Solved example – 9

Problem 1: LO 19-2 (Page 606 of the text book)

Problem 2: Solved problem LO 19-2 (Page 607 of the text book)

Problem 3: For a shoe manufacturer following is the demand forecast for the next six periods:

Period 1 2 3 4 5 6 Total
Forecast 4000 4000 6000 8000 10000 4000 36000

If the shoes are produced during regular time, it costs INR 400 to produce a pair of shoes.
However, the costs of producing shoes during overtime and through subcontracting are INR
600 and INR 1200 respectively. The maximum number of shoe pairs that can be made using
overtime is 1000 per period. Backorders are allowed, and it costs INR 1000 per shoe pair per
period. Cost of holding inventory per period is INR 200 per pair shoe on average inventory.
The capacity of the plant is 7000 pairs per period. Answer the following questions-

(a) What would be the production quantities in each period and total cost if the
manufacturer follows a level strategy?
(b) For chase strategy without overtime or subcontracting, create the production plan
and find total costs.
(c) If overtime and subcontracting are allowed, create the production plan for chase
strategy.
 Practice Problem – 9

Problem 1: Objective question 10 (page 611 of the textbook)

Problem 2: Objective question 11 (page 611 of the textbook)
Problem 3: For the Problem 3 of Solved example 9 (“Shoe manufacturer”), answer the following questions-

(a) Shoe produced by this manufacturer are in high demand. Moreover, a study has found that there is
a scarcity effect with shoe demand, i.e. If the shoe manufacturer maintains a backorder the future
demand (beyond period 6) would increase. Now, what should be the production plan and resulting
costs if the firm decides that they will maintain a back order of 1000 every period.
(b) For part (a), which of the three strategies analysed in solved example 9 would be the best?
(c) List down other possible mixed strategy based on the information given in this problem.
(d) Formulate a Linear Programming Problem to decide a production plan that minimizes the
total cost.
 Solved example – 10

Problem 1: LO 21-4 Solved Problem 4 (Page 697 of the text book)

Problem 2: Solved Problem 3 (Page 696 of the text book)

Problem 3: You own a bicycle manufacturing unit “Mercules Cycle”. The key components required for manufacturing a
good quality bicycle are a handlebar, a seat, a frame assembly & a pair of wheels. The lead time of all the components
is 1 week. The demand of the components & current the on-hand inventory of the components are given below -

Demand of Components Period - Wise

Period (week) 1 2 3 4
Handlebar 120 70 70 150
Seat 0 10 70 10
Frame assembly 50 80 60 120
Wheels 40 90 10 110

On hand Inventory of Components

Components On hand inv Lead time (week) Lot Size

Handlebar 150 1 LFL
Seat 100 1 LFL
Frame assembly 70 1 LFL
Wheels 120 1 LFL

a) Construct a simple & single level Bill of Material (Product structure tree)

b) Using Lot for Lot technique create MRP for all the components.
b)

Handlebar 0 1 2 3 4
Gross Requirements 120 70 70 150
On hand inventory 150 30 0 0 0
Net Requirements 0 40 70 150
Planned Receipts 0 40 70 150
Planned Order Release 40 70 150 0
 Seat 0 1 2 3 4
Gross Requirements 0 10 70 10
On hand inventory 100 100 90 20 10
Net Requirements 0 0 0 0
Planned Receipts 0 0 0 0
Planned Order Release 0 0 0 0

Frame Assembly 0 1 2 3 4
Gross Requirements 50 80 60 120
On hand inventory 70 20 0 0 0
Net Requirements 0 60 60 120
Planned Receipts 0 60 60 120
Planned Order Release 60 60 120 0

Wheels 0 1 2 3 4
Gross Requirements 40 90 10 110
On hand inventory 120 80 0 0 0
Net Requirements 0 10 10 110
Planned Receipts 0 10 10 110
Planned Order Release 10 10 110 0
 Practice Problem – 10

Problem 1: Objective question 14 (page 702 of the textbook)

Problem 2: Objective question 16 (page 703 of the textbook)

Problem 3: For the Problem 3 of Solved example 12 (“Bicycle manufacturer”), answer the following
questions –

a) Each wheel has following sub-parts: - 1-wheel rim, 14 spokes & 3 gears. The lead-time for eachof those sub-
parts is one week, two weeks and one week, respectively. The seat assembly has one cushion, one cover, one
seat frame and 6 springs. Each of the four sub-parts of seat has a lead time of one week. Remaining
components (handle and frame) have no sub-parts. Using this information construct a multi-level Bill of
Materials (Product Structure Tree). Also, create MRP if there is no on-hand inventory for any of the sub-parts.
Assume that on hand-inventory for Handlebar, Seat, Frame assembly and Wheels same as the original solved
problem.
b) If the lead-time of all the parent components are changed as shown in the following table. Whatwill be the
new planned order releases for all the items?

Components On hand inventory Lead time (week) Lot Size

Handlebar 150 2 LFL
Seat 100 1 LFL
Frame assembly 70 2 LFL
Wheels 120 1 LFL

c) If the on-hand inventory for bicycle was 100 units and demand for bicycle in each of four periodsis 80, 120, 100,
200 units, then create the MRP for bicycle, handlebar, seat, frame assembly andwheels. Assume lead-time for
bicycle manufacturing to be one week. Also, compare planned order releases of handlebar, seat, frame
assembly and wheels of this part with the original solved problem.