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 ($/kg) Lead time required for producing feedstock from raw material (weeks) 1mm Sheet 450 2 3mm Plate 350 2 6mm Plate 250 2 100mm Bar 150 2 Feedstock Products (Materials) Unit product value ($/kg) Yield from feedstock to product (%) 80 Lead time from feedstock to product (weeks) 2 1mm Sheet 1001 800 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 2 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 2 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 0 20 0 0 0 17 0 1002 20 56 179 41 204 560 143 276 287 584 1003 263 576 812 617 969 359 909 572 321 1004 68 611 167 803 377 404 1,263 0 1,917 0 0 0 0 0 5 0 2 1005 1006 1007 101 0 0 0 0 0 0 0 0 146 32 129 414 117 486 1008 191 690 321 101 191 8 581 263 686 98 26 176 246 1009 0 122 614 275 422 360 177 0 45 1010 1011 54 1,079 8 102 1,215 32 183 1,188 618 54 290 17 92 849 1,020 432 126 1,590 8 119 1,017 450 1012 90 228 1,100 6 0 0 0 0 O 0 35 752 12 770 0 174 1013 1014 1015 1016 1017 0 0 0 0 375 0 3 0 0 51 54 0 18 27 33 6 12 33 0 0 558 12 0 41 1018 8 0 0 230 0 0 1019 woo 0 0 0 0 11 0 44 0 3 0 0 0 35 0 0 1020 1021 6 0 0 0 8 0 0 0 1022 27 33 0 0 0 0 0 mooob 99 14 0 0 0 0 1023 1024 1025 15 0 24 0 0 15 0 o o 45 0 0 0 0 0 1026 12 0 0 0 0 0 105 1027 0 0 0 0 1028 0 189 48 293 93 0 174 452 1029 0 366 538 495 409 323 0 538 18 1030 0 57 0 0 17 0 1031 0 15 0 0 0 12 6 1032 14 0 12 1033 0 0 20 0 1034 0 0 57 0 1035 0 0 1036 23 1037 0 0 0 33 Question 1 Recommend an appropriate inventory management strategy for the Alloy #1 products to meet a target service level of 95% with order fulfilment time (the time lapsed from receiving an order to shipping out the order) of not more than 2 weeks, and estimate the average value of safety stock held after the implementation of the strategy for the following two cases: Case 1. The weekly demand of each product is normally distributed. Case 2. The weekly demand of each product is normally distributed except that of Product 1029. 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 ($/kg) Lead time required for producing feedstock from raw material (weeks) 1mm Sheet 450 2 3mm Plate 350 2 6mm Plate 250 2 100mm Bar 150 2 Feedstock Products (Materials) Unit product value ($/kg) Yield from feedstock to product (%) 80 Lead time from feedstock to product (weeks) 2 1mm Sheet 1001 800 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 2 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 2 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 0 20 0 0 0 17 0 1002 20 56 179 41 204 560 143 276 287 584 1003 263 576 812 617 969 359 909 572 321 1004 68 611 167 803 377 404 1,263 0 1,917 0 0 0 0 0 5 0 2 1005 1006 1007 101 0 0 0 0 0 0 0 0 146 32 129 414 117 486 1008 191 690 321 101 191 8 581 263 686 98 26 176 246 1009 0 122 614 275 422 360 177 0 45 1010 1011 54 1,079 8 102 1,215 32 183 1,188 618 54 290 17 92 849 1,020 432 126 1,590 8 119 1,017 450 1012 90 228 1,100 6 0 0 0 0 O 0 35 752 12 770 0 174 1013 1014 1015 1016 1017 0 0 0 0 375 0 3 0 0 51 54 0 18 27 33 6 12 33 0 0 558 12 0 41 1018 8 0 0 230 0 0 1019 woo 0 0 0 0 11 0 44 0 3 0 0 0 35 0 0 1020 1021 6 0 0 0 8 0 0 0 1022 27 33 0 0 0 0 0 mooob 99 14 0 0 0 0 1023 1024 1025 15 0 24 0 0 15 0 o o 45 0 0 0 0 0 1026 12 0 0 0 0 0 105 1027 0 0 0 0 1028 0 189 48 293 93 0 174 452 1029 0 366 538 495 409 323 0 538 18 1030 0 57 0 0 17 0 1031 0 15 0 0 0 12 6 1032 14 0 12 1033 0 0 20 0 1034 0 0 57 0 1035 0 0 1036 23 1037 0 0 0 33 Question 1 Recommend an appropriate inventory management strategy for the Alloy #1 products to meet a target service level of 95% with order fulfilment time (the time lapsed from receiving an order to shipping out the order) of not more than 2 weeks, and estimate the average value of safety stock held after the implementation of the strategy for the following two cases: Case 1. The weekly demand of each product is normally distributed. Case 2. The weekly demand of each product is normally distributed except that of Product 1029