SCHOOL OF BUSINESS

INTERNATIONAL UNIVERSITY

ASSIGNMENT 2

Exercise 1
Total demand of buses : 400000/(40*300) + 840000/(40*300*2) = 68.3 buses
Work time of driver, each bus need: 300/220 = 1.37 drivers

Total demand of drivers: 1.37*68.3 = 93.57 drivers

The actual shortage of buses: 68.3 - 61*90% = 13.4 buses
The actual shortage of drivers: 93.57 – 86*85% = 20.47 drivers
Cost of adding buses:
Buy new buses: 14*110000 = $1540000
Hire the buses : 13.4*100*300 = $402000 a year
Cost of hiring buses will exceed cost of buying after: 1540000/402000 = 3.8 years
Cost of adding drivers:
Recruit extra: 21*20000 = $420000 a year
Hire daily : 20.47*110*220 = $495374 a year
The company should recruit extra drivers rather than hire daily drivers. For the shortage of buses, the
company should hire the buses when t<3.8 years and when t>3.8 years, the company should buy new
buses .
Strategy 1: level strategy

Month 1 2 3 4 5 6 Total
Forecasting demand 10000 11000 15000 18000 25000 26000 105000
Cummulative 21000+15000=3600054000+25000=79000
79000+26000=105000
10000  10000+11000=21000 36000+18000=54000 105000
forecast demand      
105000 105000 105000 105000
105000 105000
=17500 =17500 =17500 =17500
Supply rate =17500 6 6 6 6
=17500 105000
6 6
       
Cummulative
 17500 17500+17500=35000
35000+17500=52
53500+17500=70000
50070000+17500=87500
87500+17500=105000
supply
Unused supply 7500  14000  1 6 500  16000  8500  0
Shortage of supply  0 0  0  0  0  0   
Cost of unsed
15000  28000  33000  32000 17000  0   125000
supply
Cost of shortage  0 0  0  0  0  0   
Number of 17500
=250 250  250   250 250  250  
employee 70
Cost of moving ( 250−150 )∗300=30000
0  0  0  0  0  30000 
employees  
Regular-time cost  
160000   160000 160000 160000  160000 960000 
of employees 8∗20∗4∗250=160000
Total cost 205000 188000  193000 192000  177000  160000  1115000 

Strategy 2: Chase strategy

Month 1 2 3 4 5 6 Total
Forecasting demand 10000 11000 15000 18000 25000 26000 105000
Cummulative 10000   21000  36000  54000  79000  10500    
 forecast demand
Supply rate  10000 11000  15000  18000 25000  26000   
Cummulative
 11000 21000  36000  54000   79000 105000   
supply
Unused supply 0  0  0  0  0  0  0 
Shortage of supply  0  0 0  0  0  0  0 
Cost of unsed
0  0  0   0  0  0  0
supply
Cost of shortage  0 0  0  0  0  0  0 
Number of 10000 11000 15000 18000 25000 26000
=143 =157 =214 =257 =357 =371  
employee 70 70 70 70 70 70
Cost of moving ( 157−143 )∗300=4200 ( 257−214 )∗300=12900  
( 357−257 )∗300=30000
( 150−143 )∗500=3500 ( 214−157 )∗300=17100  
employees       ( 371−357 )∗300=4200
Regular-time cost  
4∗8∗20∗157=100480
4∗8∗20∗214=136960
4∗8∗20∗257=164480
4∗8∗20∗357=228480
4∗8∗20∗371=237440
 
of employees 4∗8∗20∗143=91520
Total cost 95020  104680  154060 177380   258480  241460  1031080

 Chose chase strategy because it has cheaper cost.

