LOG203
Timed Online Assignment – July Semester 2020
Inventory Management
Monday, 16 November 2020 1:00 pm – 3:30 pm
Time allowed: 2.5 hours
INSTRUCTIONS TO STUDENTS:
This Timed Online Assignment (TOA) contains FOUR (4) questions and comprises EIGHT (8) pages (including cover page, Appendix A and B).
You must answer ALL questions.
If you have any queries about a question, or believe there is an error in the question, briefly explain your understanding and assumptions about that question before attempting it.
You MUST submit your answers via Canvas (similar to TMA submission) at the end time of this TOA (as stated on this cover page). The 15 minutes grace period as shown on Canvas is strictly meant for technical issues encountered during submission. Thereafter, you will not be able to submit your answers and you will be considered as having withdrawn from the course. No appeal will be allowed.
Your submission should consist of only one file and must not exceed 500MB in size. The file must be a Microsoft Word file saved in .docx format. All answers are to be typed. Flowcharts and graphs may be scanned or photographed and embedded in the Word file provided it does not exceed the file size limit of 500MB. Images of handwritten answers will not be marked.
To prevent plagiarism and collusion, your submission will be reviewed by Turnitin. The Turnitin report will only be made available to the marker and you will not be able to view it.
The University takes plagiarism and collusion seriously, and your Turnitin report will be examined thoroughly as part of the marking process.
You must answer ALL the questions. (Total 100 marks)
Question 1
(a) The manager of NTUC Fairprice at Bukit Timah Plaza, Mr Lim, found out that
the demand for Milo tetra packs has been declining over the last few months. So, he decided to reduce the order quantity for the drinks from its manufacturer Nestle.
Explain how various inventory-related costs will change if the order size decreases.
(9 marks)
The supermarket is planning to carry a newly introduced drink from another manufacturer along with the existing product Milo. Which product do you think the supermarket should hold more safety inventory? Why?
(4 marks)
As a supermarket manager, how would you go about evaluating the criticalness of an inventory shortage? In your answer, you should identify the questions need to be addressed.
(6 marks)
(b) Determine what are dependent and independent demand in the following
scenarios:
a fast food restaurant selling burgers, fries etc.
a bicycle manufacturer (6 marks)
Question 2
Ace Snacks Company supplies Ace Chips to 20 different stores located throughout Singapore. Based on their sales volume, the company categorised the stores into two classes – High (H) and Low (L). Table 1 represents monthly demand data for these store classes (assume demand from the stores occurs at constant rate):
Table 1 : Monthly Demand for Ace Chips
Store classes No of stores Average demand
per store (packets)
H 12 500
L 8 200
Total 20
The company allocated two managers to handle these two store classes. The managers work independently and do not combine demands from the two classes. But they combine demands from all the stores under their account and ship the optimal quantity to the stores by trucks, from the manufacturing plant located at Tuas. The transport cost for each shipment is $300. Each packet of chips costs $5. The holding cost for one packet is 20% of the item cost per year.
Solve for the optimal total annual variable cost for Ace Chips from this strategy. (10 marks)
Ace Snacks realised that the above strategy uses LTL (less than truckloads) for the shipments, rather than FTL (full truck load). The company plans to place itself as a socially responsible company and wants to reduce its carbon footprint. Since LTL does not use the available space in the truck, the company decides to employ full truckload for all its shipment, although it may incur higher cost compared to the existing strategy.
The truck capacity (in packets) is given by the equation 10*X + 10000, where X denotes the last two digits of your student PI number (e.g. if your student PI number is W1234567, then X=67 and truck capacity would be 10*67+10000 = 10670 boxes).
Determine the total annual variable cost for Ace Chips from this new strategy. How much will the company lose annually if they adopt this strategy?
(10 marks)
Can you propose a better strategy which overcomes some of the problems of the above strategies? You do not have to show that your strategy performs better than the proposed strategy.
(5 marks)
Question 3
Ajax Chemicals found that the demand for its two best-selling paints – Yellow and Red – has grown over the last few years. Figure 1 displays the quarterly demand (‘000 lbs) of each of the two types of paints from year 2010 to 2014 (20 quarters in total).
(a) Do you see any trend or seasonality (or both) in Figure 1? Examine which
forecasting techniques might be appropriate for estimating future demand of Yellow and Red paints based on the data.
