DSC 530: Managing the Value Chain
Note that you must show your calculations and formulas that were used to find your answers.
Question 1: Harley-Davidson has its engine assembly plant in Milwaukee and its motorcycle assembly plant in Pennsylvania. Engines are transported between the two plants using trucks, with each trip costing $1,000. The motorcycle plant assembles and sells 300 motorcycles each day. Each engine costs $500; Harley incurs an annual holding cost of 20 percent per year. How many engines should Harley load onto each truck? What is the cycle inventory of engines at Harley? Upload your work to Final folder (under Assignments). (5 points)
Question 2: An electronics retailer has a demand for 35 laptop per month. The retailer incurs a fixed order placement, transportation, and receiving cost of $150 each time an order for laptops is placed with the manufacturer. The retailer incurs an annual holding cost of 30 percent of the cost of the laptop. The manufacturer uses the following all unit discount pricing schedule. The retailer can only order in increments of 10. So, the retailer can order 10 or 20 laptops, but it cannot order 15.
| Order Quantity | Unit Price |
| 100 | $700 |
| 101-400 | $650 |
| Greater than 401 | $600 |
- What is the optimum lot size for the retailer? Use can Excel file to show all the possible lot sizes that the retailer can use to satisfy annual demand. For each possible lot size, calculate the annual holding cost, annual order cost, annual material cost, and total annual cost to select the optimum decision.
- What is the optimum cycle inventory?
- Plot the total cost as legend entry (y axis) and lot sizes (x-axis) on a line chart.
Upload the Excel file to Final folder (under Assignments). (15 points)
Question 3: A new technology allows books to be printed in 10 minutes. Barnes & Noble has decided to purchase these machines for each store. It must decide which books to carry in stock and which books to print on demand using this technology. Do you recommend it for best sellers or for other books? Why? Upload your work to Final folder (under Assignments). (5 points)
Question 4: The daily demand for detergent at a Carrefour store is normally distributed, with a mean of 215 and a standard deviation of 187. The store manager continuously monitors detergent inventory and places a replenishment order for 10,000 units when there are 7,000 units in inventory. The supplier takes two weeks to supply a Carrefour order. What CSL does the store achieve? What is the SS? What is the average inventory? Upload your work to Final folder (under Assignments). (7.5 points)
Question 5: The daily demand for phones in an online retailer is normally distributed, with a mean of 30 and a standard deviation of 6. The supplier takes two weeks to supply an order. The online retailer is targeting a CSL of 90 percent and monitors its inventory continuously. How much safety inventory of cell phones should the retailer carry? What should its ROP be? (7.5 points)
Formulas chapter 12 (Note that all formula may not be used in the Final):
=LD
=
CSL = NORMDIST (ROP, , , 1)
SS= NORMSINV (CSL)
=
ROP=LD+SS
Average Inventory = Cycle Inventory + SS
Average flow time = average inventory/throughput