Exercise 3

Level: 0 - B, LT=2
    Period 1 2 3 4 5 6 7 8
Gross requirement                   50
Stock on order                    
Current stock     5 5 5 5 5 5 5 5
Net requirement                   45
Start assembly               45    
Scheduled completion                   45
                     
 Level: 1 - C, LT=1
    Period 1 2 3 4 5
6 7 8
Gross requirement               90    
Stock on order                    
Current stock     29 29 29 29 29 29    
Net requirement               61    
Start assembly             61      
Scheduled completion               61    

Level: 1,2 - D, LT=1

    Period 1 2 3 4 5 6 7 8
13
Gross requirement             122 5    
Stock on order                    
Current stock     60 60 60 60 60      
13
Net requirement             62 5    
Start assembly           62 135      
13
Scheduled completion             62 5    
                     
Level: 2 - E, LT=1
    Period 1 2 3 4 5 6 7 8
Gross requirement             183      
Stock on order                    
Current stock   18 18 18 18 18 18      
Net requirement             165      
16
Start assembly           5        
Scheduled completion             165      

Exercise 4

Item: X Leadtime: 2 Lotsize: L4L

week 1 2 3 4 5 6 7 8 9
Gross Requirements 320 100
 Scheduled Receipts
Current stock 120 120 120 120 120 120 120 120
Net requirements 200 100
Start delivery 200 100
Scheduled deliveries 200 100

For level 1 items – gross requirements for level 1 of D

200 x 2 = 400 in week 6 and 100 x 2 = 200 in week 7

Item: D Leadtime: 2 Lotsize: Periodic Order Quantity

week 1 2 3 4 5 6 7 8 9
Gross Requirements 400 200
Scheduled Receipts
Current stock 50 50 50 50 50 50 200
Net requirements 550 0
Place order 550
Scheduled deliveries 550

 Conclusion: the order quantity for D is 550 units in week 4.

Exercise 5

A 1 2 3 4 5 6 7 8
Gross
requirement 95 150 130
Stock on order 0 0 0 0 0 0 0 0 0
Current stock 0 0 0 0 0 0 0 0 0
Net requirement 95 150 130
Place order 95 150 130
Scheduled
completion 95 150 130

B 1 2 3 4 5 6 7 8
Gross
requirement 80 70
Stock on order 0 0 0 0 0 0 0 0 0
Current stock 0 0 0 0 0 0 0 0 0
Net requirement 80 70
Place order 80 70
Scheduled
completion 80 70

E - Lead time = 3 1 2 3 4 5 6 7 8
Gross
requirement 190 300 260
Stock on order 200 0 0 0 0
Current stock 85 85 285 95 95 0
Net requirement 0 205 260
26
Place order 205 0
Scheduled
completion 205 260

C - Lead time = 2 1 2 3 4 5 6 7 8
Gross 26
requirement 205 270 0 300 70 260
Stock on order 0 0 0 0 0 0 0
15
Current stock 625 625 420 0 0 0 0
11
Net requirement 0 0 0 300 70 260
Place order 110 300 70 260
Scheduled 11
completion 0 300 70 260

D - Lead time = 1 1 2 3 4 5 6 7 8
Gross 14
requirement 110 650 70 560 0 260
Stock on order 0 0 0 0 0 0 0
Current stock 350 350 240 0 0 0 0
Net requirement 0 410 70 560 14 260
 0
56 26
Place order 410 70 0 140 0
Scheduled 14
completion 410 70 560 0 260

Exercise 6

X 1 2 3 4 5 6 7 8 9
Gross requirement 480 100
Stock on order
18
Current stock 180 180 180 0 180 180 180 180 180 0
Net requirement 300 100
Place order 300 100
Scheduled
completion 300 100

A 1 2 3 4 5 6 7 8 9
Gross requirement 600 200
Stock on order
10
Current stock 100 100 100 0 100 100 100 200
Net requirement 700 0
Place order 700
Scheduled
completion 700

B 1 2 3 4 5 6 7 8 9
Gross requirement 300 100
Stock on order
Current stock 50 50 50 50 50 50 50 50 50
Net requirement 250 50
Place order 300 100
Scheduled
completion 250 50

C 1 2 3 4 5 6 7 8 9
Gross requirement 900 300
Stock on order
Current stock 50 50 50 50 50 50 50 150 50
Net requirement 850 150
Place order 100 200
 0
Scheduled
completion 850 150

D 1 2 3 4 5 6 7 8 9
Gross requirement 1400 300 100
Stock on order
Current stock 50 50 50 50 50 250 250 350 250
Net requirement 1350 50 0
40
Place order 1600 0
Scheduled
completion 1350 50