Supply Chain
2.1. The Fizer Drug Company manufactures over-the-counter
and prescription drugs. Last year the company’s cost of goods sold was $470
million. It carried average raw material inventory of $17.5 million, average
work-in-process of $9.3 million, and average finished goods inventory of $6.4
million. The company operates 365 days per year. Compute the company’s inventory
turns and days of supply for last year.
2.2. The Ashton Furniture Company
manufactures coffee tables and chest of drawers. Last year the company’s cost of
goods sold was $3,700,000, and it carried inventory of oak, pine, stains,
joiners, and brass fixtures, work-in-process of furniture frames, drawers and
wood panels, and finished chests and coffee tables. Its average inventory levels
for a 52-week business year were as follows.
Raw Materials Average
Inventory Unit Cost
Oak 8000 $6.00
Pine 4500 4.00
Brass fixtures 1200
8.00
Stains 3000 2.00
Joiners 900 1.00
Work-in-Process
Frames 200
$30
Drawers 400 10
Panels 600 50
Chests 120 110
Tables 90
90
Finished Goods
Chests 300 $500
Coffee tables 200
350
Determine the number of inventory turns and the days of supply for
the furniture company.
2.3. Telecom manufactures electronic components
for computers. One measure it uses to monitor the quality of its distribution
process is the number of customer invoice errors. The distribution center
manager monitored the company’s order processing and distribution by recording
the number of invoice errors for 30 days. The sample results are as
follows:
Day Number of Errors Day Number of Errors
1 4 16 6
2 6
17 9
3 2 18 12
4 5 19 10
5 1 20 11
6 3 21 8
7 4 22 8
8 7 23
7
9 6 24 3
10 5 25 4
11 10 26 7
12 8 27 10
13 9 28 12
14 9 29
12
15 7 30 14
Construct a c-chart with 3σ limits for invoice errors
and indicate if the process was out of control at any
time.
Forecasting
2.4. The Hartley-Davis motorcycle dealer in the
Minneapolis–St. Paul area wants to be able to forecast accurately the demand for
the Roadhog Super motorcycle during the next month. From sales records, the
dealer has accumulated the data in the adjacent table for the past year.
a.
Compute a three-month moving average forecast of demand for April through
January (of the next year).
b. Compute a five-month moving average forecast
for June through January.
c. Compare the two forecasts computed in parts (a)
and (b) using MAD. Which one should the dealer use for January of the next
year?
Month Motorcycle Sales
January 9
February 7
March
10
April 8
May 7
June 12
July 10
August 11
September
12
October 10
November 14
December 16
2.5. The chairperson
of the department of management at Tech wants to forecast the number of students
who will enroll in operations management next semester in order to determine how
many sections to schedule. The chair has accumulated the following enrollment
data for the past eight semesters:
Semester Students Enrolled in
OM
1 270
2 310
3 250
4 290
5 370
6 410
7 400
8
450
a. Compute a three-semester moving average forecast for semesters
9.
b. Compute the exponentially smoothed forecast (α = 0.20) for the
enrollment data.
c. Compare the two forecasts using MAD and indicate the most
accurate.
2.6. The Dean of the College of Business at State University
has initiated a fund raising campaign. One of the selling points she plans to
use with potential donors is that increasing the college’s private endowment
will improve its ranking among business schools as published in various news
magazines. She would like to demonstrate that there is a relationship between
funding and the rankings. She has collected the following data showing the
private endowments ($ millions), and annual budgets ($ millions) from state and
private sources, for eight of State’s peer institutions plus State, and the
ranking of each school.
Private Endowment Annual Budget Ranking
2.5
8.1 87
52.0 26.0 20
12.7 7.5 122
63.0 33.0 32
46.0 12.0 54
27.1
16.1 76
23.3 17.0 103
46.4 14.9 40
48.9 21.8 98
a. Use Excel to
develop a linear regression model for the amount of the private endowment and
the ranking, and forecast a ranking for a private endowment of $70 million. Does
there appear to be a strong relationship between the endowment and
ranking?
b. Using Excel, develop a multiple regression equation for all of
these data including private endowment and annual budget, and forecast a ranking
for a private endowment of $70 million and an annual budget of $40 million. How
does this forecast compare to the forecast in part (a)?
Inventory
Management
2.7. AV City stocks and sells a particular brand of laptop. It
costs the firm $625 each time it places an order with the manufacturer for the
laptops. The cost of carrying one laptop in inventory for a year is $130. The
store manager estimates that total annual demand for the laptops will be 1500
units, with a constant demand rate throughout the year. Orders are received
2.1. The Fizer Drug Company manufactures over-the-counter
and prescription drugs. Last year the company’s cost of goods sold was $470
million. It carried average raw material inventory of $17.5 million, average
work-in-process of $9.3 million, and average finished goods inventory of $6.4
million. The company operates 365 days per year. Compute the company’s inventory
turns and days of supply for last year.
2.2. The Ashton Furniture Company
manufactures coffee tables and chest of drawers. Last year the company’s cost of
goods sold was $3,700,000, and it carried inventory of oak, pine, stains,
joiners, and brass fixtures, work-in-process of furniture frames, drawers and
wood panels, and finished chests and coffee tables. Its average inventory levels
for a 52-week business year were as follows.
