SUPPLY CHAIN ANALYSIS AND

DESIGN
Semester 1, 2023
Individual Case Study

Full Name: Nguyen Ngoc Trinh

ID’s Number: S3895069
Location RMIT Saigon South Campus
ID’s Course: OMGT2277
Course Name Supply Chain Analysis and Design
Lecturer’s Name: Kha kieu Manh
Word count: No word limits

“I declare that in submitting all work for this assessment I have read, understood
and agree to the content and expectations of the Assessment declaration’
Q1 (2 marks)

The EOQ display a optimal order quantity that minimize the total cost and meet the demand in terms
of ordering and holding inventory (source).
The question given some indicator:
Ordering cost (OC): $504
Holding cost (HC) of one unit of product in a year: $3
Annual rate of demand : 10,000 products
•Optimal order quantity (Q*)

EOQ=
√ 2(annualunit demand)(oder cost per purc h ase )
h olding cost per unit
=
√2∗10000∗504
3
=1833 units

•Total cost
Quantity order annualunit demand 1833 10000
Total cost = ∗¿holding cost + *order cost = ∗3+ ∗504 = $5,499
2 qu a ntity order 2 1833

•Frequency of orders
Number of order per year: total demand/quantity of order =10000/1833=5.45= 5 times

•Time between orders

365 365
Time between orders = = =73 days
number of order per year 5
Q2 (5 marks)

Mathematical model – Apply interger linear programming

Holding cost unit of one product i n a year 3 1

 Cost of holding inventory per month = = =
12 12 4
 Decision variables

{
y i= 1 if place order belong monthi ¿ 0 otherwise ¿
¿ }
X i = Number of product order in month i
 Objective function
12
Minimize ∑ 504 y i+ 41 ¿+11 X 2 +10 X 3 +¿…+1 X 1 2)
i=1

i = (1,2,3,4…,12)
 Constraints
Integrity:
y i= 0 or 1 for all i
X i  0 and integer
Demand:
i i

∑ X i ∑ Di
i=1 i=1

i = (1,2,3,4,…,12)
X i =number of product order
y i = Demand
Linking constraints
X i  M y i <=> X i - M y i  0

Based on the result in excel solver file, we will got the minimum total cost. Place order with supplier
in month 1,3,5,8 and 11 of the period. The quanity of supply is enought to meet the demand of at
least 1 month after. Especially, in the fist month, the bussiness order 1000 product that will meet the
demand for month 1 and 2 with 300 and 700 peoduct, respectively. Next in the second month, the order
will be 1700 units so that it meet the demand for month 3rd ∧4th . The in next order, the order
will be 4100, hence that also meet the demand for month 5th , 6 th, 7th and so on.

Number of
Deman product
Table 1: Demand and number of product order
Month d order
According to the table 1, there 1 300 1000 are 5 times order product in this y
2 700 0
month with the quantity of 1000,1700,4100,1400 and 1800, r
3 800 1700
4 900 0
5 3300
beginnin 4100
6 200
g 0
ending average
Deman Order 7 Holdin 600 0
inventor inventor inventor
Month d cost 8 g cost 900
y 1400
y y
1 300 504 9 0.25 200 1000 0 700 850
2 700 504 10 0.25 300 700 0 0 350
3 800 504 11 0.25 1000 1700 1800900 1300
4 900 504 12 0.25 800 900 0 0 450
5 3300 504 0.25 4100 800 2450
6 200 504 0.25 800 600 700
7 600 504 0.25 600 0 300
8 900 504 0.25 1400 500 950
9 200 504 0.25 500 300 400
10 300 504 0.25 300 0 150
11 1000 504 0.25 1800 800 1300
12 800 504 0.25 800 0 400
4600 9600

Table 2: Beginning inventory, ending and average inventory

Average inventory = Beginning inventory + ending inventory

Acoording to the table 2, The minimum cost will be $3,670 by holding cost is apply ending inventory
1
Minimum cost = ∑ 504∗5+ ∗4 6 00=$ 3,670
4
However, holding cost is applied average inventory, the minimum cost will be
1
Minimum cost = ∑ 504∗5+ ∗9600=$ 4,920
4
 Q3 :Use ‘Lot for Lot’ heuristic method and compute the total cost.
Lot for lot use the exact shortage quanitity that match the net requirement for each period, lot for lot
solution suggest to order the same quantity demand in each month, hence we eill order 12 times
(Nasir et.al 2022)

