Question 1
Hotel Singapura uses plastic litter bags for housekeeping. The hotel places orders for these bags only when the inventory is below the reorder level. The hotel operates for 52 weeks a year, 7 days per week. The bags come in a pack of 12 and costs $10.75 each. The following information is available about these bags.
Demand = 95 packs/week
Order cost = $58/order
Annual holding cost = 25% of cost
Required service level = 90%
Lead time = 4 weeks (28 working days)
Standard deviation of weekly demand = 16 packs
Records show that there are 315 packs available on-hand and no orders are pending from the supplier.
Solve for the Economic Order Quantity of the number of packs. What would be the average time between orders (in weeks)?
(5 marks)
Solve what should be the reorder point, ROL. An inventory withdrawal of 10 packs was just made. Discuss whether it is time to reorder or not.
(5 marks)
The hotel currently uses a lot size of 490 packs (i.e., Q = 490). What are the annual holding and ordering costs of this policy? From these two values, examine whether the current lot size is too large or not.
What would be the annual cost saved by shifting from the 490-packs lot size to the EOQ?
(7 marks)
Suppose that the weekly demand forecast of 95 packs is incorrect and actual demand averages only 65 packs per week. How much higher will the total costs be, owing to the distorted EOQ caused by this forecast error?
(8 marks)
LOG203 Copyright © 2019 Singapore University of Social Sciences (SUSS)
Examination – July Semester 2019
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Question 2
Two Leaves Bakery is famous for its curry puffs. Every morning, it makes the puffs and sells from its only store located at Bukit Timah Road. Based on past experience, the daily demand for its puffs can be represented as a random variable (varies between 50 to 300) with (discrete) distribution and can be given as follows (Table 1):
Table 1
Demand
50
100
150
200
250
300
Probability
10%
20%
25%
25%
15%
–
Each puff is sold at $2 each and costs the bakery 76 cents to make. Unsold puffs are purchased by a nearly restaurant for 19 cents each at the end of the day.
It was found that the demand can only be 50, 100, 150, 200, 250 and 300. What is the probability when demand is 300?
(5 marks)
How many puffs should the bakery make each day to maximise its expected profit? Analyse the problem to determine the expected profit.
(12 marks)
Consider an organisation that you are currently working for or one that you are familiar with which keeps inventories. Describe any four (4) types of information that inventory managers of the organisation need to manage most efficiently.
(8 marks)
Question 3
The number of cars arriving at Mr Tan’s Garage for repair has been as follows:
Table 2
Month
Number of Cars
Jan
41
Feb
46
Mar
57
Apr
52
May
59
Jun
51
Jul
60
Aug
62
LOG203 Copyright © 2019 Singapore University of Social Sciences (SUSS)
Examination – July Semester 2019
Page 3 of 8
Mr Tan hired an analyst to forecast the number of cars for the months of September, October and November. The analyst decided to use linear regression for the forecasting and obtained the following data after regression analysis.
R2 0.668
R 0.890
Intercept , a 42.464
Gradient , b 2.452
Examine the relationship between the number of cars and the month with a linear regression equation. Apply the equation to forecast the number of cars for the months of September, October and November. For the relationship, you denote the months as Jan=1, Feb=2 and so on.
(9 marks)
What can you infer from the R2 and R statistics of the resulting regression equation?
(4 marks)
Give your views as to whether you should use this linear model to predict the number of cars arriving at Mr Tan’s Garage 3 years in the future.
(4 marks)
Inventsoft is planning to launch a new product in the market but does not have any historical data to forecast the demand for the product. Comment on the forecasting approach that Inventsoft should use to predict the demand for the new product. Relate any three (3) forecasting methods for this situation.
(8 marks)
Question 4
Mr Goh operates a small production facility in Tuas and supplies machine parts to different companies. He uses a short-term operational schedule to plan the production. The schedule shows what each job, person, equipment should be doing at any given time. But recently, production has been hampered due to unforeseen factors like illness, late deliveries etc. Mr Goh wants to keep a check on these problems by using a control system. Outline the control system in brief and identify its main purposes.
(5 marks)
A new start-up company has started to assemble robots for floor cleaning. The robots are assembled using various components shown in Table 3. The numbers within the brackets show the units of the component required to produce each unit of the item. All the components are ordered lot-for-lot except G which must be ordered in multiples of 80 units. Assume that the components are used only for this particular robot.
LOG203 Copyright © 2019 Singapore University of Social Sciences (SUSS)
Examination – July Semester 2019
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Table 3
Item
Lead Time (weeks)
On Hand
Components
Robot
2
10
B,G,C(3)
B
1
5
E,F
C
1
20
G(2),H
E
2
4
–
F
3
8
–
G
2
15
–
H
1
10
–
Apply the Material Requirements Planning (MRP) approach to develop the bill of materials for the robot.
(3 marks)
The company just received an order for 40 units of the robot, which is to be delivered at the start of week 7. Implement MRP to schedule orders for components B to H and the timing of those orders. In your answer, you should use the Material Requirement Planning Worksheet provided to support your design.
(12 marks)
Give your views on how 3D printing technology is affecting the way inventory is managed.
(5 marks
—– END OF PAPER —–
LOG203 Copyright © 2019 Singapore University of Social Sciences (SUSS)
Examination – July Semester 2019
Page 5 of 8
Appendix A: Formula sheet
Z = 1.28 as required service-level is 90%
Z = 1.64 as required service-level is 95%
Z = 2.33 as required service-level is 99%
2RCD
EOQ(Q0 ) HC
ROL LT D Z LT
VC
HC Q
RC D
2
Q
Q
Q
Q UC
EP (Q ) SPD Prob( D ) QProb( D )
SV
(Q D )Prob( D )
D 0
D Q 1
D 0
T0 Q0/D
Q
2RCD(1E1)
HC (1
E2 )
ROL LT D n Q0
Q
2RCD
P
HC
P D
Q
2 RC D (HC SC)
HC SC
LOG203 Copyright © 2019 Singapore University of Social Sciences (SUSS)
Examination – July Semester 2019
Page 6 of 8
Appendix B: Worksheet for Question 4
Examination Index No.: Student PI No. :
Master Schedule for: Robot
Week
Beg.
1
2
3
4
5
6
7
Inv.
Quantity
40
Robot LT=2
Lot size: Lot-for-Lot
Gross requirements
Opening stock
Scheduled receipts
Net requirements
Place order
LT=1
Lot size: Lot-for-Lot
Gross requirements
Opening stock
Scheduled receipts
Net requirements
Place order
C(3) LT=1
Lot size: Lot-for-Lot
Gross requirements
Opening stock
Scheduled receipts
Net requirements
Place order
LT=2
Lot size: Lot-for-Lot
Gross requirements
Opening stock
Scheduled receipts
Net requirements
Place order
LT=3
Lot size: Lot-for-Lot
Gross requirements
Opening stock
Scheduled receipts
Net requirements
Place order
LOG203 Copyright © 2019 Singapore University of Social Sciences (SUSS) Page 7 of 8
Examination – July Semester 2019
G & G(2)
LT=2
Lot size: Multiples of 80
Gross requirements
Opening stock
Scheduled receipts
Net requirements
Place order
H
LT=1
Lot size: Lot-for-Lot
Gross requirements
Opening stock
Scheduled receipts
Net requirements
Place order
LOG203 Copyright © 2019 Singapore University of Social Sciences (SUSS)
Examination – July Semester 2019
