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: Feedstock 1mm Sheet 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. 3mm Plate 6mm Plate Raw material 100mm Bar Unit value ($/kg) 450 350 Feedstock 250 150 Lead time required for producing feedstock from raw material (weeks) 2 2 Products 2 2 Feedstock 1mm Sheet 3mm Plate 6mm Plate 100mm Bar Products (Materials) 1001 1002 1003 1011 1023 1032 1004 1008 1009 1010 1018 1019 1021 1027 1033 1035 1006 1007 1012 1013 1022 1024 1036 1037 1005 1014 1015 1016 1017 1020 1025 1026 1028 1034 1030 1031 1029 Unit product value ($/kg) 800 800 800 800 800 800 700 700 700 700 700 700 700 700 700 700 600 600 600 600 600 600 600 600 600 600 600 600 600 600 600 600 600 600 600 600 450 Yield from feedstock to product (%) 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 90 Lead time from feedstock to product (weeks) 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Product 1001 1002 1003 1004 1005 1006 1007 1008 1009 1010 1011 1012 1013 1,100 1014 1015 1016 1017 1018 1019 1020 1021 1022 1023 1024 1025 1026 1027 1028 1029 1030 1031 1032 1033 Jan 1034 1035 1036 1037 171 20 263 68 0 101 321 0 0 618 228 6 3 0 8 0 44 0 0 0 15 45 12 0 0 323 0000000 Feb 56 576 611 0 146 101 122 54 1,079 8 oo od o oooom 12 27 99 0 0 0 105 189 000 Mar 0 287 584 Jun 204 B6 617 969 167 1,917 803 III!! 117 129 486 8 422 45 1,020 432 0 0 0 6 12 0 1,263 32 191 614 102 1,215 32 Too.0000 33 | 14 24 Sales Kgs per month May Apr 366 20 179 812 275 183 1,188 90 770 0 51 8 18 48 57 15 14 0 0 0 0 0 0 0 . 0 293 538 20 57 414 23 98 360 54 290 17 35 752 0 54 558 230 o o N O O 0 0 00 0 oo. 93 538 18 0 12 2 Jul 0 560 572 321 5 0 581 263 686 126 1,590 8 00 0 0 375 33 0 0 0 35 0 0 0 0 0 495 12 Aug 17 143 359 377 0 26 176 246 92 849 0 0 0 0 27 0 41 11 0 15 409 17 Sep 0 276 909 404 2 0 191 690 177 119 1,017 450 174 33 12 174 452 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. Question 2 Suppose that the yield from 1mm feedstock to the 6 products follows the probability distribution below. Yield from 1mm feedstock to product (%) 50 60 70 80 90 Probability 0.10 0.05 0.65 0.15 0.05 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.