NMIMS - Supply Chain Management

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NMIMS

Master of Business Administration - MBA Semester 4

Supply Chain Management

Q1. Vashi pharmaceuticals, Inc., handles a variety of health products. A weight reduction product costs the company $2.95 per unit. The annual holding cost rate is 20 percent. Using an EOQ model, they determined that an order quantity of 300 units should be used.

The lead time to receive an order is one week, and the demand is normally distributed with a mean of 150 units per week and a standard deviation of 40 units per week. The ordering cost per order is determined as $50. Calculate cycle stock and safety stock point if the firm is willing to tolerate a 1% chance (Z0.99 = 2.32) of a stockout during an order cycle. Also calculate the total cost of inventory. (10 Marks)

Answer.

Q2. An auto parts supplier sells branded batteries to the auto mechanics. The annual demand is approximately 3,600 batteries. The supplier pays $28 for each battery and estimates that the annual holding cost is 25% of the battery’s value. It costs approximately $20 to place an order (ordering cost). The supplier currently orders 300 batteries per month.

a. Determine the ordering, holding, and total inventory costs for the current order quantity.

b. Determine the economic order quantity (EOQ).

c. How many orders should be placed per year using the EOQ?

d. Determine the ordering, holding, and total inventory costs for the EOQ. (10 Marks)

Answer.

Q3. a. Calculate Forecasting error (MAD, MSE, RMSE and MAPE) for the data given below

Period 1 2 3 4 5 6 7 8

Forecast 10 15 10 15 25 15 20 25

Demand 15 15 20 15 10 20 20 30

(5 Marks)

Answer.

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