SUPPLY CHAIN MANAGEMENT: CASE PROBLEMS

1. Given the figure below, operation 4 represents a rework operation on parts that fail
inspection upon completion of operation 2. How many units are required to supply
20,000 units? d1 = 2%, d2 = 3%, d3 = 4%, d4 = 5%.

Solution:
2. A product is assembled using two parts; Part A requires 6 minutes to finish, Part B
requires 7 minutes to finish. How many machines are needed for each process if the
company received an order of 600 items for a 12-hour operation? Set up time for both
machines are 0.25 hour and 0.35 hour. Machines have a rated capacity of producing
82% and 93% good units. How many machines are needed in Part A and B?
3. Kim Drug Store Chain wishes to build a new warehouse to serve the whole Leyte. Now,
she is looking at three possible locations. The factors, weights, and ratings being
considered are given below. Which location is the best to build the new warehouse?

4. EVSU is considering another site for its operation with the following grid-map
coordinates: A (350, 300), B (150, 250), and C (250, 275). Determine the best location.
Site Location X Y Demand
1 100 300 30
2 210 180 25
3 250 400 15
4 300 150 20
5 400 200 18

5. Mulayan Inc. is a toy manufacturing that acquire some molding machines to produce
160,000 good parts per year. They will be installed in a production line that normally
produces 20% rejects because of the tight aerospace specifications. Assume that it
takes 90 seconds to mold each part and the plant operates 2,000 hours per year. If the
molding machines are used only 75% of the time and are 90% efficient, what actual
(usable) molding machine output per hour would be achieved?
6. Alma and Leonora hopes to expand the present operation of their canteen by adding one
new outlet. Leonora studied three locations. Each would have the same labor and
material costs (food, serving containers, napkins, etc.) of Php88 per sandwich.
Sandwiches sell for Php132.50 each in all locations. Rent and equipment costs would be
Php250,000 per month for location A, Php275,000 per month for location B, and
Php290,000 per month for location C. Determine the volume necessary at each location
to realize a monthly profit of Php500,000.
7. Ken is a Procurement Officer at a printing industry specializing in printing different kinds
of packaging labels. As part of the procurement team, he wanted to know what papers
are being used frequently and what are not. By gathering the past record, she ended up
with following data.
Item Demand in SQM (000) Unit Cost ($ per SQM)
 80001 4,000 0.58
80011 2,500 0.43
80023 700 0.66
80045 2,400 0.53
80251 1,500 0.63
80037 200 0.89
80055 500 0.73
80361 1,000 0.67
80481 1,300 0.55
80041 400 0.68

a. Compute for the Total Annual Currency Volume.

b. Categorize the items using ABC Method of Analysis.
8. Randy, an operator of plating machine uses a film sheet to expose the plate and have
the image printed on it. As instructed by his manager, he recorded the number of film
sheet he has been using every month. After 3-months of record, the average film sheets
used was 168 units. If the ordering of this films is Php340.00 and the holding cost 5% of
the ordering cost.
a. Determine the optimal number of film sheets to be acquired per order.
b. How many times they will order the film sheets every month?
c. Calculate the total cost for every order that will be incurred per month.
d. Considering that there are 24 working days/month and lead time is 2 days,
compute for the reorder point.
e. If the usage of the film sheet is normally distributed with a standard deviation of 2
and the desired service level is 95%, what will be the reorder point?
9. College of Engineering is preparing for their annual event of Engineering Days and is
looking for provider of the shirts they will be wearing for the said event. Eager to win a
quote for a customer, Pascual, a sales manager of a T-shirt printing business has
prepared a discount schedule to the student council of the college. For an increasing
volume, they
will be receiving greater discounts. Given on the data, shirts will be sold at Php240.00
per shirt, ordering cost of Php750.00 and holding cost of 15% from the price of the shirts.
Order Size Discount
1 – 399 0%
400 – 699 3%
700 – 899 5%
900 - above 8%

