TENG 343 Project3 (10% of total grade) Mareh 21, 2006 Project is due on Thursday, April 13, 2005. Late projects are deducted 5% per day. Project Purpose: To apply and demonstrate student understanding of material taught in IENG 343. Project Format/Directions: a Type each question on the page you are putting the answer on. Use new sheet for each major questions. Include table of contents with all pages numbered including all attachments. Refer to page number of tables or spreadsheets that are referenced so I can find the numbers quickly. _A7 Explain everything and show a sample calculation of each item asked. “#7 Explanations are NOT to be out of the book. Put the explanations applicable to your own company + Make assumptions and create any necessary data required to solve the problems. _s~ Spreadsheet examples are attached All of the finished products (A, B, C) are part of your inventory as Finished Goods. _-*~ Assume your company works one shift/day, 5 days/week and works 48 weeks/year. _#™ Assume you work the whole year at full capacity. Capacity is 2005 demand/48. _*~ Use part number’s as a reference on everything when you refer to a part. 1 Enclose any necessary corrections to project 1 and 2 in the appendix. (5 points) A. List, explain & reference corrections that you made to Project 1 and 2 that will affect Project 3. B. Enclose complete product structures (LANDSCAPE) for finished products. C. Year 2006 forecast of sales in units for each final product, Show MONTHLY and yearly forecast. D. Items that must be included in the appendix include all data needed for project 3. Fixed costs, forecasted monthly and yearly demand for 2006, company competitive strategy, etc. Establish an average inventory value at the beginning of the year (January 1, 2006): (10 points) A. Establish an inventory of your component parts and final products. Show all parts in an inventory spreadsheet. See inventory spreadsheet example attached. B. List the quantities of each component part required at the next level on the inventory spreadsheet. C. Establish beginning balances of stock quantity for each inventory item for December 31, 2005. Use 2005 sales numbers. Show stock in units on the inventory spreadsheet. Denote the unit of measure (piece, ounce, pound, gallon, etc.) Note: you must have a beginning stock for all of your items. Each item in stock should be at least 20% of your usage for that part in a 4-month period based on year 2005, actual sales. Use at least 3-4 different values (like 20%, 25%, 30%, 40% BUT DO NOT exceed 40%). D. Avg lin Value is calculated as the number of parts(units) in stock on Dec 31multiplied by the unit cost (for each part in inventory. Anventory Analysis: (10 points) ‘A. Doan “ABC Analysis” using ALL of your inventory items for your company. Use the "Dollar Annual Usage” method. Assign each part (with justification) the A, B, C identification. Use a spreadsheet. Show percentage of total dollar value and the percentage of number of part numbers that make up the A, B, and C classifications. B. Setup a cycle counting schedule for your company for the whole year for all parts. This schedule (spreadsheet) should show the months that you will count and actual part numbers you will cycle count in that month. Use the A, B, C classification assignment found in problem 4.4 above. C. For two of your inventory items, choose two different alternate methods (chapter 12 study guide) to assign the (A, B, C) classification and justify your reason for using the method you chose. DO NOT use any form of annual usage type methodology. Also, do not use these new assignments as part of your cyele count schedule above D. Explain in detail why you need cycle counting and explain how this would be done im Your Company,4 Purchasing problems: (12 points) ‘A. Choose one of your purchased component parts with a high yearly volume. Create two vendors competing to become a partner with your company. Prepare a “Vendor Evaluation Form” and evaluate both vendors as a potential supplier of that particular purchased part. (Chapter 11 handout) Do the rating and decide which vendor you will choose, Explain vour choice as it relates to your company and your stated competitive strategy. Restate your competitive strategy and explain why you chose ‘that strategy. B. Doa benchmark of your company and pick 3 measures (Chapter 11 in textbook or the “GTE Baseline Study” handout). Compare your measurements (made up) to those of your competition or a major ‘competitor (not similar firms). Explain how your company would use this benchmarking process for identifying problems and what will your company plan to do to make improvements. C. Choose both backward and forward vertical integration and give an example as to how this could be accomplished for your company. Explain. Note: for any company that does not have a partner you only need to pick one — either backward or forward. D. Forthe following two terms (postponement or channel assembly), demonstrate how you would implement these in relation to your suppliers, your company, or your customers. Make up examples with detail to show your understanding of the terms. Note: for any company that does not have a partner you only need to pick one postponement or channel assembly. E. For the following two terms (drop shipping or blanket order)and demonstrate using your company, your suppliers, or your customers for these terms. Make up companies, customers, info. etc. that you need to demonstrate, Note: for any company that does not have a partner you only need to pick one — drop shipping or blanket order. 