(4 marks) Figure 1: Quarterly demand for Yellow and Red Paints
(b) Ajax Chemicals decided to use a linear regression model to predict future
demands for the paints. Figure 2 shows selected summary output of the regression analysis for the two types of paints.
Regression Statistics
Yellow Red
Multiple R 0.955412699 Multiple R 0.931048614
R Square 0.912813426 R Square 0.866851522
Adjusted R Square 0.906585814 Adjusted R Square 0.857340916
Standard Error 345.5089346 Standard Error 509.7729917
Observations 16 Observations 16
Coefficients Coefficients
Intercept 2592.75 Intercept 3611.98
X Variable 1 226.85 X Variable 1 263.94
Figure 2: Summary Output of the Regression Analysis
(i) What would be the demand for Yellow and Red paints in last quarter of
2015 and first quarter of 2020, based on the regression equation?
Hint: The independent variable here is Quarter (1, 2, 3,….)
(8 marks) (ii) It was later found that the realised demand for these quarters were 8,000
and 12,000 respectively for Yellow paints and 10,000 and 14,500 respectively for Red paints.
Using MAD, determine whether the forecast for Yellow paints is better than the forecast for Red paints.
In your opinion, how reliable is this result?
(8 marks)
(c) Appraise the quality of demand forecasts for Yellow and Red paints by examining
two (2) pieces of data from the summary output shown in Figure 2.
(5 marks)
Question 4
HiTech Pvt Ltd manufactures chip XX12 which is used in laptops of several brands. To manufacture one XX12 chip, 12 units of part XA11, 10 units of part XB12 and 20 units of part XC13 are needed. Part XA11 is made of 2 units of component AA11, 2 units of component AA12 and 2 units of component BB11. Each unit of part XC13 is made of 6 units of component BB11 only. According to MPS, the company needs to deliver two shipments of XX12 chip by week 6 and week 8.
The required numbers of chips to be delivered are shown in the Table 2, depending on the last two digits of your Student PI number. Choose one of the three scenarios that applies to you.
Table 2: Number of XX12 Required
Last 2 digits of Student XX12 needed at Week XX12 needed at Week
PI Number 6 8
00-33 120 100
34-66 150 120
67-99 80 60
More details for the parts and components are shown in Table 3.
Table 3: Details about the required items
Item Stock on
hand Minimum
stock Lead
Time Scheduled
Receipts Lot Size
XX12 40 0 2
XA11 460 100 2
XB12 680 0 1 500 on week 4
XC13 820 200 2
AA11 720 0 1 1000 on week 3
AA12 1240 0 2 1000
BB11 2400 0 1 2000
Apply the Material Requirements Planning (MRP) approach to develop the bill of materials for XX12. Identify the different levels.
(5 marks)
Implement MRP to schedule orders for the items XX12, XA11, XC13, AA11 and BB11 and the timing of those orders. In your answer, you should use the Material Requirement Planning Worksheet provided in Appendix B. Remember to fill up the relevant information in the worksheet.
(20 marks) END OF PAPER
2 × ×
RC D
EOQ Q
( ) =
0
ROL = LT ×D +Z ×ó × LT
HC Q RC D
× × +
2 Q
Optimal cycle time =
T Q D
=
0 0 /
Q =
HC ×
2 × × × +
RC D (1 )
E 1
(1 )
+ E 2
ROL LT D n Q
= × – × 0
2 × ×
RC D P
Q =
2 × × ×
RC D HC SC
( + )
Q =
HC SC
×
n
Mean error = ?=
i 1
n
Mean absolute error = ?=
i 1 n
Mean squared error = ?=
i 1
Exponential Smoothing:
New forecast = a × latest demand + (1 – a) × previous forecast
Appendix B: Worksheet for Question 4
Please insert this table in your answer file.
Master Schedule for: Week Beg.
Inv. W1 W2 W3 W4 W5 W6 W7 W8
Quantity
Item: LT = Lot size:
Gross requirements
Opening stock
Scheduled receipts
Net requirements
Place order
Item: LT = Lot size:
Gross requirements
Opening stock
Scheduled receipts
Net requirements
Place order
Item: LT = Lot size:
Gross requirements
Opening stock
Scheduled receipts
Net requirements
Place order
Item: LT = Lot size:
Gross requirements
Opening stock
Scheduled receipts
Net requirements
Place order
Item: LT = Lot size:
Gross requirements
Opening stock
Scheduled receipts
Net requirements
Place order
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Timed Online Assignment – July Semester 2020
