MGT-455 Module 7 Chapters 11, S11, and 12 Problem Set

11.5 Baker Mfg. Inc. (see Table 11.9) wishes to compare
its inventory turnover to those of industry leaders, who have turnover
of about 13 times per year and 8% of their assets invested in
inventory.

a) What is Baker’s inventory turnover?
b) What is Baker’s percent of assets committed to inventory?
c) How does Baker’s performance compare to the industry leaders?

S11.4 Johnson Chemicals is considering two options for
its supplier portfolio. Option 1 uses two local suppliers. Each has
a “unique-event” risk of 5%, and the probability of a “super-event”
that would disable both at the same time is estimated to be 1.5%.
Option 2 uses two suppliers located in different countries. Each has
a “unique-event” risk of 13%, and the probability of a “super-event”
that would disable both at the same time is estimated to be 0.2%.

a) What is the probability that both suppliers will be disrupted using option 1?
b) What is the probability that both suppliers will be disrupted using option 2?
c) Which option would provide the lowest risk of a total shutdown?

S11.9 Consider a three-firm supply chain consisting of a
retailer, manufacturer, and supplier. The retailer’s demand over
an 8-week period was 100 units each of the first 2 weeks, 200 units
each of the second 2 weeks, 300 units each of the third 2 weeks, and
400 units each of the fourth 2 weeks. The following table presents
the orders placed by each firm in the supply chain. Notice, as is
often the case in supply chains due to economies of scale, that total
units are the same in each case, but firms further up the supply
chain (away from the retailer) place larger, less frequent, orders.

a) What is the bullwhip measure for the retailer?
b) What is the bullwhip measure for the manufacturer?
c) What is the bullwhip measure for the supplier?
d) What conclusions can you draw regarding the impact that economies of scale may have on the bullwhip effect?

S11.15 Monczka-Trent Shipping is the logistics vendor 
for Handfield Manufacturing Co. in Ohio. Handfield has daily 
shipments of a power-steering pump from its Ohio plant to an 
auto assembly line in Alabama. The value of the standard shipment 
is $250,000. Monczka-Trent has two options: (1) its standard 
2-day shipment or (2) a subcontractor who will team drive 
overnight with an effective delivery of one day. The extra driver 
costs $175. Handfield’s holding cost is 35% annually for this kind 
of inventory. 
 
a) Which option is more economical? 
b) What production issues are not included in the data presented?

L. Houts Plastics is a large manufacturer of injection molded
plastics in North Carolina. An investigation of the company’s
manufacturing facility in Charlotte yields the information
presented in the table below. How would the plant classify these
items according to an ABC classification system?

12.4 Lindsay Electronics, a small manufacturer of electronic 
research equipment, has approximately 7,000 items in its 
inventory and has hired Joan Blasco-Paul to manage its inventory. 
Joan has determined that 10% of the items in inventory are 
A items, 35% are B items, and 55% are C items. She would like to 
set up a system in which all A items are counted monthly (every 20 
working days), all B items are counted quarterly (every 60 working 
days), and all C items are counted semiannually (every 120 
working days). How many items need to be counted each day? 

12.13 Joe Henry’s machine shop uses 2,500 brackets during     
the course of a year. These brackets are purchased from a supplier     
90 miles away. The following information is known about     
the brackets:     
Annual demand:     2,500 
Holding cost per bracket per year:    $1.50  
Order cost per order:    $18.75  
Lead time:    2 days
Working days per year:    250 
     
a) Given the above information, what would be the economic order quantity (EOQ)?     
b) Given the EOQ, what would be the average inventory? What would be the annual inventory holding cost?
c) Given the EOQ, how many orders would be made each year? What would be the annual order cost?
d) Given the EOQ, what is the total annual cost of managing the inventory?
e) What is the time between orders?
f) What is the reorder point (ROP)?

12.17 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? PX