Case Study Suppose that you are the consultant hired by a manufacturing company to design a suitable inventory management strategy for its Alloy #1 products for determining the weekly production schedule. Alloy #1 products are the products with the highest priority and they can be produced using either make-to-order or make-to-stock approach. The typical production process is as follows: < Raw material Feedstock Products The weekly production schedule specifies the production quantities of products and feedstocks that the company has to produce every week. After discussing with the production staff about the product hierarchy, you have compiled the following information about the products. < Feedstock Unit value ($/kg) < Lead time required for producing feedstock from raw material (weeks) < 1mm Sheet 450 < 2 3mm Plate 350 20 6mm Plate 250 2 100mm Bar 150 2 Feedstock Products (Materials) < Unit product Yield from Lead time from value ($/kg) feedstock to feedstock to product (%) 1mm Sheet product (weeks) < 1001 800 80 20 1002 800 80 2 1003 800 80 2 1011 800 80 2 1023 800 80 2 1032 800 80 2 3mm Plate 1004 700 80 2 1008 700 80 2 1009 700 80 2 1010 700 80 2 1018 700 80 2 1019 700 80 2 1021 700 80 20 1027 700 80 2 1033 700 80 2 1035 700 80 2 6mm Plate 1006 600 80 2 1007 600 80 2 1012 600 80 23 1013 600 80 2 1022 600 80 2 1024 600 80 2 1036 600 80 2 1037 600 80 2 1005 600 80 2 1014 600 80 2 1015 600 80 2 1016 600 80 2 1017 600 80 2 1020 600 80 2 1025 600 80 2 1026 600 80 2 1028 600 80 2 1034 600 80 2 1030 600 80 2 1031 600 80 2 100mm Bar 1029 450 90 2 Product Sales Kgs per month Jan Feb Mar Apr May Jun Jul Aug Sep 1001 171 0 < 20 0 < 0 < 17 0 < 1002 20 56 287 179 41 < 204 < 560 143 276 1003 263 < 576 584 812 617 969 572 359 909 1004 68 611 1,263 167 1,917 803 321 377 404 1005 0 < 0 < 0 < 0 < 0 < 0 < 5 < 0 < 2 < 1006 101 < 0 < 0 < 0 < 0 < 0 < 0 < 0 < 1007 0 < 146 32 117 129 414 < 581 26 191 1008 321 101 < 191 486 8 98 263 < 176 690 1009 0 < 122 614 275 < 422 360 686 246 177 1010 0 < 54 < 102 < 183 45 < 54 < 126 92 < 119 1011 618 1,079 1,215 1,188 1,020 290 1,590 849 1,017 < 1012 < 228 8 32 90 432 17 < 8 0 < 450 1013 1,100 0 < 0 < 0 < 0 < 35 0 < 0 0 < 1014 6 12 < 0 < 770 < 0 < 752 < 0 < 0 < 174 < 1015 0 < 0 < 0 < 0 < 0 < 0 < 375 0 < 0 < 1016 3 0 < 0 51 < 6 < 54 < 33 27 33 1017 0 < 0 < 8 12 558 0 < 0 < 1018 8 0 < 0 < 0 < 0 < 230 0 < 41 < 2 12 0 < 1019 0 < 0 < 0 < 0 < 0 < 0 < 11 1020 44 < 1021 0 < 1022 0 < 1023 0 < 99 3628 0 0 < 0 < 0 35 6 < 0 < 0 < 8 0 < 27 < 33 < 0 < 0 < 0 0 < 14 < 18 < 0 < 0 0 < 0 < 0 < 2 2 2 2 0 < 0 < 1024 15 0 < 24 < 0 < 0 < 0 0 < 15 0 < 1025 45 < 0 < 0 < 0 < 0 < 0 0 < 0 < 1026 12 0 < 0 < 0 < 0 < 0 0 < 1027 0 105 0 < 0 < 0 < 0 0 < 0 < 0 1028 0 < 189 48 < 293 93 174 < 1029 323 0 < 366 0 < 538 538 495 < 409 452 1030 0 < 1031 0 < 1032 0 < 0 < 0 < 57 0 < 18 0 < 17 0 < 0 < 0 15 0 < 0 0 < 0 < 0 < 0 < 14 0 < 12 12 0 < 1033 0 < 0 < 0 0 < 20 0 0 < 0 < 0 < 1034 0 < 0 < 0 < 57 < 0 < 0 0 < 1035 0 0 < 0 < 0 < 0 < 2 < 0 < 0 < 0 1036 0 < 0 < 0 < 0 < 23 0 < 0 < 0 < 1037 0 0 0 0 < 0 0 0 < 0 33 Question 2 Suppose that the lead time required for producing the 6 products from 1mm feedstock follows the probability distribution below. Lead time required for producing feedstock from raw material (week) < 1 2 3 40 Probability 0.06 0.90 0.02 < 0.02 Discuss how to design a good inventory control policy for the products made from 1mm feedstock to meet a target service level of 95% with order fulfilment time of not more than 2 weeks.