BBMG3014 OPERATIONS MANAGEMENT

TUTORIAL 10-SUPPLY CHAIN DESIGN

1. Last year, RJT Enterprises had average inventories (raw materials, work-in-process,
and finished goods) of $7.5 million. During this same year the cost of goods sold was
$30 million. The company operates 50 weeks per year.
a. What is their total inventory (measured as weeks of supply)?
b. What is their inventory turnover?

Weeks of supply = average aggregate inventory value/weekly sales at cost =

7.5 million/(30 million/50) = 12.5 weeks
Inventory turnover = annual sales (at cost)/average aggregate inventory value =
30 million/7.5 million = 4

2. Rome Corporation is a supplier of ball bearings. Because of the specialized

manufacturing process employed, considerable work-in-process and raw material
inventories are created. The current inventory levels are $1,500,000 and $3,775,000,
respectively. In addition, finished goods inventory is $3,500,000, and sales (at cost) for
the current year are expected to be about $28 million. Assume they operate 50 weeks
per year.
a. What is their total inventory (measured as weeks of supply)?
b. What is their inventory turnover?

a. Weeks of supply = average aggregate inventory value/weekly sales at cost =

(1,500,000 + 3,775,000 + 3,500,000)/(28,000,000/50) = 15.7 weeks
b. Inventory turnover = annual sales (at cost)/average aggregate inventory value
=
28 million/8.775 million = 3.19

3. The VP of Finance studied the printing costs at the university and knew it was time for
bold, decisive action. The annual fixed cost of printing at the school was $1,250,000 and
the per-page cost was one cent. Fortunately, his brother-in-law happened to own a
company that would lease the printers to the university for only $850,000 and charge
three cents per page. At what point would the university be indifferent between owning
their printers and leasing their printers?

Q=

Q=
Q = 20,000,000 pages
 REVISION-ESSAY

1.Explain how a firm can reduce costs while improving the performance of its supply
chain.

2. Based on an industry of your choice, analyze the strategic importance of the

industry’s supply chain design in order to achieve it’s competitive priorities.

3. Pick any manufacturing organization and describe some supply options at their
disposal.

4. To what extent do you agree that the sales and operations planning process is similar
to the forecasting process?

5. Apply your understanding of forecasting to the idea of developing a reorder point for
uncertain demand. What could be done to make a reorder point more accurate?

6. Critically evaluate the relationship between inventory and the 9 competitive priorities.

7.Will organizations ever get to the point where they will no longer need inventories?
Why or why not?