Raw Materials Average
Inventory Unit Cost
Oak 8000 $6.00
Pine 4500 4.00
Brass fixtures 1200
8.00
Stains 3000 2.00
Joiners 900 1.00
Work-in-Process
Frames 200
$30
Drawers 400 10
Panels 600 50
Chests 120 110
Tables 90
90
Finished Goods
Chests 300 $500
Coffee tables 200
350
Determine the number of inventory turns and the days of supply for
the furniture company.
2.3. Telecom manufactures electronic components
for computers. One measure it uses to monitor the quality of its distribution
process is the number of customer invoice errors. The distribution center
manager monitored the company’s order processing and distribution by recording
the number of invoice errors for 30 days. The sample results are as
follows:
Day Number of Errors Day Number of Errors
1 4 16 6
2 6
17 9
3 2 18 12
4 5 19 10
5 1 20 11
6 3 21 8
7 4 22 8
8 7 23
7
9 6 24 3
10 5 25 4
11 10 26 7
12 8 27 10
13 9 28 12
14 9 29
12
15 7 30 14
Construct a c-chart with 3σ limits for invoice errors
and indicate if the process was out of control at any
time.
Forecasting
2.4. The Hartley-Davis motorcycle dealer in the
Minneapolis–St. Paul area wants to be able to forecast accurately the demand for
the Roadhog Super motorcycle during the next month. From sales records, the
dealer has accumulated the data in the adjacent table for the past year.
a.
Compute a three-month moving average forecast of demand for April through
January (of the next year).
b. Compute a five-month moving average forecast
for June through January.
c. Compare the two forecasts computed in parts (a)
and (b) using MAD. Which one should the dealer use for January of the next
year?
Month Motorcycle Sales
January 9
February 7
March
10
April 8
May 7
June 12
July 10
August 11
September
12
October 10
November 14
December 16
2.5. The chairperson
of the department of management at Tech wants to forecast the number of students
who will enroll in operations management next semester in order to determine how
many sections to schedule. The chair has accumulated the following enrollment
data for the past eight semesters:
Semester Students Enrolled in
OM
1 270
2 310
3 250
4 290
5 370
6 410
7 400
8
450
a. Compute a three-semester moving average forecast for semesters
9.
b. Compute the exponentially smoothed forecast (α = 0.20) for the
enrollment data.
c. Compare the two forecasts using MAD and indicate the most
accurate.
2.6. The Dean of the College of Business at State University
has initiated a fund raising campaign. One of the selling points she plans to
use with potential donors is that increasing the college’s private endowment
will improve its ranking among business schools as published in various news
magazines. She would like to demonstrate that there is a relationship between
funding and the rankings. She has collected the following data showing the
private endowments ($ millions), and annual budgets ($ millions) from state and
private sources, for eight of State’s peer institutions plus State, and the
ranking of each school.
Private Endowment Annual Budget Ranking
2.5
8.1 87
52.0 26.0 20
12.7 7.5 122
63.0 33.0 32
46.0 12.0 54
27.1
16.1 76
23.3 17.0 103
46.4 14.9 40
48.9 21.8 98
a. Use Excel to
develop a linear regression model for the amount of the private endowment and
the ranking, and forecast a ranking for a private endowment of $70 million. Does
there appear to be a strong relationship between the endowment and
ranking?
b. Using Excel, develop a multiple regression equation for all of
these data including private endowment and annual budget, and forecast a ranking
for a private endowment of $70 million and an annual budget of $40 million. How
does this forecast compare to the forecast in part (a)?
Inventory
Management
2.7. AV City stocks and sells a particular brand of laptop. It
costs the firm $625 each time it places an order with the manufacturer for the
laptops. The cost of carrying one laptop in inventory for a year is $130. The
store manager estimates that total annual demand for the laptops will be 1500
units, with a constant demand rate throughout the year. Orders are received
- 2.8. Kroft Foods makes cheese to supply to stores in its area. The dairy can
make 350 pounds of cheese per day, and the demand at area stores is 205 pounds
per day. Each time the dairy makes cheese, it costs $175 to set up the
production process. The annual cost of carrying a pound of cheese in a
refrigerated storage area is $12. Determine the optimal order size and the
minimum total annual inventory cost.
- 2.9. The TransCanada Lumber Company and Mill processes 10,000 logs annually,
operating 250 days per year. Immediately upon receiving an order, the logging
company's supplier begins delivery to the lumber mill at the rate of 60 logs per
day. The lumber mill has determined that the ordering cost is $1600 per order,
and the cost of carrying logs in inventory before they are processed is $15 per
log on an annual basis. Determine the following:
- a. The optimal order size
- b. The total inventory cost associated with the optimal order quantity
- c. The number of operating days between orders
- d. The number of operating days required to receive an order
- 2.10. The bookstore at Tech purchases jackets emblazoned with the school
name and logo from a vendor. The vendor sells the jackets to the store for $38
apiece. The cost to the bookstore for placing an order is $120, and the annual
carrying cost is 25% of the cost of a jacket. The bookstore manager estimates
that 1700 jackets will be sold during the year. The vendor has offered the
bookstore the following volume discount schedule:
Order Size
|
Discount
|
1-299
|
0%
|
300-499
|
2%
|
500-799
|
4%
|
800+
|
5%
|
What is the bookstore's optimal order quantity, given this quantity discount
information?
information?
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