a. Determine what will be the optimal order quantity for each of given quantity
discount information given there are 3,000 students who will order the shirts.
b. What will be the total cost for each discount? Which discount will be the most
favorable?
10. Arthur is running a training center supplying most companies’ safety officer trainings. His
team teaches different first aid measures for different types of accidents and injuries. The
training center was designed to handle 50 participants each session. However, Arthur
believed that the training will only be effective if they accommodate only 40 participants.
During one session, 37 participants only have attended. What is the utilization and
efficiency of the center?
11. A pneumatic valve is one of the parts in assembling an engine of a car. Abringe Motors
uses this valve and is currently using 4 units a week, a total of 208 units per year. If the
cost of ordering these valves is Php32,150.00 and the cost of carrying these valves is
20% of the ordering cost, what will be the economic order quantity of the pneumatic
valves?
12. Jamora Furniture store sells specialized wooden cabinets. As per sales department’s
data, the average weekly demand is 20 units at Php6,000 price from the supplier. Each
order placed with the supplier, will cost the store Php5,000. Annual holding cost of these
wooden cabinets is 25% of the product price. If the store is open for 52 weeks per year
and the management of the store chose a lot order of 400 units, what will be the annual
cost of the current ordering policy?
13. Chernen Foods can produce their famous meat pies at a rate of 1,650 cases with 48 pies
each per day. The firm distributes the pies to provincial stores and restaurants at a
steady rate of 250 cases per day. The setup cost, cleanup, idle time in transition from
other products to pies, etc. (in dollars) is $320. Annual holding costs are $11.50 per case
and the firm runs 250 days/year.
a. Determine the optimum run of production.
b. Determine the production runs per year.
c. Determine the maximum inventory.
d. Determine the total inventory cost per year.
14. Daily demand for a product is normally distributed with a mean of 150 units and a
standard deviation of 15 units. the firm currently uses a reorder point system and seeks a
75% service level during the lead time of 6 days.
a. What safety stock is appropriate for the firm?
b. What is the reorder point?
15. Bugho Shoe Center is one of the leading shoe manufacturers in Tacloban City. One of
their stores sells sandals in which has average lead time of 6 days. The average monthly
demand is 288 pairs and the stores operate 24 days/month. If the standard deviation of
the demand is 2 pairs/day and standard deviation of lead time is 1 day, calculate the
reorder point at 95% confidence.
16. As the owner of Yadao Construction Supply, Roel used the historical records and found
out that the demand for the sand and gravel averages to 75 cubic meters per week and
the average lead time of 2 weeks. Assuming a normal distribution, the standard deviation
of the demand is 8.5 cubic meters.
a. Using 99% confidence interval, how much safety stock should be held?
b. Calculate the reorder point of the company.
17. May owns a pasalubong center in San Pablo, Laguna and wants to know the reorder
points of the products they are selling one of their best-selling products is chocolate
moron. Upon checking the records of sales, the average daily demand is 62 dozen and
 the average lead time for the products to be delivered is 2 days, what is the reorder point
for the certain product?
18. Label rolls need paper core that are used and inserted onto the labelling machine. The
warehouse officer and the procurement officer of a label printing plant has agreed to a
fixed-point system for ordering these cores. On that note, the plant will be run printing
jobs that will need 4,500 cores for the following week. The plant only works at 5 days a
week.
Additional data as follows.
a. Calculate the amount to be ordered for the next week run.
b. Disregarding the ordering interval, calculate the reorder point
Deviation of demand 150 units
Lead time 3 days
Ordering interval 5 days
Amount on hand on reorder time 1,710 units
Desired Service level 95%

19. Acebo Express, Inc. manufactures high quality bikes and scooters and has about 4,000
items in its inventory. The warehouse manager wants to determine how many items they
will count each day. The company policy is to count A items monthly of every 20 working
days, all B items per quarter of every 60 working days, and all C items per 6 months of
every 120 working days. Based on data exported by the warehouse manager, there are
400 class A items, 1,400 class B items, and 2,200 class C items. Calculate the items to
be counted per day.
20. Mel Dairy Farm is manufacturing different types of dairy products such as fresh milk,
yoghurt, and cheese. One of their customers, Sheen’s Pastry, ordered 400 blocks of
cheese but due to unexpected machine breakdown, they only delivered 365 blocks to the
customer. Determine the percentage stock out in the customer’s perspective.
21. Nicle Coffee is one of Mel’s Dairy Farms customer for fresh milk. The fresh milk is being
delivered every start of the month with a varying demand from 400 to 500 liters/month.
Nicle pays Php80.00/liter and charges at Php120.00/liter. Expiration of the milk is in a
month time, thus, unutilized milk has no salvage value and cannot be carried over into
the next month. Find the service level and optimal stock level for that quantity.
22. The average weekly demand for Acer laptops at Octagon store is 12 with a standard
deviation of 3 units. the reorder is at 45 units of laptops and the service level is 95%.
a. Calculate the time it takes for the order to be received using the given situation.
b. How much safety stock should Octagon in-store?
23. The museum in Tacloban City has opened a souvenir shop. Currently, the top selling
item are keychains. On average, sales have been 180 units per week and the supplier is
charging Php40.00/unit. The cost of placing the order to the supplier is Php60.00. Annual
holding cost is 25% of the keychain’s value and the shop operates at 52 weeks/year.
Calculate the annual cost of the inventory with an order quantity of 500 units.
24. Louise Publishing is a start-up company in Tacloban City. Some of their major customers
are universities ordering workbooks and laboratory manuals to be used during the school
year. Due to the seasonality of ordering these manuals and workbooks, the company
prepared a chain metric plan for them to economically meet the demand as the data
follows.
Quarter Months Demand
1 Jan – Mar 4,000
2 Apr – Jun 8,000
3 Jul – Sept 24,000
4 Oct – Dec 20,000

Regular Capacity 8,000 manuals per quarter

Overtime Capacity 4,000 manuals per quarter
Subcontracting Capacity 8,000 manuals per quarter
Regular Production Rate Php280.00 per manual
Overtime Rate Php420.00 per manual
Subcontracting Rate Php490.00 per manual
Holding Cost Php55.00 per manual

Quarter Demand Regular Overtime Subcontract Inventory, End

1 4,000 8,000 4,000 - 8,000
2 8,000 8,000 4,000 - 12,000
3 24,000 8,000 4,000 - 0
4 20,000 8,000 4,000 8,000 0