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MEM511-Assignment 2 New

This document contains an assignment with three problems related to operations and supply chain management. Problem 1 involves forecasting demand for gasoline using different forecasting methods and calculating forecast accuracy. Problem 2 involves developing an aggregate production plan for a medical supply manufacturer using chase demand. Problem 3 involves determining optimal order quantities, inventory costs, number of orders, and days between orders given costs per order and carrying inventory.

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88 views3 pages

MEM511-Assignment 2 New

This document contains an assignment with three problems related to operations and supply chain management. Problem 1 involves forecasting demand for gasoline using different forecasting methods and calculating forecast accuracy. Problem 2 involves developing an aggregate production plan for a medical supply manufacturer using chase demand. Problem 3 involves determining optimal order quantities, inventory costs, number of orders, and days between orders given costs per order and carrying inventory.

Uploaded by

Electron
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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College of Engineering

MEM511 – Operations & Supply Chain Management

ASSIGNMENT #2
Individual Work

Problem I (2P)
The manager of the Excom Service Station wants to forecast the demand for unleaded gasoline
next month so that the proper number of gallons can be ordered from the distributor. The owner
has accumulated the following data on demand for unleaded gasoline from sales during the past
10 months:

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a. Develop a 3-period moving average from period 4 through 11.
b. Develop a three-period weighted moving average forecast for periods 4 through 11. Use
weights of 0.4, 0.35, and 0.3, with the most recent observation weighted the highest.
c. Develop two exponential smoothing forecasts for periods 2 through 11. For the first
forecast, use a = 0.2. For the second, use a = 0.7.
d. Calculate the MAD values for periods 4 through 10. Which method is the most precise
one?

Problem II (1.5P)
Bioway, Inc., a manufacturer of medical supplies, uses aggregate planning to set labor and
inventory levels for the year. While a variety of items are produced, a standard kit composed of
basic supplies is used for planning purposes. Demand varies with seasonal illnesses and the
quarterly ordering policies of hospitals. The average worker at Bioway can produce 1000 kits a
month at a cost of $9 per kit during regular production hours and $10 a kit during overtime
production. Completed kits can also be purchased from outside suppliers at $12 each. Inventory
carrying costs are $2 per kit per month. Overtime is limited to regular production, but
subcontracting is unlimited. Due to high quality standards and extensive training, hiring and firing
costs are $1500 per worker. Bioway currently employs 25 workers. Given the demand forecast
below, develop a six-month aggregate production plan for Bioway using chase demand.
Month Demand
Apr 60,000
May 22,000
Jun 15,000
July 46,000
Aug 80,000
Sept 15,000
Total 238,000

Problem III (1.5P)


A firm is faced with the attractive situation in which it can obtain immediate delivery of an item it
stocks for retail sale. The firm has therefore not bothered to order the item in any systematic way.
However, recently profits have been squeezed due to increasing competitive pressures, and the
firm has retained a management consultant to study its inventory management. The consultant has
determined that the various costs associated with making an order for the item stocked are
approximately $70 per order. She has also determined that the costs of carrying the item in
inventory amount to approximately $27 per unit per year (primarily direct storage costs and
forgone profit on investment in inventory). Demand for the item is reasonably constant over time,
and the forecast is for 16,500 units per year. When an order is placed for the item, the entire order
is immediately delivered to the firm by the supplier. The firm operates 6 days a week plus a few
Sundays, or approximately 320 days per year. Determine the following:
a. Optimal order quantity per order
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b. Total annual inventory costs
c. Optimal number of orders to place per year
d. Number of operating days between orders, based on the optimal ordering

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