ISyE 3104: Introduction to Supply Chain Modeling ...



ISyE 3104: Introduction to Supply Chain Modeling: Manufacturing and Warehousing

Instructor: Spyros Reveliotis

Summer 2003

Homework #7

Due Date: Tuesday, 7/22/03

Reading Assignment:

• Chapter 12 in your text on Inventory Management

Problem set:

a. Discussion Questions:

1. With the advent of low-cost computing, do you see alternatives to the popular ABC classification?

2. What is the difference between the standard EOQ model and the production inventory model?

3. What are the main reasons that an organization keeps inventory?

4. Does the production model or the standard EOQ model yield a higher optimal order quantity if set up costs and holding costs are the same? Why?

5. What is meant by “service level”?

6. How would a firm go about determining service level?

7. Describe the difference between a fixed-quantity and a fixed-period inventory system.

b. Problems at the end of Chapter 12: 2, 12, 14, 18, 20, 26, 28 and 30 (for both textbook editions)

Hint: For problem 30, you must build a decision tree with three actions: order 100, order 150, or order 200 units, and evaluate the expected total (i.e., holding and stock out) cost for each case, assuming that all demand takes place early in the year, and therefore, you do not experience any holding cost with respected to the consumed items. – This problem is a variation of what is known as the newsvendor problem: Every morning the newsvendor has to buy a number of papers to sell that day, without knowing how many (s)he will actually sell. If (s)he buys too many, (s)he will be left with a bunch of useless papers (and you can think of the money (s)he paid to buy this stock as the associated holding cost); if (s)he buys too few, (s)he will loose the potential profit that (s)he would have made selling the extra papers (and you can think of this loss as the associated stockout cost).

Extra Credit (25%)

Read Chapter 16 in your textbook (End of Supplement of Chapter 12 for those with the old edition) and answer the following questions:

1. What are the types of waste JIT is designed to remove?

2. What is the difference between a “pull” and a “push” system?

3. What are the types of variability that JIT is expected to help remove?

4. What is the impact on JIT of reducing setup costs?

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