Xavier Institute of Management Prof. S.K. Bishwal Bhubaneswar Supply Chain Management End Term Examination 19" Dec 2014 PGDM II Time: 2 hrs Equal weitage for each question THIS IS AN OPEN BOOK EXAMINATION. YOU CAN BRING IN PRESCRIBED TEXT BOOK & YOUR CLASS NOTE. NO OTHER MATERIAL IS ALLOWED. NOT ALLOWED TO USE LAP TOP: ZC A distributor is positioned in the supply channel between his customers and suppliers. He knows that the customers maintain inventory that should be taken into account in planning his own inventory levels. In the spirit of cooperation, the customers share their end demand data with the distributor. Fora particular item supplied by the distributor to three customers in his territory, the monthly demand for an item priced at the customer at Rs1600 per unit is as follows ‘Customer ] Avg. demand, Units/Month. | Demand Std. Dev., | _ | — Units/Month. 2 a so {2 883 sae oA ons B 276 8 [ The item is valued a little less at the distributor (Rs1400 per unit ). Inventory-carrying cost is, estimated at 20 percent per year at both echelons, Order-placement cost for the customers is s2300 per order. The distributor can supply the customers within two weeks, but it takes vendors four weeks to fill the distributor's replenishment orders. Customers set their in-stock probability during the order cycle at 95 percent, whereas the distributor uses 90 percent. Both ‘echelons uso the reorder point method of inventory control. The distributor places orders on the vendor for 2,000 units to realize a purchase discount. How much average inventory of this item should the distributor stock if no inventory is assumed to be in transit to customers?2, Motorola obtains cell phones from its contract manufacturer located in China to serve the US market. The US. market is served from a warehouse located in Memphis, Tennessee. Daily demand at the Memphis warehouse is normally distributed, with a mean of 5,000 and a standard deviation of 4,000. The warehouse aims for a CSL of 99 percent. The company is debating whether to use sea or air transportation from China. Sea transportation results in a lead time of 36 days and costs Rs23 per phone. Air transportation results ina lead time of 4 days and costs Rs70 per phone, Each phone costs Rs4500, and Motorola uses a holding cost of 20, percent. Given the minimum lot sizes, Motorola would order 100,000 phones at a time (on average, once every 20 days) if using sea transport and §,000 phones at a time (on average, daily) if using air transport. Motorola takes ownership of the inventory on delivery at manufacturing point in China Do you recommended sea or air transportation? Justify 3. Two plants (P) are to serve three market (M) points through one or two warehouses, as shown in Figure 13-16. Volume flowing cither to or from cach Point, and the associated transportation rates, are given as follows. Point Volume | Transportation Rate No __Vittons) _| R:(Rs./tons/mile.) I |__5,000. 24 2 17.000: 24 5 3,500. 6 4 3,000 6 5 5.500 6 Using the center-of-gravity method, find the approximate location for a Single warehouse. Figure 13-16 Location of Plants and Markets with Grid Overiay 1234867890 Horizontal grid coordinates. x Sea:4, The manager at Goodstone Tires, a distributor of tires in Illinois, uses a continuous review policy to manage inventory. The Manager currently orders 10.000 tires when inventory of tires drops to 6,000. Weekly demand for tires is normally distributed, with a mean of 2,000 and a standard deviation of 500. The replenishment lead time for tires is two weeks, Each tire costs Goodstone Rs. 40, and the company sells each tire for Rs, 80. Goodstone incurs a holding cost of 25 percent. How much safety inventory does Goodstone currently carry? At what cost of under stocking is the manager's current inventory poliey justified? How much safety inventory should Goodstone carry if the cost of under stocking, is Rs. 80 per tire?