Indian Institute of Manaeement Luckno% , 2013-14P,,,

MID-TERM EXAMINATION
SUPPLY CHAIN MANAGEMENT
PGP-I Term III SECTION: C and D

Time: 1'./2 Hours Marks: 60

Instructions:
1.Closed book, closed notes exam. Required Statistical Table is provided at the end of this question paper.
2.Answers to different questions must start on a new page .
3.Please read the questions carefully . before assuming anything. Do not assume unnecessarily. State clearly all
the assumptions if you are using any.
4.Numbers on the extreme right hand side indicate marks for that question and!or its part.

1 1151
a.The annual demand for a product is 15,600 units. The weekly demand is 300 units with a OS

standard deviation of 90 units. The cost to place an order is 531_20, and the time from
ordering to receipt is four weeks. The annual inventory carrying cost is $0.10 per unit Find the
reorder point necessary to provide a 98 percent service probability.
Suppose the production manager is asked to reduce the safety stock of this item by 50
percent. If she does so, what will the new service probability be?
b.Mr. TVS Susuki needs a specialized throttle valve that has been offered b a vendor that too 10
with some quantity discounts if he will purchase more than his present order quantities. The
new volumes and prices are:
Range of Order Quantities 1 399 400 699 700+
Acquisition Cost per Valve (5) 2.20 2.00 1.80

Mr. Susuki asks you to investigate the new prices under two sets of assumptions:
1) Orders are received all at once, and 2) deliveries are gradual.

You have developed these estimates: Annual Demand = 10,000, Carrying cost per valve/per
year = 20% of valve cost, and ordering cost = $5.50 per order. Production rate is 120 valve
per day and consumption would be 40 valve per day.
Work out your recommendations to Mr. Susuki considering both the assumptions.
2. Products are shipped from a company's factory warehouse to two regional w arehouses, the 1151
forecasted demands for these warehouses A and B for the next five eeks are (130, 190, 280,
150, 310) and (2 10, 140. 180, 150, 140) respectively. Scheduled Receipts in Week 1 for the
warehouses A and B are 250 and 150 respectively. Also we know that the previous week's
ending inventories are 230 for warehouse A and 180 for warehouse B. Lead time for shipping
products from the warehouse at the factory to warehouse A is 2 weeks, the standard shipping
quantity is 250 units, and the safety stock at A is 150 units. Lead time for shipping products
from the Warehouse at the factory to warehouse B is 1 week, the standard shipping quantity is
150 units, and the safety stock for warehouse B is 80 units. Lead time for final assembly of
products and moving them into the warehouse at the factory is 1 week, the standard production
lot size is 500 units, and the safety stock is 150 units. The warehouse at the factory has an
ending inventory of 100 in the previous week, and a scheduled receipt in Week 1 of 500.
a.Complete the DRP records for both the warehouses A, B and the warehouse at the factory. 12
b.In what way can you relate this with the factory MRP? 03