Average
inventor
Month Demand y
1 300 150
2 700 350
3 800 400
4 900 450
5 3300 1650
6 200 100
7 600 300
8 900 450
9 200 100
10 300 150
11 1000 500
12 800 400
5000
Table 3: Demand and average inventory
Average inventory = Demand/ 2
Total cost = ordering cost* (time of order )+ Holding cost * total average inventory
= 504*12+1/4*5000 = $7,298

Q4: Use “Part Period Balancing”

Nunber of
order
computatio Average inventory Holdin
alternatives
n g cost place order
Q=300
(month 1) 300/2=150 37.5  
Since $300 is
1 closer to $504 =>
Q=1000 place order
(month 1,2) (1000+700)/2=1200 300 Q=1000
Q=1800 1800+1500)/2+(1500+800)/2+(800/2)= 800  
 (month 1,2, 3) 3200
Q=800 (month 3) 800/2= 400 100  
Since $437.5 is
closer to $504 =>
2 Q=1700 place order
(month 3,4) (1700+900)/2+900/2=1750 437.5 Q=1700
Q=5000 (5000+4200)/2+(4200+3300)/
(month 3,4,5) 2+(3300/2)=10000 2500  
Q= 3300
(month 5) (3300/2)= 1560 0.75  
Since $487.5 is
closer to $504 =>
3
Q=3500 place order
(month 5,6) (3500+200)/2+(200/2)= 1950 487.5 Q=3500
Q=4100
(month 5,6,7) (4100+800)/2 +(800+600)/2+(600/2)=3450 862.5  
Q=600
(month 7) 600/2= 300 75  
Q=1500
(month 7,8) (1500+900)/2+(900/2)=1650 412.5  
4
Since $537.5 is
closer to $504 =>
Q=1700 place order
(month 7,8,9) (1700+1100)/2+(1100+200)/2+200/2=2150 537.5 Q=1700
Q=300
(month 10) 300/2= 150 37.5  
Since $412.5 is
closer to $504 =>
5
Q=1300 place order
(month 10,11) (1300+1000)/2+(1000/2)= 1650 412.5 Q=1300
Q=2100
(month 10,11,12) (2100+1800)/2+(1800+800)/2+800/2= 3650 912.5  
 Since only month
12 remains =>
6 Q=800 order same
(month 12) 800/2= 400 100 quality Q=800
     

Apply part period balancing , we will place order in 6 times. In month 1,3,5,7,10,12 with the quantity
1000,3500,1700,1300 and 800 respectively.
Total cost = Ordering cost +holding cost = 504*6+ (300+437.5+487.5+537.5+412.5+100)= $5.299
Q5 Silver meal

Silver – meal heuristic determine the average cost per period to span or stop computation that meet the
requirement of operations at minimum cost (Buana 2022)

Nunber of Order
Average Holding ordering Total cost Total cost
computatio alternative
inventory($) cost ($) cost ($) ($) per periood
n s
$ $ $ $
Q=300 150 37.5 504 541.5 $ 541.5
$ $
1 $ 300.0
Q=1000 $ 1,200 504 804.0 $ 402.0
$ $
$ 800.0
Q=1800 $ 3,200 504 1,304.0 $ 434.67
Since the minimum total cost per period to cover the demand of month 1,2 => place oder Q= 1000
$ $ $
$ 100.0
Q=800 400 504 604.0 $ 604.0
$ $
2 $ 437.5
Q=1700 $ 1,750 504 941.5 $ 470.75
$ $
$ 2,500.0
Q=5000 $ 10,000 504 3,004.0 $ 1,001.33
Since the minimum total cost per period to cover the demand of month 3,4 => place oder Q= 1700
$ $
$ 412.5
Q= 3300 $ 1,650 504 916.5 $ 916.5
$ $
3 $ 487.5
Q=3500 $ 1,950 504 991.5 $ 495.75
$ $
$ 862.5
Q=4100 $ 3,450 504 1,366.5 $ 455.50
$ $
  $ 1,650.0
Q=5000 $ 6,600 504 2,154.0 $ 538.50
Since the minimum total cost per period to cover the demand of month 5,6,7=> place oder Q= 4100
$ $ $
$ 112.5
Q=900 450 504 616.5 $ 616.5
$ $ $
4 $ 187.5
Q=1100 750 504 691.5 $ 345.75
$ $
$ 375.0
Q=1400 $ 1,500 504 879.0 $ 293.00
$ $
  $ 1,250.0
Q=2400 $ 5,000 504 1,754.0 $ 438.50
Since the minimum total cost per period to cover the demand of month 8,9,10=> place oder Q= 1400
$ $ $
$ 125.0
Q=1000 500 504 629.0 $ 629.00
$ $
$ 425.0
5 Q=1800 $ 1,700 504 929.0 $ 464.50
 
