INDUSTRIAL MANAGEMENT ENGINEERING SOCIETY

FACPLAD REVIEWER for Quiz 3

I. Dedicated storage is to be used for three product classes (Nuts, Bolts, and Screws). Storage demands
occur randomly and independent. Inventory levels are distributed continuously and uniformly over the
following ranges:
Product Range
Nuts (20, 40)
Bolts (10, 50)
Screws (50, 90)

a. Formulate the mathematical model that minimizes the probability of shortage of storage space.
Assume that there are 150 slots available.
Decision Variable:

Objective Function:

Constraints:

b. Suppose that each storage space costs $20 per day and each space shortage costs $40. Assuming
daily inventory levels, how much is the daily expected cost if the number of allocated slots 30 for
Nuts, 50 for Bolts, and 80 for Screws.
(Please set-up the equation)

Total expected cost:

 INDUSTRIAL MANAGEMENT ENGINEERING SOCIETY
FACPLAD REVIEWER for Quiz 3
II. Consider a storage problem involving dedicated storage of four products: A, B, C, and D. Demand and
replenishments for the products occur randomly and independently. Hence inventory levels per week are
statistically independent random variables, with the following distributions:
Inventory Level
A B C D
(thousand of bushels)
5 0.20 - - 0.3
10 0.25 0.2 - 0.1
15 - 0.3 0.2 0.2
20 0.25 0.4 0.3 -
25 0.20 0.1 0.3 0.3
30 0.10 - 0.2 0.1

a. Determine the minimum number of storage positions having a probability no greater than 0.40 of
a storage space shortage.
A B C D Total
Q*

Actual Service Level

b. Determine the allocation of 85 storage positions among the four products that will minimize the
probability of a space shortage.
A B C D Total
Q*

Service Level

c. Assume that the demand for storage space follows normal distribution and dedicated storage
system is used. Determine the minimum number of storage positions for each product. The
average demand for storage space and variances are shown in the table.
Product Mean Variance Service Level
A 30 12 0.96
B 20 9 0.90
C 25 10 0.95
D 15 5 0.98
Compute for the total storage positions needed. What is the probability that there will be no
shortage of space for first two weeks in a five-week period?
A B C D Total
z-value

Q*

Service Level
 INDUSTRIAL MANAGEMENT ENGINEERING SOCIETY
FACPLAD REVIEWER for Quiz 3

Probability

d. Assume that a randomized system is used and demand for storage space follows a normal
distribution. Use the appropriate data presented in the previous question. The company is aiming
for 98% service level. How many storage positions must be provided? What is percentage
decrease in space requirement (compare to c)? What is the probability that in a 5-week period
there will be two weeks without shortage of space?
Mean demand for space Standard deviation for space z-value

Q* Percentage decrease Probability

e. Assume that a randomized system is used and demand for storage space follows a poisson
distribution. The mean demand for storage space for each product is as follows: 4, 3, 5, and 2
units per week, respectively. How many storage positions must be provided if the occurrence of
shortage of space is no greater than 3%. DO NOT use the normal distribution to approximate
poisson distribution.
No. of storage positions

f. Suppose that is cost $250 to construct one unit of storage position. Also, it costs $50 per week
per storage position short and it costs $10 per week to utilize a storage position. Find the optimal
number of storage positions for each product that minimizes total expected cost for 10 weeks.
Hint: Treat each product independently.

Critical Ratio

A B C D Total
Q*

Expected cost

III. Suppose that a shared storage is to be used in a situation involving three products: apples (A), bananas
(B), and cantaloupes (C). The beginning inventories of each are as follows: 3 apples, 3 bananas, and 2
cantaloupes. The retrieval rate is one pallet load per day for each product. Each product will be
replenished if the ending inventory for a day is 1 unit and it will be received at the start of the next day.
The order quantity of apples, bananas, and cantaloupes are 3 pallet loads, 2 pallet loads, and 1 pallet
load, respectively.
a. Fill out the table below to show the ending inventory for seven days.
 INDUSTRIAL MANAGEMENT ENGINEERING SOCIETY
FACPLAD REVIEWER for Quiz 3
End of day A B C Aggregate
1
2
3
4
5
6
7

b. Fill out the table below to show the movement of inventory for each storage slot. What is the
average percentage utilization of the storage system for seven-day period using ending inventory
as the basis?
End of 1 2 3 4 5 6 7 8
day
0 A A A B B B C C
1
2
3
4
5
6
7

c. How many storage slots per product are needed if dedicated storage is used?
d. How many storage slots are needed if randomized storage is used?
e. What is the percentage decrease?
IV. Consider a warehouse of dimension 120 f. x 160 ft. having a single dock (I/O) located at the lower left
corner of the warehouse. Randomized storage is to be used. Find the storage layout for the storage space
requirement of 7,000 and 16,000 square feet. Assume that item movement is equally likely to occur
between the dock and any point in the storage region. Travel is rectilinear. Construct contour lines by
creating horizontal and vertical lines of varying lengths from the I/O point (located at the southwest
corner of the warehouse).

