plastic parts valued at $100 per case from 2 suppliers. Purchases are currently divided equally between the suppliers. Each supplier uses rail transport and achieves the same average delivery time. However, for each day that a supplier can reduce the average delivery time, the appliance manufacturer will shift 5 percent of its total purchases or 150 cases to the supplier offering the premium delivery service. A supplier earns a margin of 20 percent on each case before transportation charges. Supplier A would like to consider whether it would be beneficial to switch from rail to air or truck modes. The following transportation rates per case and average delivery times are known for each mode: Transport Mode Transport

RateDelivery Time

Rail $2.50 / Case 7 days

Truck $ 6.00 / Case 4 days

Air $10.35 / Case 2 days

Page 5: Problems SCM Mica

5

GLOBAL

ABC CLASSIFICATION: ILLUSTRATIONProduct Type Number of Units Unit Price (Rs)

1 1000 2.52 250 0.553 150 6.54 300 15 100 1.56 700 1.437 500 7.08 15 4.989 1000 0.75

10 600 1.6211 25 3312 4 15.513 1000 514 2850 2.515 10 0.8316 355 0.9817 50 1.3718 393 1.85

Page 6: Problems SCM Mica

6

1.Company A is a highly diversified company with each business organized as SBUs (Strategic Business Unit). Two of it’s SBUs- Soap division and Coal division has a single Logistics and Supply Chain Head, Mr. Gujral. Cost of Coal is Rs. 10 per kg and the cost of Soap is Rs. 300 per kg. Annual demand is 2000T each for Coal and Soap and distributed across the country. Mr. Gujral is reviewing two options for the logistics system for Soaps and Coal. The characteristic of 2 options is given in the table below:

Option 1Option 2

Mode Water Road

Minimum Lot Size 500 Tonnes 100 Tonnes

Average Transportation costs (considering all locations)

Rs. 1 per kg Rs. 8 per kg

Average Inventory throughout the year (considering all factors like lead time, uncertainty, safety stock etc)

500 T 100 Tonnes

Inventory Holding Cost 25% 25%Considering only Tansportation and Inventory Holding as the logistics costs, suggest which system is suitable for each product?

Page 7: Problems SCM Mica

7

“Sada Shop” is planning to open retail outlets in Pune. It’s aim is to end FY 2009 with 25 stores. It has got a supplier base of 300 vendors who are located locally in and around Pune. Each vendor will make 2 deliveries a week. CEO of “Sada Shop” is considering the direct shipment model whereby the vendors will send the consignments directly to the store. He feels this is quite simple and efficient and would ensure smooth running of the supply chain. But the SCM head of the company feels there would be a lot of problems in this model in terms of number of transactions at the Store level. And the best model is to have a DC in Pune whereby the suppliers would be supplying to DC twice a week and at DC . Each store would receive 2 shipments from the DC. Compare the two options.