Since the minimum total cost per period to cover the
demand of month 11,12=> place oder Q= 1800 
  
 

To compute the holding cost, we will check the caring cost that excess ordercost so stop the computation
Apply silver meal, there are 5 times place order. In month 1,3,5,8,11with the quantity of 1000,1700,4100,
1400, and 1800 respectively

Total cost =(804+941.5+1366.5+879+929)= 4,920

Q6 (3 marks)

Wagner-Whitin Algorithm.

F(t) is the minimum cost of demand satisfactions in period 1 by t

St * is the best period, where to start the production run for satisfying demand for period t

 t = 0 : F(0) = 0
 t = 1 : F(1) = OC = 504 => S1 * = 1
 t = 2 : F(2) = Min {[F(0) + A+ HC(1,2) ], [F(1)+A+ HC(2,2 ) ]}
= Min {[0 + 504 + 0.25 × 700], [504 + 504 ]
= Min {679, 1008} => S2 * = 1
 t = 3 : F(3) = Min {[F(0) + A+ HC(1,3) ], [F(1)+A+ HC(2,3) ], [F(2)+A+ HC(3,3 ) ]

= Min {[0+504+0.25*(1500+800)], [504+504+(800)*0.25], [679+504+0]}

= Min {1079, 1208, 1183-> => S3 * = 1

 t = 4 : F(4) = Min {[F(0) + A+ HC(1,4) ], [F(1)+A+ HC(2,4 ) ], [F(2)+A+ HC(3,4 ) ], [F(3)+A+

HC(4,4) ]}
= Min {[0+504+0.25*(2400+1700+900)], [504+504+(1700+900)* 0.25],
[679+504+(900)*0.25],[1079+504+0]}
= Min {1754, 1658, 1408, 1583}=> S4 * = 3

 t = 5 : F(5) = Min {[F(0) + A+ HC(1,5) ], [F(1)+A+ HC(2,5) ], [F(2)+A+ HC(3,5 ) ], [F(3)+A+

HC(4,5 ) ],[F(4)+A+ HC(5,5 ) ]}
= Min {[0+504+0.25*(5700+5000+4200+3300)],[504+504+(5000+4200+3300)*0.25]
[679+504+(4200+3300)*0.25],[1079+504+(3300)*0.25],[1408+504+0}

= Min {5054, 4133, 3058, 2444, 1912} => S5 * = 5

 t = 6 : F(6) = Min {[F(0) + A+ HC(1,6) ],[F(1)+A+ HC(2,6 ) ],[F(2)+A+ HC(3,6 ) ], [F(3)+A+

HC(4,6 ) ],[F(4)+A+ HC(5,6 ) ] ],[F(5)+A+ HC(6,6 ) ]}
= Min {[0+504+0.25*(5900+5200+4400+3500+200)], [504+504+(5200+4400+3500+200)* 0.25],
[679+504+(4400+3500+200)*0.25], [1079+504+(3500+200)*0.25], [1408+504+200*0.25],
[1912+504+0]}
= Min {5304, 4333, 3208, 2508, 1962, 2416} => S6 * = 5

 t = 7 : F(7) = Min {[F(0) + A+ HC(1,7) ], [F(1)+A+ HC(2,7 ) ],[F(2)+A+ HC(3,7 ) ], [F(3)+A+

HC(4,7 ) ], [F(4)+A+ HC(5,7 ) ], [F(5)+A+ HC(6,7 ) ],[F(6)+A+ HC(7,7 ) ]}
= Min {[0+504+0.25*(6500+5800+5000+4100+800+600)],
[504+504+(5800+5000+4100+800+600)*0.25], [679+504+(5000+4100+800+600)*0.25],
[1079+504+(4100+800+600)*0.25],
[1408+504+(800+600)*0.25], [1912+504+(600)*0.25], [1962+504+0]}
= Min {6204, 5083, 3808, 2958, 2262, 2566, 2466} => S7 * = 5

