Supply Chain Analytics

Week 4, 2020

1. If value of smoothing constant (alpha) is taken as 1, what is the meaning of it?

(a) No fluctuations of current period are considered.
(b) Complete fluctuations of current period are considered.
(c) Some fluctuations of current period are considered.
(d) None of the above

2. Which of the following is most appropriate?

(a) Values of three smoothing constant α, β, γ must be same in a particular model.
(b) Values of three smoothing constant α, β, γ must be different in particular model.
(c) Value of at least one of the smoothing constant out of three smoothing constants α, β, γ
should be zero.
(d) None of the above.

3. In case of value addition from stage 1 to stage 2 in a supply chain, the respective holding cost
are h1 and h2, then:
a) h1 < h2
b) h1 > h2
c) Both a and b
d) None of the above

4. Demand of spare parts at an OEM is 15,000 units per annum. The upstream vendor is
responsible to supply this item. Whenever order is placed, OEM incurs a cost of Rs600. The unit
price of each item is Rs200. OEM incurs holding cost of material @ Rs25 per unit per annum.
What should be the number of units in each order to minimize the cost associated with
inventory?
(a) 849
(b) 223
(c) 2450
(d) None of the above

5. Demand of spare parts at an OEM is 15,000 units per annum. The upstream vendor is
responsible to supply this item. Whenever order is placed, OEM incurs a cost of Rs600. The unit
price of each item is Rs200. OEM incurs holding cost of material @ Rs25 per unit per annum. If
each order is placed for minimizing the overall inventory cost, what is the annual cost of
ordering?
(a) Rs10,000
(b) Rs 10601
(c) Rs 22421
(d) Rs 2041
6. Demand of spare parts at an OEM is 12,000 units per annum. The upstream vendor is
responsible to supply this item. Whenever order is placed, OEM incurs a cost of Rs550. The unit
price of each item is Rs200. OEM incurs holding cost of material @ Rs24 per unit per annum.
What can be lowest possible inventory cost?
(a) Rs17799
(b) Rs7072
(c) Rs22421
(d) Rs20000

7. If Q1 = n Q2, (where Q1 is quantity ordered at installation 1 while Q2 is quantity ordered at installation

2) and ‘n’ is an integer value then it defines:

a) The procurement cycle at stage 1 will differ in its timing with the procurement cycle at stage 2.
b) The procurement cycle at stage 1 will match in its timing with the procurement cycle at stage 2.
c) Both a and b
d) None of the above

8. Increase in holding cost has:

a) No effect on order size
b) Decrease order size
c) Increase order size
d) None of the above

9. In a supply chain as shown in following figure, set up cost at installation 1 is Rs 5000 and holding cost
is Rs2, setup cost at installation 2 is Rs500 and holding cost is Rs5. The annual requirement of the given
product is 200 units at installation 2. If Q1 = n Q2, what can be the possible value of n? ( Q1 is quantity
ordered at installation 1 while Q2 is quantity ordered at installation 2.)

Installation Installation 2
1

(a) 0.5
(b) 1
(c) >1
(d) Between 0 to 1.

10. In a supply chain as shown in following figure, set up cost at installation 1 is Rs 5000 and holding cost
is Rs2, setup cost at installation 2 is Rs500 and holding cost is Rs5. The annual requirement of the given
product is 200 units at installation 2. If Q1 = n Q2, what can be the possible value of n? ( Q1 is quantity
ordered at installation 1 while Q2 is quantity ordered at installation 2.)

Installation Installation 2
1
(a) 1
(b) 3
(c) 8
(d) 5

1. B 2.D 3.A 4.A 5.B 6.A 7.B 8.B 9.C 10.B

Solution:

4 :
(A) 849

D = 15,000 per year

Cp = Rs. 600 per order
CH = Rs 25 per unit per year

EOQ = √(2*(15,000)*600)/(25) = 849

5:
(B) = Rs 10601

D = 15,000 per year

As determined in question 4, EOQ is 849. Therefore, number of order per year is 15000/849.

Therefore annual cost of ordering is 600 X (15000/849) = 10601.

6:
(A) 17799

D = 12,000 per year

Cp = Rs. 550 per order
CH = Rs 24 per unit per year

Minimum Inventory Cost = √2 (𝐷)( 𝐶𝑝)( 𝐶ℎ) = √2 𝑥 12,000 𝑥 550 𝑥 24 = 17799

9. (c)

K1 = Rs 5000 h1 = Rs2, Therefore, e1 = Rs2

K2 = Rs500 h2 = Rs5. Therefore, e2 = h2 – h1 = Rs3

K1/ e1 = 2500, k2/e2 = 166

Since k1/e1 > k2/e2, value of n > 1.

10 (b)

𝐾 𝑒 5000 𝑥 3
n = √ 𝐾1 𝑒 2 = √ 500 𝑥 2 = √15 = 3.87
2 1