3. A two-workstation cell uses a kanban system to produce 200,000 parts per year. Expected leadtime to replenish a container is 0.75 hours (i.e. 45 minutes). Parts cost $100 and have an inventory opportunity cost of 15%. There are three material handling options available:

Manual - annual fixed cost of $25,000, cost per trip = $0.10, Max load size = 5;

Push Cart - annual fixed cost of $25,000 + $5,000 initial investment (must be amortized over 5 years), cost per trip = $0.15, Max load size = 50; and

Forklift - annual fixed cost of $25,000 + $60,000 initial investment (must be amortized over 8 years), cost per trip = $0.50, Max load size = 1000.

Note: The company uses a MARR of 20% for all investments.

a) (25%) Specify the following system design parameters: container size, material handling type, # kanban that will be feasible and minimize material handling cost.

b) (5%) How would the system be different if it was controlled by CONWIP versus Kanban? Provide a conceptual example.