INSTITUTE OF BUSINESS MANAGEMENT

Second Hourly Examinations – spring 2020

Course Title: Quantitative Method in Production & Logistics Course Code: SCM601W1-5521
Faculty: Waqas Mahmood Section:
Day / Date: Saturday/ 18th April, 2020 Timings: 2:00pm – 3:30pm
Student’s Name: Muhammad Hamza Ijaz Total Marks: 15
Student ID: 20202-27041
Note: Attempt all questions. All questions

Case Study Analysis:

EOQ-based Inventory Control Policies for Perishable Items:

The Case of Blood Plasma Inventory Management
Q1. Explain the background of the case which must includes background information, relevant facts, and
the most important issues. Demonstrate that you have researched the problems in this case study. (3
Marks)
Answer: An inventory control management system is understudy to keep the blood plasma demand
fulfilled by developing a system of its supply so as to monitor and keep it under control. The most factor
is the deterioration of plasma with the passage of time and this factor places a constraint on the
inventory volume whilst the demand is stochastic and transient.
Economic Order Quantity model is used for inventory management. In this case there are two methods
of analyzing the data. One is continuous monitoring and the second one is periodic monitoring.
Continuous monitoring is attributed with high cost but less system risk and vice versa is true for periodic
monitoring.
Continuous review policy is the policy where inventory is monitored real time and orders are placed
when inventory level reaches the reorder point.
However, for the periodic review policy, the inventory position is checked at fixed intervals only, and
orders are placed based on the current position.
Three cases are demonstrated in this application:
1. The first case, demand is a random variable, but lead time is constant.
2. The second case deals with constant demand and random lead time.
3. The last one both demand and lead time are random variables.

By calculating the possible safety stock level and associated total inventory costs the degree of risks for
each policy could be determined.
Numerical assumptions include data distributions of demand and lead time for the random cases.
1) Demand and lead time are presented in weeks.
2) The blood donors come to donate when they receive the blood shortage advertisement.
3) Both continuous review policy and periodic review policy are developed under service levels of 90%,
which means that in 90% cases there is no shortage based on the adopted policy.
4) Inventory monitoring investment, including purchasing software or hiring labor, does not include the
inventory setup cost or inventory holding cost, and it is an independent cost type within the total cost.
5) The total inventory cost is calculated by the modified equation: Total annual inventory cost = annual
setup cost + annual holding cost + annual safety stock holding cost +annual monitor cost.

The setup cost is used to pay the advertisement of blood shortage cost. The holding cost is used to pay
 all the blood plasma holding related cost. The annual safety stock holding cost is used to consider the
safety stock. The monitoring cost, which is regarded as an independent cost, is used to pay for the labor
or purchasing monitoring software and related facilities.

Model assumptions made in our model are categorized in two groups:

1. Structural (logic) assumptions
2. Numerical (data) assumptions.

Structural assumptions:
1. Consider demand per week and lead time by week.
2. Sufficient blood donor supply when facing shortage
3. Inventory monitor investment includes purchasing monitoring software and hiring the required
labor
4. Total inventory annual cost = annual setup cost + annual holding cost + annual safety stock holding
cost +annual monitoring cost
Numerical Assumptions:
1. 20 minutes of thawing from frozen conditions
2. 90% service level

Q2. Outline the various pieces of the case study that you are focusing on. Evaluate these pieces by
discussing what is working and what is not working. (4 Marks)
Answer: In general, continuous review policy is better than periodic review policy. If the budget is over the
total cost of the continuous review policy, we will select it. If the budget is lower, lower than the
total cost of continuous review policy but over the periodic review policy, we will select lower cost
one.

Variable Demand and Constant Lead Time

Continuous Review Policy vs. Periodic Review Policy

Budget for Continuous Review Policy is greater than equal to 5871,

Budget for Periodic Review Policy is less than equal to 5871 and is greater than equal 5486
Since Periodic Review Policy is greater than equal to 5871 (Closer to budget)

Variable Lead Time and Constant Demand

Continuous Review Policy vs. Periodic Review Policy
Budget for Continuous Review Policy is greater than equal to 6056,
Budget for Periodic Review Policy is less than equal to 6056 and is greater than equal 5843
Since Periodic Review Policy is greater than equal to 5843 (Closer to budget)

Variable Lead Time and Variable Demand

Continuous Review Policy vs. Periodic Review Policy
Budget for Continuous Review Policy is greater than equal to 6065,
Budget for Periodic Review Policy is less than equal to 6065 and is greater than equal 5859
Since Periodic Review Policy is greater than equal to 5859 (Closer to budget)
Q3. A) If there will be shortages of blood plasma, what are the contingency scenarios? (2 Marks)
Answer: : Blood plasma the executives gets expanding worries as it is straightforwardly identified
with sparing lives, as a lack could prompt high hazard for generally speaking medicinal services the
board. Blood plasma stock is difficult to control in light of the fact that accessible givers and patients
change stochastically, and blood plasma is transient. Satisfactory degrees of plasma should be
gathered

B) How are donors encouraged to donate? (2 Marks)

Answer: Contributors are urged to give red platelets, entire blood and platelets
 by giving gratefulness endorsements
 Need of this honorable purpose by open
LIFESAVING POSITIVES (B+ can give red platelets to other B+ and AB+ beneficiaries).
POSITIVE RECEIVER (Those with B+ can just get red platelets from B or O blood classifications.
THE POWER OF POSITIVITY (Since different kinds of B+ gifts are helpful, gifts are significant

Q4. A) Provide specific and realistic solution(s) or changes needed. Explain why this solution was chosen.
(2 Marks)
Answer: The paper presents a scientific stochastic model for transitory open-dating nourishments
including deficiency and outdating costs. The interest changes have been considered demonstrating
them through a typical conveyance, and their effect on the capacity time has been contemplated
thinking about the stochastic idea of such a parameter thus. The evaluation of died items has been
additionally tended to, deciding the likelihood for a result of staying in stock past the finish of its Shelf
Life. Based on such premises, the ideal arrangement of parameters that limit the absolute unit cost has
been resolved. A numerical application and a sensitivity analysis show the practical applicability of the
proposed model in the context of warehouse management, underlining managerial insights

B) Determine and discuss specific strategies for accomplishing the proposed solution. (2 Marks)

Answer: The strategies are

 Planning of intermittent observing strategy for brief timeframe interims