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Tutorial Questions Operations Management (Iet204)

The document contains 11 tutorial questions related to operations management. The questions cover topics like determining safety stock and reorder point given demand information, impacts of underestimating demand on inventory costs, calculating optimal order quantities, comparing costs of different production strategies, and calculating reorder points.

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Jagajith Sathis Chandran Nair
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191 views3 pages

Tutorial Questions Operations Management (Iet204)

The document contains 11 tutorial questions related to operations management. The questions cover topics like determining safety stock and reorder point given demand information, impacts of underestimating demand on inventory costs, calculating optimal order quantities, comparing costs of different production strategies, and calculating reorder points.

Uploaded by

Jagajith Sathis Chandran Nair
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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TUTORIAL QUESTIONS

OPERATIONS MANAGEMENT (IET204)

1. The following details are regarding a component required by a manufacturing firm for its
operations.
Mean weekly demand= 200 units, Standard deviation of weekly demand = 40 units,
Unit cost of component= Rs.300/-, Ordering cost=Rs.460 per order.
Carrying cost percentage= 20 % per annum, Lead time = 2 weeks
Determine Safety stock and Reorder point for ensuring a service level of 95%.
2. Management in the Sharp, Inc. underestimates total annual demand by 50% (say demand is
actually 1,500 needles rather than 1,000 needles) while using the same Q. How will the annual
inventory cost be impacted? Given the setup or ordering cost is Rs 10 per order; and the holding
cost per unit per year is Rs .50.
3. Nathan Manufacturing, Inc., makes and sells specialty hubcaps for the retail automobile.
Nathan’s forecast for its wire-wheel hubcap is 1,000 units next year, with an average daily
demand of 4units. However, the production process is most efficient at 8 units per day. So the
company produces 8 per day but uses only 4 per day. The company wants to solve for the
optimum number of units per order. (Note: This plant schedules production of this hubcap only as
needed, during the 250 days per year the shop operates.)
4. Wohl’s Discount Store stocks toy race cars. Recently, the store has been given a quantity discount
schedule for these cars. This quantity schedule was shown in Table. Thus, the normal cost for the
toy race cars is Rs 5.00. For orders between 1,000 and 1,999 units, the unit cost drops to Rs 4.80;
for orders of 2,000 or more units, the unit cost is only Rs 4.75. Furthermore, ordering cost is Rs
49.00 per order, annual demand is 5,000 race cars, and inventory carrying charge, as a percent of
cost, I, is 20%, or .2.What order quantity will minimize the total inventory cost?

5. The average daily demand for Apple iPods at a Circuit Town store is 15, with a standard
deviation of 5 units. The lead time is constant at 2 days. Find the reorder point if management
wants a 90% service level (i.e., risk stock outs only 10% of the time). How much of this is safety
stock?
6. Whole Nature Foods sells a gluten-free product for which the annual demand is 5,000 boxes. At
the moment, it is paying Rs 6.40 for each box; carrying cost is 25% of the unit cost; ordering
costs are Rs 25. A new supplier has offered to sell the same item for Rs 6.00 if Whole Nature
Foods buys at least 3,000 boxes per order. Should the firm stick with the old supplier, or take
advantage of the new quantity discount?

7. Suppose the average demand is 18 units per week with a standard deviation of 5 units.
The lead time is constant at two weeks. Determine the safety stock and reorder point at
90% cycle- service level.
8. The forecast for the group of items manufactured in a firm is shown below.

Quarter 1 2 3 4 5 6 7 8
Demand 370 320 570 670 550 370 350 480

The firm estimates that it costs Rs.200 per unit to increase the production rate, Rs.250 per unit to
decrease the production rate, Rs.75 per unit per quarter to carry the items on inventory and
Rs.125 per unit if subcontracted. Compare the cost incurred if the following pure strategies are
followed:
Varying the workforce, changing the inventory level, subcontracting.
9. A firm has a demand distribution of demand during a constant lead time with a standard deviation
of 400 units. The firm wants to provide 95% service. How much safety stock should be carried
for them? If the demand during the lead time averages 1500 units, what is the appropriate reorder
level?

10. A regional warehouse purchase hand tools from various suppliers and then distributes them on
demand to retailers in that region. The warehouse operates 5 days per week, 52 weeks per year.
The following data is estimated for a hand drill. Average daily demand = 100 drills, Standard
deviation of daily demand= 30 drills. Lead time = 3 days. Holding cost = Rs. 9.40/unit/year
Ordering cost= Rs. 35 per order. Cycle service level= 92 % The warehouse uses a continuous
review system. What order quantity and reorder point should be used?

11. Annual demand for notebook binders at Meyer’s Stationery Shop is 10,000 units. Brad
Meyer operates his business 300 days per year and finds that deliveries from his supplier
generally take 5 working days. Calculate the reorder point for the notebook binders.

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