1) (10 marks) An importer of television sets from the Far East distributes them throughout the EuropeanUnion from four warehouses. Shipments are received monthly and this month's shipment is 120,000 sets.Sets are allocated to the warehouses based on monthly forecasts. The inventory records and forecasts forthe coming month show the following situation:Warehouse Quantity on hand Demand forecast1 700 10,0002 0 15,0003 2,500 35,0004 1,800 25,000How should the allocation of the television sets be made to the warehouses?2) (15 marks) A computer supply company has a memory chip in inventory that it sells to customersaround the country. The company imports the memory chips from a Japanese manufacturer. Thefollowing data are given:Average annual demand 3200 unitsReplenishment lead time 1.5 weeksUnit holding cost $8.25 /unit/yearOrdering cost $35 per ordera. Design an inventory control method for this item (that is, find the order size, the order frequency, andthe reorder point). What are the annual ordering and holding costs for the method you designed?b. Suppose that the company considers buying the chips from a local manufacturer instead of importingthem from Japan. In that case, the ordering cost will decrease to $10 per order. Additionally, thereplenishment lead time will reduce to 1 day. How should the inventory control method be changed ifthe company works with the local supplier? What would be the total annual ordering and holding costsof the updated system?3) (15 marks) A famous high end department store must decide on the quantity of a high-priced woman’shandbag to procure for the following season. The unit cost of the handbag to the store is $28.5 and thehandbag will sell for $150. Any handbags not sold by the end of the season are purchased by a discountfirm for $20. In addition, the store accountants estimate that the cost of handling each handbag is $10.a. Suppose that the sales of the bags are equally likely to be anywhere from 50 to 250 handbags duringthe season (Hint: This means that the demand distribution for handbags is uniform). Based on this,how many bags should the buyer purchase?b. A detailed analysis of past data shows that the number of bags sold is better described by a normaldistribution with mean 150 and standard deviation 20. Now, what is the optimal number of bags to bepurchased?Important notes:1. You are expected to provide full, detailed and explanatory answers, containing all relevant facts andinformation, with examples when appropriate. Show your work!2. Your homework should look professional and organized. If you use MS Excel to solve any problems, submit aprinted copy of your worksheet and clearly indicate the answer. Also, any formulas used must be indicated.3. Assignments should NOT be submitted in plastic files (please use a single staple).4. Respect the policy of working alone for all questions (see “Academic Integrity and Discipline” in syllabus.5. No late submission is allowed (17:00 in my office on 23 December 2015, Wednesday is a strict deadline).6. Keep a copy of your answers (submitted assignment) as marked assignments will NOT be returned.24) (10 marks) Mr. Lock, the manager of a hardware outlet, is concerned with the acquisition of a particulartype of snow blower that must be ordered several months before the winter. Each snow blower costs $60and sells for $100. Any units unsold at the end of the winter will be marked down to $51/unit, avoidingthe expense of storing them until the next season. The probability distribution of regular demand isestimated to be:Demand 300 400 500 600 700 800Probability 0.1 0.1 0.4 0.2 0.1 0.1a. What is the expected demand? What is the variance of demand?b. To maximize expected profit, how many units should Mr. Lock (using a discrete demand model)acquire? What is the expected profit under this strategy?c. Suppose Mr. Lock decides to fit a normal distribution, having the same mean and standarddeviation, to the above discrete distribution. With this normal distribution model, what is therecommended order quantity?5) (15 marks) Suppro is an industrial distributor that sources from hundreds of suppliers. The two modesof transportation available for inbound shipping are LTL (less than truckload) and TL (truckload). LTLshipping costs $1 per unit, whereas TL shipping cost $400 per truck. Each truck can carry up to 1.000units. Suppro wants a rule assigning products to shipping mode (TL or LTL) based on annual demand.Each unit costs $50, and Suppro uses a holding cost of 20 percent per year. Suppro incurs a fixed cost of$100 for each order placed with a supplier.a. Determine a threshold for annual demand above which TL is preferred and below which LTL ispreferred.b. How does the threshold change [relative to part (a)] if unit cost is $100 (instead of $50) with all otherdata unchanged? Which mode becomes preferable as unit cost grows?c. How does the threshold change [relative to part (a)] if the LTL cost comes down to $0.8 per unit(instead of $1 per unit)?6) (20 marks) A large hospital uses a