 t = 8 : F(8) = Min {[F(0) + A+ HC(1,8) ],[F(1)+A+ HC(2,8 ) ],[F(2)+A+ HC(3,8 ) ], [F(3)+A+

HC(4,8 ) ], [F(4)+A+ HC(5,8 ) ], [F(5)+A+ HC(6,8 ) ], [F(6)+A+ HC(7,8 ) ], [F(7)+A+ HC(8,8 ) ]}
= Min {[0+504+0.25*(7400+6700+5900+5000+1700+1500+900)],
[504+504+(6700+5900+5000+1700+1500+900)*0.25], [679+504+(5900+5000+1700+1500+900)*0.25],
[1079+504+(5000+1700+1500+900)*0.25], [1408+504+(1700+1500+900)*0.25],
[1912+504+(1500+900)*0.25], [1962+504+(900)*0.25], [2262+504+0]}
= Min {7779, 6433, 4933, 3858, 2937, 3016, 2691, 2766} => S8 * = 5

 t = 9 : F(9) = Min {[F(0) + A+ HC(1,9) ], [F(1)+A+ HC(2,9 ) ], [F(2)+A+ HC(3,9 ) ], [F(3)+A+

HC(4,9 ) ], [F(4)+A+ HC(5,9 ) ], [F(5)+A+ HC(6,9 ) ], [F(6)+A+ HC(7,9 ) ], [F(7)+A+ HC(8,9 ) ],
[F(8)+A+ HC(9,9 ) ]}
= Min {[0+504+0.25*(7600+6900+6100+5200+1900+1700+1100+200)],
[504+504+0.25*(6900+6100+5200+1900+1700+1100+200)],
[679+504+(6100+5200+1900+1700+1100+200)*0.25],
[1079+504+(5200+1900+1700+1100+200)*0.25], [1408+504+(1900+1700+1100+200)*0.25],
[1912+504+(1700+1100+200)*0.25], [1962+504+(1100+200)*0.25], [2262+504+200*0.25],
[2691+504+0]}
= Min {8179,6783, 5233, 4108, 3137, 3166, 2791, 2816, 3195} => S9* = 7

 t = 10 : F(10) = Min {[F(0) + A+ HC(1,10) ], [F(1)+A+ HC(2,10) ], [F(2)+A+ HC(3,10) ],

[F(3)+A+ HC(4,10 ) ], [F(4)+A+ HC(5,10) ], [F(5)+A+ HC(6,10) ], [F(6)+A+ HC(7,10) ],
[F(7)+A+ HC(8,10 ) ], [F(8)+A+ HC(9,10 ) ],[F(9)+A+ HC(10,10) ]}
= Min {[0+504+0.25*(7900+7200+6400+5500+2200+2000+1400+500+300)],
[504+504+(7200+6400+5500+2200+2000+1400+500+300)*0.25],
[679+504+(6400+5500+2200+2000+1400+500+300)*0.25],
[1079+504+(5500+2200+2000+1400+500+300)*0.25],
[1408+504+(2200+2000+1400+500+300)*0.25],
[1912+504+(2000+1400+500+300)*0.25], [1962+504+(1400+500+300)*0.25],
[2262+504+(500+300)*0.25], [2691+504+(300)*0.25], [2791+504+0]}
= Min {8854, 7383, 5758, 4558, 3512, 3466, 3016, 2966, 3270, 3295}=> S10* = 8

