Webmba 6100 Final Exam Spring 2018 Directions
Webmba 6100 Final Exam Spring 2018 Directions
This is an individual assignment. Show your work for Part I, either handwritten and scanned or typed. Answer parts II and III in essay format using a word processor, including any scanned diagrams. Complete the extra credit question if desired, showing all work. Turn in one document with all answers. Parts I and IV will be graded based on correctness; essays will be graded on relevance, organization, and language.
Part I involves inventory management for a steel fabricator using a fixed quantity model, including calculations for EOQ, re-order point, cycle length, and safety stock based on demand variability and lead time.
Part II offers a choice between establishing a new prototype manufacturing facility with decisions on process, location, scheduling, and quality, or analyzing the competitive priorities and operations differences between Rolex and Timex, considering structural and infrastructural aspects.
Part III requires developing a recovery plan for a small custom cabinet business after data loss, contrasting planning and control systems in simple versus complex manufacturing, and proposing a suitable new system.
Extra credit questions include evaluating a secondary supplier and its impact on inventory, safety stock, and quality costs.
Paper For Above instruction
Introduction
Efficient inventory management, strategic operations decisions, and robust recovery planning are critical components in manufacturing and supply chain management. The complexities of managing materials, particularly in manufacturing settings, necessitate understanding models such as Economic Order Quantity (EOQ), safety stock calculation, and reorder points. Similarly, setting up a new manufacturing facility or recovering from operational setbacks requires a thoughtful analysis of structural and infrastructural decisions, which align with overarching competitive priorities. This paper addresses these themes by analyzing inventory management strategies for a steel fabricator, exploring operations decisions for a new prototype production facility, and proposing a comprehensive recovery plan for a small cabinet-making business after data loss.
Part I: Inventory Management for Steel Fabricator
The steel fabricator purchases steel sheets of 12" x 12" size, with each sheet weighing 0.9792 pounds at a cost of $8.00, and orders are placed with a cost of $100 per order. The annual demand is 5,000 sheets, with a weekly demand of 96 sheets (calculated as 5,000 sheets / 50 weeks). The lead time for an order is 1 week, and demand variability has a standard deviation of 50 sheets per week, with a desired service level of 75%.
a. Optimal Order Quantity (EOQ)
The EOQ formula is:
EOQ = sqrt((2 D S) / H)
where D = annual demand (5,000 sheets), S = ordering cost ($100), H = holding cost per unit per year.
First, determine H. The cost of steel per sheet is: $8.00, so per pound it is:
Price per pound = $8.00 / 0.9792 ≈ $8.17
Annual holding cost per square foot:
20% of the price per square foot. Since each sheet is 1 sq ft, H = 0.20 * $8.17 ≈ $1.63 per sheet per year.
Calculating EOQ:
EOQ = sqrt((2 5000 100) / 1.63) ≈ sqrt(1,000,000 / 1.63) ≈ sqrt(613,495) ≈ 783 sheets
Thus, the optimal order quantity is approximately 783 sheets.
b. Re-order Point (ROP)
ROP considers demand during lead time and safety stock:
ROP = demand during lead time + safety stock
Demand during lead time (one week): 96 sheets
Safety stock calculation:
Safety stock (SS) = z * σL
where z for 75% service level ≈ 0.674, σL = standard deviation of demand during lead time, calculated as:
σL = σ weekly demand sqrt(lead time) = 50 sqrt(1) = 50 sheets
Thus, SS = 0.674 * 50 ≈ 33.7 sheets
Re-order point:
ROP = 96 + 33.7 ≈ 130 sheets
c. Average Cycle Length
The cycle length in weeks is:
Cycle length = EOQ / weekly demand = 783 / 96 ≈ 8.15 weeksd. Fixed Interval Replenishment (10 Weeks)
In a fixed interval system with 10-week cycles:
- Average demand over 10 weeks = 96 * 10 = 960 sheets
- Safety stock based on demand variability over 10 weeks:
SS = z σ over interval = 0.674 50 sqrt(10) ≈ 0.674 50 * 3.16 ≈ 106 sheets- Stocking level at the beginning of interval: demand over 10 weeks + safety stock ≈ 960 + 106 ≈ 1066 sheets.
