Homework
Problem I
KAR Foods, a large Brazilian food processing company, serves three regions near Sa~o Paulo, and maintains consignment inventory (owned by KAR Foods) at each location. Currently, KAR uses refrigerated TL transportation to deliver separately to each customer. Each truck costs $700 plus $150 per stop. KAR Food is considering aggregating deliveries to Sa~o Paulo on a single truck. A careful study of the sales regions revealed three large customers, three medium-sized customers, and ten small customers. Demand at the large customer is 60 tons a year, demand at the medium customer is 24 tons per year, and demand at the small customer is 8 tons per year. Product cost for KAR Foods is $10,000 per ton, and it uses an annual holding cost of 25 percent. Truck capacity is 12 tons.
i. What is the annual transportation and holding cost if KAR Food ships a full truckload to each customer when they are running out of stock?
ii. What is the optimal delivery policy to each customer if KAR Food ships separately to each of them? What is the annual transportation and holding cost?
iii. What is the optimal delivery policy to each customer if KAR Food aggregates shipments to each of the three customers on every truck that goes to Sa~o Paulo? What is the annual transportation and holding cost?
iv. Can you come up with a tailored policy that has lower costs than the policies in (ii) or (iii)? What are the costs and inventories for your suggested policy?
Problem II
Gang Aft Agley, a manufacturing company, faces the aggregate planning problem with a demand forecast shown in the table below. Demands are in thousands. The plant operates 20 days a month, eight hours a day. One unit can be produced every 10 minutes. Workers are paid 20 dollars per hour and 50 percent for overtime. The current number of employees is 1250 workers. The cost of material is $20, and the cost of carrying a unit in inventory from one month to the next is $3. The current policy does not allow Gang Aft Agly to lay-off its employees. Overtime is limited to a maximum of 20 hours per month per employee. The starting Inventory is 50,000 units and wants to end the year with the same level of inventory. Also, hiring costs 800 dollars and firing costs 1200 dollars per employee.
i. What is the annual cost of employing a chase strategy? Assume that the lay-off policy does not hold.
ii. What is the annual cost of employing a leveled strategy? Compare the total costs with chase strategy.
iii. Assuming no backlogs, no subcontracting, and no new hires, what is the optimal production schedule? What is the annual cost of this schedule? Model formulation is necessary.
iv. Is there any value for management to negotiate an increase of allowed overtime per employee per month from 20 hours to 40 hours?
v. Reconsider parts c and d if the company starts with only 1200 employees. Reconsider parts c and d if the company starts with 1300 employees. What happens to the value of additional overtime as the workforce size decreases?
Month January February March April May June July August September October NovemberDecember
Forecast 1000 11001000 12001500 1600 1600 900 1100 800 1400 1700
Problem III
A. Consider a supermarket deciding on the size of its replenishment order from Proctor &Gamble. Name three costs that the supermarket should it take into account when making this decision and describe their impact on the replenishment decision (e.g., impact on order quantity and order frequency).
B. The Outer wear company makes three different products-winter coats, winter fleeces, and fleece lined sweatshirts-in the same production facility, but using different production processes. Due to global warming, demand for outerwear's products are trending lower. The company's forecasting group has developed independent forecast estimates (anticipated demand by month) for each of the three products for the upcoming year. Outerwear would like to use this information to plan its workforce and machine capacity. Management has determined that an aggregate planning model must be used to determine appropriate workforce levels. However, they are unclear about how to integrate the three different product forecasts. Should they develop a single model for all three products or should they develop 3 separate models. Justify your choice clearly.
C. The U Furniture company faces a steady demand for synthetic fibers (that it uses in furniture upholstery) and places periodic orders of the same size on PlasFib, a manufacturer of these fibers. Last year, this ordering policy resulted in a total annual holding cost of $450,000 and a total annual ordering cost of $70,000. Should U Furniture change its ordering policy? If so, how and why?
D. SunChem is a manufacturer of specialty chemicals. SunChem uses a third-party logistics distributor (3PL) to ship its products to its retail customers. The 3PL charges SunChem a fixed fee of $1000 for a truck and a per-drop fee of $100 for a stop at a retail location. Currently, SunChem makes independent deliveries to each of the 20 retail locations in the coverage area under consideration. SunChem's supply chain managers want to explore the possibility of aggregate multiple retail stores into a single delivery. One of the team members argues that aggregation is always beneficial and hence all 20 stores must be aggregated into a single route. Is this true? Justify.
Format your homework according to the following formatting requirements:
i) The answer should be typed, using Times New Roman font (size 12), double spaced, with one-inch margins on all sides.
ii) The response also includes a cover page containing the title of the homework, the student's name, the course title, and the date. The cover page is not included in the required page length.
iii) Also include a reference page. The Citations and references must follow APA format. The reference page is not included in the required page length.