 t = 11 : F(11) = Min {[F(0) + A+ HC(1,11) ], [F(1)+A+ HC(2,11) ], [F(2)+A+ HC(3,11) ],

[F(3)+A+ HC(4,11) ], [F(4)+A+ HC(5,11) ],[F(5)+A+ HC(6,11) ], [F(6)+A+ HC(7,11) ], [F(7)+A+
HC(8,11) ], [F(8)+A+ HC(9,11) ], [F(9)+A+ HC(10,11) ], [F(10)+A+ HC(11,11) ]}
= Min {[0+504+0.25*(8900+8200+7400+6500+3200+3000+2400+1500+1300+1000)],
[504+504+(8200+7400+6500+3200+3000+2400+1500+1300+1000)*0.25],
[679+504+(7400+6500+3200+3000+2400+1500+1300+1000)*0.25],
[1079+504+(6500+3200+3000+2400+1500+1300+1000)*0.25],
[1408+504+(3200+3000+2400+1500+1300+1000)*0.25],
[1912+504+(3000+2400+1500+1300+1000)*0.25], [1962+504+(2400+1500+1300+1000)*0.25],
[2262+504+(1500+1300+1000)*0.25], [2691+504+(1300+1000)*0.25], [2791+504+(1000)*0.25],
[2966+504+0]}
= Min {11354, 9633, 7758, 6308, 5012, 4716, 4016, 3716, 3770, 3545, 3470}
=> S11* = 11

 t = 12 : F(12) = Min {[F(0) + A+ HC(1,12) ], [F(1)+A+ HC(2,12) ], [F(2)+A+ HC(3,12) ],

[F(3)+A+ HC(4,12 ) ], [F(4)+A+ HC(5,12) ], [F(5)+A+ HC(6,12) ], [F(6)+A+ HC(7,12) ],
[F(7)+A+ HC(8,12) ], [F(8)+A+ HC(9,12) ], [F(9)+A+ HC(10,12) ], [F(10)+A+ HC(11,12) ],
[F(11)+A+ HC(12,12) }
= Min {[0+504+0.25*(9700+9000+8200+7300+4000+3800+3200+2300+2100+1800+800)],
[504+504+(9000+8200+7300+4000+3800+3200+2300+2100+1800+800)*0.25]
[679+504+(8200+7300+4000+3800+3200+2300+2100+1800+800)*0.25],
[1079+504+(7300+4000+3800+3200+2300+2100+1800+800)*0.25],
[1408+504+(4000+3800+3200+2300+2100+1800+800)*0.25],
[1912+504+(3800+3200+2300+2100+1800+800)*0.25],
[1962+504+(3200+2300+2100+1800+800)*0.25], [2262+504+(2300+2100+1800+800)*0.25],
[2691+504+(2100+1800+800)*0.25], [2791+504+(1800+800)*0.25],
[2966+504+(800)*0.25], [2712+504+0]}
= Min {13554, 11633, 9558, 7908, 6412, 5916, 5016, 4516, 4370, 3945, 3670, 3974} => S12* = 11

average
inventor
Month Demand y
1 300 850
2 700 350
3 800 1300
4 900 450
5 3300 2450
 6 200 700
7 600 300
8 900 950
9 200 400
10 300 150
11 1000 1300
12 800 400

Period 1 = 1650+ 1150+400= 3200

Period 2= 450
Period 3 =2450+700+300=3450
Period 4 =650+100= 750
Period 5= 150
Period 6= 1300+400= 1700
Total cost = 6*504 +0.25* (3200+450+3450+750+150+1700) = $5,449

Summary

Method Number of Months that an Total Total Total Cost

Orders Orders are Holdin Ordering
Placed g Costs Cost
students
EOQ 6 Every 73 days $2749 $2749 $5499.0908

=> place order

MILP based on Ending 5 1; 3; 5; 8; 11 $1150 $2520 $3670

Inventory
MILP based on Average 6 1; 3; 5; 7; 8; 11 $2400 $2520 $4920
Inventory
Lot for Lot heuristic 12 One each month 0 $6048 $6048

Part Period Balancing heuristic 6 1; 3; 5; 7; 10; $2275 $3024 $5299

12

Silver Meal heuristic 5 1; 3; 5; 8; 11 $2400 $2520 $4920

Wagner-Whitin Algorithm 6 1; 4; 5; 8;10; $2025 $3024 $5449

11
References
Martin & Nasir 2022 ‘Optimal operation of energy hubs including parking lots for hydrogen vehicles and
responsive demands’ Journal of journey shortage, vol 50, doi: 10.1016/j.est.2022.104630
Pedro 2021 ‘The economic lot-sizing problem with remanufacturing and heterogeneous returns:
formulations, analysis and algorithms,
International Journal of Production Research, doi: 10.1080/00207543.2021.1925771
Buana 2022, Glucose Supply Control Using Silver Meal Heuristic Method at PT. XM Sidoarjo, journal of
applied industrial engginering, doi: 10.36456/tibuana.5.2.5940.135-140