University of Pretoria

Department of Industrial and Systems Engineering

Industrial Logistics BLK 320

Lecturer: Prof. Wilna Bean
Total marks: 42 marks

Test answers
2 1. (a)

r s
2RA 2(32 000)(750)
Qb = = X ≈ 355 unitsX
VW (1900)(0.2)

3 (b) What is the total annual cost of the company at the basic economic order quantity? Show
all your calculations. We calculate t as:
Qb 355
t = 360 = 360 = 4.00X
R 32 000

Total cost for basic order quantity (Less than volume order quanitity):

1 R tm
C b = Qb V W + A + Qb V Y + HR
2 Qb t
1 32 000 2
= (355)(1900)(0.2) + 750 + (355)(1 900)(0.15) + 4.5(20)(32 000)X
2 355 4.00
= R 3 065 722X

2 (c) What is the total annual cost of the company the volume rate order quantity? Show all your
calculations. We calculate tv as:
Qv 400
tv = 360 = 360 = 4.50.
R 32 000

Total cost for volume order quantity:

1 R tn
C v = Qv V W + A + Qv V Y + LR
2 Qv tv
1 32 000 2
= (400)(1900)(0.2) + 750 + (400)(1 900)(0.15) + 4.5(0.8)(20)(32 000)X
2 400 4.50
= R 2 490 667X

1 (d) Should the company accept the offer of the transportation service provider? Why? Yes, it is a
good idea from a financial perspective. They will save R 575 055 in transportation, inventory
and ordering cost per year if they set their order quantity to 400 units. X

Semester test 2 - Memo 1 of 4 © 2023 University of Pretoria

2 2.
r
n2
X2 = (X1 )
n1
r
5
= (50 000)
2
= 31 623 units in totalX

31 623
This means that 2 = 15 811 units should be kept in inventory per DC X.

2 3. (a) There are many possible answers to this question. They can relate to cost reductions, im-
proved visibility (and reduced inventory duplication), improved customer satisfaction, im-
proved agility, etc.
(Any two points that are correct, properly explained and properly motivated.X × 2)

2 (b) There are many possible answers to this question. They can relate to cost reduction, improved
service delivery, reduced lead times, improved resilience, enhanced market reach, ability to
focus on core competencies, etc.
(Any two points that are correct, properly explained and properly motivated.X × 2)

5 4. The ABC classification is summarised in the table below:

1
(Award X 2 per product calculation and classification)

Semester test 2 - Memo 2 of 4 © 2023 University of Pretoria

2 5. (a)

lines filled 3
line fill rate = 100 = X = 42.9%X
lines ordered 7

2 (b)

items filled 28 300

item fill rate = 100 = X = 89.3%X
items ordered 31 700

4 6. Minimise travel time Sequence picking to allow for only one trip, use batch picking (multiple
orders), use zone picking (limited area), etc. to help reduce travel time. This will reduce non-
value adding processes and related costs and improve picking efficiency because of reduced
non-value adding time.
Maximise picking time Reduce or eliminate paperwork (voice or light directed picking) Keep
similar items together. Tools and equipment must be available when needed. This will
ensure that pickers are spending as much time as possible picking, reducing non-value adding
time/activities which improves picking efficiency.
Facilitate accurate order picking Use clean well-lighted areas for picking, clearly identify pick
locations with labels that can be read from a distance, etc. For example: Poka-Yoke. This
will reduce the number of picking errors and improve overall picking accuracy and efficiency.
Use materials handling equipment Use carousels, and automated storage and retrieval so-
lutions, conveyor lines from storage to picking stations to shipping and for replenishment
of picking areas. Use goods-to-person systems where applicable. This will reduce non-value
added activities of pickers walking around and searching for products which will enhance
efficiency because non-value adding time is reduced.
Minimise idle time Plan inventory slotting to reduce congestion, maintain adequate inventory
levels in pick slots, develop and enforce time standards for picking, etc. This will reduce
non-value added activities of pickers waiting from pick-slot replenishments and will improve
efficiency because idle time of pickers is reduced..
(Any two of the picking principles that is correct, explained and properly motivated.XX ×2)

5 7. (a) Cash flow lost = Backorder cost + Lost sale cost + Backorder invoice deduction
At 88% fill rate:
Cash flow lost = (0.12)(0.75)(15000)(250 + 700 + 650) + (0.12)(0.25)(15000)(40)(1300)
+ (0.12)(0.75)(15000)(1100)X = 27 045 000X
At 92% fill rate:
Cash flow lost = (0.08)(0.75)(15000)(250 + 700 + 650) + (0.08)(0.25)(15000)(40)(1300)
+ (0.08)(0.75)(15000)(1100)X = 18 030 000X

Financial benefit is a R 27 045 000 - R 18 030 000 = R 9 015 000 reduction in cash flow
lost.X
2 (b) Yes, from a financial perspective the investment of R 4.5 million is justified Xas R 9 015 000,
can be saved in cash-flow lost per year with the increased order fill rate. The investment will
therefore be recovered quickly.X

Semester test 2 - Memo 3 of 4 © 2023 University of Pretoria

2 8. (a) A critical transportation management issue is modal choice as it affects how quickly and
efficiently products will flow across portions of the supply chain. Choosing among the six
modal options is a function of modal capabilities, product characteristics, and modal cost
and even though all modes provide the same basic service of moving freight from point to
point in the supply chain, different modes serve different customer requirements and goods
in terms of value, tonnage, and ton-miles. The reason for the different uses is that each
mode has unique attributes and capabilities that impact its ability to serve specific customer
requirements at the best possible cost. That is why choosing the most appropriate mode is
extremely important.
(Any answer that is correct, logical and properly motivated.XX)
1 1
2 (b) i. Ocean transportation X 2 on a Ro-Ro vessel X 2 → The vehicles must be transported
over a long distance of ocean. Vehicles are large and heavy goods, making it less suitable
1
for air transportation, therefore ocean transportation is most suitable.X 2 A Roll-On
Roll-Off vessel is most often used to transport vehicles on the ocean as the vehicles can
1
drive onto the vessel’s deck at the origin and off the vessel’s deck at the destination. X 2
1 1
2 ii. Road transportation X 2 in refrigerated trucks X 2 → Secondary distribution to the var-
ious pharmacies requires an accessible and reliable transportation mode, therefore road
1
transportation would be best.X 2 Since it is cold chain pharmaceuticals being transported,
1
refrigerated trucks will be required.X 2
1 1
2 iii. Rail transportation X 2 in bulk linehaul carriers X 2 → Coal is a low-value bulk item that
should be transported by rail (or conveyor) as rail is best for low value high volume items
1
X 2 . Bulk linehaul carriers are typically used to transport coal between major markets
1
and customers X 2 .

Semester test 2 - Memo 4 of 4 © 2023 University of Pretoria