Operations management – Inventory
Question1
| SKU # | Description | Quantity Used Per Year | Dollar Value Per Unit | ||
| a-1 | Steel panel | 500 | 2 | 5.00 | |
| a-2 | Steel bumper | 750 | 135.00 | ||
| a-3 | Steel clamp | 3500 | |||
| a-4 | Steel brace | 200 | 20.00 | ||
| b-1 | Copper coil | 1 | 250 | 260.00 | |
| b-2 | Copper panel | 50.00 | |||
| b-3 | Copper brace 1 | 75.00 | |||
| b-4 | Copper brace 2 | 150 | 125.00 | ||
| c-1 | Rubber bumper | 8500 | 0.75 | ||
| c-2 | Rubber foot | 6500 | |||
| c-3 | Rubber seal 1 | 1500 | 1.00 | ||
| c-4 | Rubber seal 2 | ||||
| c-5 | Rubber seal 3 | 1200 | 2.25 | ||
| d-1 | Plastic fastener kit | 3.50 | |||
| d-2 | Plastic handle | 2000 | |||
| d-3 | Plastic panel | 1000 | 6.50 | ||
| d-4 | Plastic bumper | 1.25 | |||
| d-5 | Plastic coil | 450 | 6.00 | ||
| d-6 | Plastic foot | 6000 | 0.25 |
Q1) Southern Markets, Inc. is considering the use of ABC analysis to focus on the most critical SKUs in its inventory. Currently, there are approximately 20,000 different SKUs with a total dollar usage of $10,000,000 per year.
a. What would you expect to be the number of SKUs and the total annual dollar usage for A items, B items, and C items at Southern Markets, Inc.?
b. The following table provides a random sample of the unit values and annual demands of eight SKUs. Categorize these SKUs as A, B, and C items.
Question2
Q2) Leaky Pipe, a local retailer of plumbing supplies, faces demand for one of its SKUs at a constant rate of 30,000 units per year. It costs Leaky Pipe $10 to process an order to replenish stock and $1 per unit per year to carry the item in stock. Stock is received 4 working days after an order is placed. No backordering is allowed. Assume 300 working
days a year.
a. What is Leaky Pipe’s optimal order quantity?
b. What is the optimal number of orders per year?
c. What is the optimal interval (in working days) between orders?
d. What is the demand during the lead time?
e. What is the reorder point?
f. What is the inventory position immediately after an order has been placed?
Question3
Q3) Radovilsky Manufacturing Company, in Hayward, California, makes flashing lights for toys. The company operates its production facility 300 days per year. It has orders for about 12,000 flashing lights per year and has the capability of producing 100 per day. Setting up the light production costs $50. The cost of each light is $1. The holding cost is $0.10 per light per year.
a) What is the optimal size of the production run?
b) What is the average holding cost per year?
c) What is the average setup cost per year?
d) What is the total cost per year, including the cost of the lights?