certain intravenous solution that it maintains in inventory. Pertinentdata about this item are as follows:Forecasted daily usagea = 50 unitsForecast error std. dev.b = 15 unitsAverage lead time = 7 daysLead time std. dev.b = 2 daysAnnual carrying cost = 30%Procurement cost per order = $50Product value = $45 per unitService level (in-stock probabilityc) = 85%a365 days per yearbNormally distributedcDuring the lead time or during the order interval plus lead time, depending on the inventory control designa. Design a continuous review system of inventory control for this item.b. Design a periodic review system of inventory control for this item.37) (15 marks) Suppose that a company has two of its warehouses that it would like to consolidate into acentral warehouse. Three top-selling items stocked in both warehouses are selected for evaluation. Fromthe monthly forecasts of the demand in the two warehouse territories, the following statistics are known:Warehouse1 Warehouse2ProductMonthlyDemand(units)MonthlyStandardDeviation(units)MonthlyDemand(units)MonthlyStandardDeviation(units)ProductValue($/unit)A 3,000 500 5,000 700 15B 8,000 250 9,500 335 30C 12,500 3,500 15,000 2,500 25The product order quantities are determined locally at each warehouse using the EOQ formula and areordered from separate vendors with an order processing cost of $25 per order. Replenishment lead timesaverage three weeks, or 0.75 months. Inventory carrying costs are 24 percent per year. The service levelduring the order cycle is set at 95 percent.How much inventory can be saved through risk pooling if the inventory is consolidated into a central1

IE 341 Transportation & Logistics Engineering, Fall 2015 Assignment #4 Due on 23 December 2015, Wednesday, 17:00 (in my office D249) You should work independently (alone). 1) (10 marks) An importer of television sets from the Far East distributes them throughout the European Union from four warehouses. Shipments are received monthly and this month's shipment is 120,000 sets. Sets are allocated to the warehouses based on monthly forecasts. The inventory records and forecasts for the coming month show the following situation: Warehouse Quantity on hand Demand forecast 1 700 10,000 2 0 15,000 3 2,500 35,000 4 1,800 25,000 How should the allocation of the television sets be made to the warehouses? 2) (15 marks) A computer supply company has a memory chip in inventory that it sells to customers around the country. The company imports the memory chips from a Japanese manufacturer. The following data are given: Average annual demand 3200 units Replenishment lead time 1.5 weeks Unit holding cost $8.25 /unit/year Ordering cost $35 per order a. Design an inventory control method for this item (that is, find the order size, the order frequency, and the reorder point). What are the annual ordering and holding costs for the method you designed? b. Suppose that the company considers buying the chips from a local manufacturer instead of importing them from Japan. In that case, the ordering cost will decrease to $10 per order. Additionally, the replenishment lead time will reduce to 1 day. How should the inventory control method be changed if the company works with the local supplier? What would be the total annual ordering and holding costs of the updated system? 3) (15 marks) A famous high end department store must decide on the quantity of a high-priced woman’s handbag to procure for the following season. The unit cost of the handbag to the store is $28.5 and the handbag will sell for $150. Any handbags not sold by the end of the season are purchased by a discount firm for $20. In addition, the store accountants estimate that the cost of handling each handbag is $10. a. Suppose that the sales of the bags are equally likely to be anywhere from 50 to 250 handbags during the season (Hint: This means that the demand distribution for handbags is uniform) . Based on this, how many bags should the buyer purchase? b. A detailed analysis of past data shows that the number of bags sold is better described by a normal distribution with mean 150 and standard deviation 20. Now, what is the optimal number of bags to be purchased? Important notes: 1. You are expected to provide full, detailed and explanatory answers, containing all relevant facts and information, with examples when appropriate. Show your work! 2. Your homework should look professional and organized. If you use MS Excel to solve any problems, submit a printed copy of your worksheet and clearly indicate the answer. Also, any formulas used must be indicated. 3. Assignments should NOT be submitted in plastic files (please use a single staple). 4. Respect the policy of working alone for all questions (see “Academic Integrity and Discipline” in syllabus. 5. No late submission is allowed (17:00 in my office on 23 December 2015, Wednesday is a strict deadline) . 6. Keep a copy of your answers (submitted assignment) as marked assignments will NOT be returned.

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