5, Establish other related costs, rates, and measurements: (10 points) . Purchased item ordering cost (S): Calculate and define your order costs for purchased items and include at least three sub costs. Tell me how you would go about calculating the sub-costs. Assign ‘costs to each sub-group per order. (Example: you have one full time person that does all the purchasing in your company. He spends 4 hours per day doing this. He makes $20/hour including fringes. You estimate that you place 10 purchase orders per Week. So the purchasing (buyer) labor component part would be (4 hours) * (5 days) * ($20) = $400. You would then divide that by 10 orders per week and get $40 per purchase order — for this one sub-group. Do this same activity for a minimum of three other associated costs (in chapter 12 study guide). Note: you only need one purchase ordering cost forall of ‘your purchased parts because they are all the same (S) Purchased parts are all equal. B. Manufactured item ordering cost (S): Choose one of your manufactured component parts and calculate and define your order cost for that part. Include at least four sub-costs. Use a part that is in the bill of material for one of vour finished part with increasing sales (part A). Explain how you would go about calculating the sub-costs. Assign costs to each sub-group for your identified one manufactured part. One of the sub-groups must be set-up cost. Explain how you would get the cost to set up for the manufacture of that chosen manufactured part in your company. Assign (made up) a setup cost and the total ordering cost for all other manufactured items for bilf of material for all your finished partAs,. Note: Each manufactured item would get an individual ordering cost. (Need a spreadsheet). C. Inventory carrying cost rate: Calculate the inventory carrying cost rate for your company. Establish your yearly costs for carrying the inventory. Note: you must show the breakdown of these costs (toreroom costs, etc.) and all assumptions and/or reasons for coming up with the costs or rates used. ‘You must have a minimum of four sub-costs to make up your final total inventory carrying costs. Define and explain how you attive at individual costs that are part of the total costs of carrying inventory. Use this “inventory carrying cost rate number” and your average inventory value at the end of December 2005 to calculate the inventory earrying cost rate (k) for your company. Use actual cast figures developed and NOT percentages. D. Calculate your inventory turns for 2005. Cost of Sales (COS) equals the total of the unit costs for your finished products for all of your 2005 annual sales. E. Calculate a Return on Investment for 2005. [Revenue — Fixed costs ~ COS = Income]. Note: (for simplification) the investment will be your annual average inventory. ROI= Incomefinvestment. For extra credit, you can add other values and explain as a part of the investment.6 Production Planning: (5 points) Must include all final products. ‘The required format is Figure 14.2 in chapter 14. To simplify: use your anticipated weekly capacity to caleulate your production plan for the week. Your anticipated production by product is your 2006 ‘forecasted sales divided by 48 weeks for the year. Use these numbers throughout this project. ‘A. Prepare an Aggregate Production Plan for the first 6 months of year 2006. B. Prepare a Master Production Schedule for the first 6 months of year 2006 in weekly time buckets. 7. Inventory problems: (10 points) Use parts that are in the bill of material for your finished part A’s. Each partner must do this problem. A. Caleulate an EOQ for one of your purchased parts related to each partner’s product A. Explain why ‘you chose that particular part to do an EOQ on it. Does it fall into the required criteria? B. Caleulate a Produetion Order Quantity like example 8 (Chapter 12) for one of your manufactured pars from your product A. Note: the daily production rate must be greater than the daily demand rate. Explain all numbers and method. C. Calculate an Reorder Point (ROP) for one of your component parts (other than the one you chose in part A above). Explain why you chose that part to doa ROP. D. For the same component in part (C) above, establish a safety stock quantity to be added to the ROP. Explain why you chose a certain % service level (based on your company) to calculate your safety stock. (To get a bonus, tie the safety stock together with some data to do an actual MAD calculation). E, Demonstrate for the purchase part that you did an EOQ for (in part A above), the quantity discount problem for a new quantity rounded at 3 or 4 times the calculated EOQ. The supplier will give you 45% discount in the price to you if you buy in lot sizes equal to the new quantity. NOTE: The new quantity MUST NOT be more that a year’s supply. If tis, then pick another purchased part to do this problem with or lower the new order lots (Q) to meet the annual criteria. Do the problem in detail. Calculate total costs (carrying cost, ordering cost, and purchase price). Tell me the savings or loss and whether your company will take the quantity discount. Use the numbers from your unit cost, carrying cost rate, ordering cost, etc. that were established earlier in this project. MRP Problems: (20 points) Note: each partner must do this problem for their Part A. Put name on spreadsheets. Make sure all spreadsheets are in landscape mode and that all headings show on all pages. A, Doa Time-Phased Product Structure as shown in figure 14.4 on page 557 of the textbook for the final product with the most Bill of Material levels. Product A. B. DoaNet Material Requirements Plan for your final product identified in part A above. (the final product (A) that has the most component parts). (As per Chapter 14 handout). Use the MPS from problem 6 to drive the MRP. Assume a LOT SIZE (order size) to be LOT for LOT for all but two component parts for this exercise. Use format attached. C. You may change your on-hand stock values to minimize the number of orders needed. Note: You may (if necessary) use two different numbers, that is, one set of numbers to calculate an inventory valuation and another set of stock numbers to demonstrate the MRP problem. Hint: This would help ‘you greatly to simplify the MRP problem. You can add beginning stock greater than the 20% levels for the MRP problem so that you won’t need very many orders. Will save you time! D. You must show at least one planned order for every part in the BOM (Bill of Material). E. Note: You will need to add the requirements from the Master Production Schedule for your replacement component part to any requirements generated from the parent part when you do the MRP for that part. This is the hardest part of the Project, Make sure that you explain this clearly. F. One of your component parts must be a FOQ (fixed order quantity) and one of your component parts must be a FPQ (fixed period quantity). Make sure you identify the fixed period and accurately demonstrate this lot-sizing technique, ‘Kenton ColvinvIENG 343 Project 3pring 2006 q 8 PARTNERSHIPS: Note: each partner is required to do problem 8, & 9 Please identify name at top of each page related to these few problems.