Part II: Strategic Decisions for a Prototype Manufacturing Facility
Option A: Establishing a New Prototype Facility
The primary order-winning criterion for the facility is agility and quality suited for small-volume custom prototypes and scalable to mass production for the US Olympic team. The order qualifying criteria include timely delivery, cost competitiveness, flexibility, and high-quality standards.
Structural decisions encompass process choices favoring flexibility, such as a job shop layout with modular equipment that can adapt to various designs. Location should be strategic—preferably near the target markets or an innovation hub to facilitate rapid response and access to skilled labor.
The capacity should be designed for small batch runs initially, with room for scaling production. A layout emphasizing workflow modularity will enhance flexibility, while capacity planning must incorporate buffer stocks for rapid responsiveness.
Infrastructural decisions should focus on master scheduling with a push system initially, transitioning to pull methods (like Kanban) as demand stabilizes, fostering lean operations. Material planning should align with Just-in-Time principles to reduce inventory holding, and quality control must be rigorous, including inline inspection and real-time feedback. Workforce management should emphasize cross-trained personnel, fostering multi-skill capabilities for versatility.
These decisions support a strategy characterized by flexibility and speed, prioritized over cost, to meet the demanding requirements of prototype and Olympic uniform production.
Option B: Rolex and Timex — Competitive Priorities and Operations
Rolex exemplifies a focus on quality and prestige, emphasizing meticulous craftsmanship, timeless design, and exclusivity. Its operational priorities center on high-quality standards, precision, and reliability, which require extensive infrastructural investments in skilled labor, specialized machinery, and strict quality control. Structural decisions include a highly automated,advanced manufacturing process tailored toward batch processing of luxury watches, and distribution strategies that preserve exclusivity.
Timex leans toward affordability, durability, and timeliness. Its operations emphasize low cost and flexibility, enabling quick response to market trends through mass production techniques. The manufacturing setup favors a repetitive process with standardized components, minimal customization, and efficient assembly lines. Infrastructure investments are focused on high automation and integrated supply chains to reduce costs and improve lead times. Both firms, however, maintain core infrastructural elements like quality assurance, but the emphasis varies depending on their strategic priorities.
In conclusion, Rolex’s strategic focus on luxury and quality results in a highly controlled, specialized operational environment, while Timex emphasizes operational efficiency, low cost, and flexibility, leading to distinct structural and infrastructural decisions aligned with their market positioning.
Part III: Recovery Plan for a Small Custom Cabinet Business
The destruction of operational records imposes an infrastructural problem—lack of essential planning and control data—rather than a structural problem involving physical assets or layout. The focus shifts to establishing resilient, manageable processes to regain control and ensure quality.
The first step involves assessing the current capacity, inventories, and customer orders to develop a makeshift plan. Transitioning from a push scheduling system to a pull-based, Kanban-driven approach minimizes excess inventory and improves responsiveness. Incorporating Material Requirements Planning (MRP) will help synchronize procurement and production, especially if custom orders dominate, aligning with make-to-order strategies, which are suitable for custom cabinetry and reduce inventory costs.
In simple manufacturing environments, batch processes and local priority rules are typical, whereas complex environments utilize job shop or repetitive processes with detailed scheduling—highlighted in diagrams illustrating push versus pull systems. In this context, a hybrid system combining Kanban and MRP can optimize workflow, ensuring timely deliveries while maintaining flexibility.
The new system will focus on establishing a clear, integrated schedule using digital tools, ensuring traceability and real-time adjustment capabilities. Training staff on lean principles and implementing standardized work procedures will improve quality and efficiency, critical for a small-scale but custom-focused business.
Conclusion
The recovery plan emphasizes creating an adaptable, transparent operational system—shifting from a fragile, data-dependent infrastructure to a resilient, lean process-driven framework—that better supports small-scale customization and customer satisfaction.
References
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