Homework 1
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University of Texas, Arlington *
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Course
3301
Subject
Industrial Engineering
Date
Dec 6, 2023
Type
Pages
2
Uploaded by sehal96
OPMA 5368 – Global Supply Chain Management
Homework 1
1)
A North Face retail store in Chicago sells 500 jackets each month. Each jacket costs the
store $100 and the company has an annual holding cost of 25 percent. The fixed cost of a
replenishment order (including transportation) is $100. The store currently places a
replenishment order every month for 500 jackets. What is the annual holding and ordering
cost? On average, how long does a jacket spend in inventory? If the retail store wants to
minimize ordering and holding cost, what order size do you recommend? How much would
the optimal order reduce holding and ordering cost relative to the current policy?
2)
Amazon sells 20,000 units of consumer electronics from Samsung every month. Each unit
costs $100 and Amazon has a holding cost of 20 percent. The fixed clerical and
transportation cost for each order Amazon places with Samsung is $4,000. What is the
optimal size of the order that Amazon should place with Samsung? With the goal of
reducing inventories, Amazon would like to reduce the size of each order it places with
Samsung to 2,500 units (allowing it to get four replenishment orders every month). How
much should it reduce the fixed cost per order for an order of 2,500 units to be optimal?
3)
An electronics company has two contract manufacturers in Asia. Foxconn assembles its
tablets and smartphones while Flextronics assembles its laptops. Monthly demand for
tablets and smartphones is 10,000 units while that for laptops is 4,000. Tablets cost the
company $100 while laptops cost $400 and the company has a holding cost of 25 percent.
Currently, the company has to place separate orders with Foxconn and Flextronics and
receives separate shipments. The fixed cost of each shipment is $10,000. What is the
optimal order size and order frequency with each of Foxconn and Flextronics?
The company is thinking of combining all assembly with the same contract
manufacturer. This will allow for a single shipment of all products from Asia. If the fixed
cost of each shipment remains $10,000, what is the optimal order frequency and order size
from the combined orders? How much reduction in cycle inventory can the company
expect as a result of combining orders and shipments?
4)
Harley purchases components from three suppliers. Components purchased from Supplier
A are priced at $5 each and used at the rate of 20,000 units per month. Components
purchased from Supplier B are priced at $4 each and are used at the rate of 2,500 units per
month. Components purchased from Supplier C are priced at $5 each and used at the rate
of 900 units per month. Currently, Harley purchases a separate truckload from each
supplier. As part of its JIT drive, Harley has decided to aggregate purchases from the three
suppliers. The trucking company charges a fixed cost of $400 for the truck with an
additional charge of $100 for each stop. Thus, if Harley asks for a pickup from only one
supplier, the trucking company charges $500; from two suppliers, it charges $600; and
from three suppliers, it charges $700. Suggest a replenishment strategy for Harley that
minimizes annual cost. Assume a holding cost of 20 percent per year. Compare the cost of
your strategy with Harley’s current strategy of ordering separately from each supplier.
What is the cycle inventory of each component at Harley?
5)
Prefab, a furniture manufacturer, uses 20,000 square feet of plywood per month. Its
trucking company charges Prefab $400 per shipment, independent of the quantity
purchased. The manufacturer offers an all unit quantity discount with a price of $1 per
square foot for orders under 20,000 square feet, $0.98 per square foot for orders between
20,000 square feet and 40,000 square feet, and $0.96 per square foot for orders larger than
40,000 square feet. Prefab incurs a holding cost of 20 percent. What is the optimal lot size
for Prefab? What is the annual cost of such a policy? What is the cycle inventory of
plywood at Prefab? How does it compare with the cycle inventory if the manufacturer does
not offer a quantity discount but sells all plywood at $0.96 per square foot?
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