120

160
 INDUSTRIAL MANAGEMENT ENGINEERING SOCIETY
FACPLAD REVIEWER for Quiz 3

Polygon Area (Equation) Limits (of k)

3-sides

4-sides

5-sides

Value of k
Area
3-sides 4-sides 5-sides Conclusion
7,000 sq. ft.
16,000 sq. ft.

V. Consider a storage rack layout shown in the figure below. A lift truck travels along the aisle, stops, and
raises and lowers its forks to store and retrieve unit loads of the products at the indicated (*) locations.
The time required to travel between the I/O points (*) and storage/retrieval locations (*) are proportional
to their distances.
7 8 9 10 11 12 13 14
* * * * * * * *
1 2 3 4 5 6
I/O * * * * * * I/O2
1
I/O3

The travel time is dependent on the distance to be travelled. Each slot has a dimension of 6 feet (length,
→) x 5 feet (width, ↑). Forty percent of all requests are being received at I/O2. Percentage request being
received at I/O1 is 10% more than to I/O3.
Assuming five products (A, B, C, D, E) will be stored in the storage rack and the respective number of
storages and retrievals to be performed per day are 35, 30, 25, 15, and 20. The number of storage
positions required for each product be as follows: 5, 3, 2, 2, and 2 slots. Find an optical assignment of
location for each product and the minimum expected distance traveled per day. What is the expected
distance traveled if product A will be assigned in locations 1 to 5, product B in locations 6, 13, and 14,
product C in locations 7 to 8, product D in locations 9 to 10 and product E in locations 11 to 12?
I/O1 I/O2 I/O3
0.4

Slot 1 2 3 4 5 6 7
Expected
Travel
Time
Slot 8 9 10 11 12 13 14
Expected
 INDUSTRIAL MANAGEMENT ENGINEERING SOCIETY
FACPLAD REVIEWER for Quiz 3
Travel
Time

7 8 9 10 11 12 13 14

1 2 3 4 5 6

Expected distance to be traveled (optimal): Expected distance to be traveled:

 INDUSTRIAL MANAGEMENT ENGINEERING SOCIETY
FACPLAD REVIEWER for Quiz 3
Answers

I. a.
Decision Variable:

( ) ( ) (

Objective Function:

(∫ )(∫ )(∫ )

Constraints:

b.
(Please set-up the equation)
[∫ ( ) ∫ ] ∫ ( )( )

[∫ ( ) ∫ ] ∫ ( )( )

[∫ ( ) ∫ ] ∫ ( )( )

Total expected cost:

2675

II.
a.
A B C D Total
Q* 25 20 30 25 100
Actual Service Level 0.7290

b.
A B C D Total
Q* 25 20 25 15 85
Service Level 0.3888
 INDUSTRIAL MANAGEMENT ENGINEERING SOCIETY
FACPLAD REVIEWER for Quiz 3
c.
A B C D Total
z-value 1.75 1.28 1.645 2.05 -
Q* 37 24 31 20 112
Service Level 0.8044
Probability 0.0048

d.
Mean demand for space Standard deviation for space z-value
90 6 2.05
Q* Percentage decrease Probability
103 8.04% 7.6832 x 10-5

e. 21 storage positions
f. C.R. = 0.625
A B C D Total
Q* 10 15 20 10 55
Expected cost 7150 6650 8650 7100 29,550

III.
a.
End of day A B C Aggregate
1 2 2 1 5
2 1 1 1 3
3 3 2 1 6
4 2 1 1 4
5 1 2 1 4
6 3 1 1 5
7 2 2 1 5

b.
End of 1 2 3 4 5 6 7 8
day
0 A A A B B B C C
1 - A A - B B - C
2 - - A - - B - C
3 A A A - B B - C
4 - A A - - B - C
5 - - A - B B - C
6 A A A - - B - C
7 - A A - B B - C

c. A = 3, B = 2, C = 1
d. 6
e. 0%
 INDUSTRIAL MANAGEMENT ENGINEERING SOCIETY
FACPLAD REVIEWER for Quiz 3
IV.
Polygon Area (Equation) Limits (of k)
3-sides

4-sides

( )
5-sides

Value of k
Area
3-sides 4-sides 5-sides Conclusion
7,000 sq. ft. 118.32 118.33 123.80 3-sides
16,000 sq. ft. 178.86 193.33 200 5-sides

V.
I/O1 I/O2 I/O3
0.35 0.4 0.25

Slot 1 2 3 4 5 6 7
Expected
Travel 18 16.2 14.4 14.1 15.3 16.8 26.9
Time
Slot 8 9 10 11 12 13 14
Expected
Travel 23 21.2 19.4 19.1 20.3 21.5 25.1
Time

7 8 9 10 11 12 13 14
A A A D E D A A
1 2 3 4 5 6
E B C C B B

Expected distance to be traveled (optimal): Expected distance to be traveled:

2328.9 2499.25