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Exercises
Fundamentals of
Supply Chain

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CHAPTER 1

Introduction to Supply
Chain Management

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Exercise 1
Classify these industrial companies :
Production
Process Environnement MTS ETO / ATO or MTO
Choices

FLOW

INTERMITTANT

PROJECT

Ships Manufacturing Mechanical subcontracting Manufacturing of skis

Refineries Ready-to-wear clothing Satellites
Assembly of car Collective housing Milk manufacturing

Mme L. BOUSFIHA Fundamentals of SCM V1 HYB - 3

Exercise 2
Product Layout vs. Process Layout :

Product Process
Capital cost
Flexibility
Annual setup cost
Run cost
Work-in-process inventory
Production and inventory control costs
Lead time

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CHAPTER 2

Demand Management

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Exercise 3
Given the following data, calculate the three-month
moving average forecasts for months 4, 5, 6, and 7.

Month Actual Demand Forecast

1 60
2 70
3 40
4 50
5 70
6 65
7

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Exercise 4
Weekly demand for an item averaged 100 units over the past year. Actual demand
for the next eight weeks is shown in what follows:
a. Plot the data on graph paper.
b. Letting α = 0.25 , calculate the smoothed forecast for each week.
c. Comment on how well the forecast is tracking actual demand. Is it lagging or
leading actual demand?

Week Actual Demand Forecast

1 103 100
2 112
3 113
4 120
5 126
6 128
7 138
8 141
Mme L. BOUSFIHA 9 Fundamentals of SCM V1 HYB - 7

Exercise 5
A company uses a tracking signal trigger of +-4 to decide whether a
forecast should be reviewed. Given the following history, calculate
the MAD and determine in which period the forecast should be
reviewed.

Cumulative Absolute Tracking

Period Forecast Actual Deviation
Deviation Deviation Signal
1 100 110
2 105 90
3 110 85
4 115 110
5 120 105
6 125 95

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CHAPTER 3

Master Planning

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Exercise 6
A company wants to develop a level production plan for a family of
products. The opening inventory is 100 units, and an increase to 160
units is expected by the end of the plan.
The demand for each period is given in what follows. How much
should the company produce each period? What will be the ending
inventories in each period? All periods have the same number of
working days.

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Exercise 7
A company wants to develop a level production plan for a family of
products. The opening inventory is 600 units, and a decrease to 200
units is expected by the end of the plan.
The demand for each of the months is given in what follows. How
much should the company produce each month? What will be the
ending inventory in each month? Do you see any problems with the
plan?

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Exercise 8
A company wants to develop a level production plan. The beginning
inventory is zero. Demand for the next four periods is given in what follows.
a. What production rate per period will give a zero inventory at the end of
period 4?
b. When and in what quantities will back orders occur?
c. What level production rate per period will avoid back orders? What will
be the ending inventory in period 4?

d. If the cost of carrying inventory is $50 per unit per period, the production
cost is $20 per unit and stockouts cost $500 per unit, what will be the cost of
the plan developed in a? What will be the cost of the plan developed in c?
f. What are your comments ?
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Exercise 9
Because of its labor contract, a company must hire enough labor for
100 units of production per week on one shift or 200 units per week
on two shifts. It cannot hire, lay off, or assign overtime. During the
fourth week, workers will be available from another department
to work part or all of an extra shift (up to 100 units). There is a
planned shutdown for maintenance in the second week, which will
cut production to half. Develop a production plan. The opening
inventory is 200 units, and the desired ending inventory is 300 units.

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Exercise 10
Based on the following information , Calculate the total resource
requirements for the cycle product families for July:
Bill of Resources
Product Families: July prod. plan
Product Labor Cycles
Families: Steel (tons) (standard
Cycles hrs) Unicycle 500
Unicycle 0.00030 .40 Bicycles 2,500
Bicycle 0.00055 .60 Tricycles 1,000
Tricycle 0.00035 .30

Based on the following information , Calculate the total resource

requirements for the cycle product families for July
If the capacity available for the cycle product families in terms of
Labor for July is = 1900 hours; can we accept this plan ?
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Exercise 11
The Wicked Witch Whisk Company manufactures a line of broomsticks. The most popular
is the 36-inch model, and the sales department has prepared a forecast for 6 weeks. The
opening inventory is 30.
As master scheduler, you must prepare an MPS. The brooms are manufactured in lots of
100.

Week 1 2 3 4 5 6
Forecast Sales 10 50 25 50 10 15
Projected Available
Balance 30

MPS

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Exercise 12
Worldwide Can-Openers, Inc., makes a family of two hand-operated can openers. The
production plan is based on months and is stated to 16000 dozen for the next month.
The MPS is made using weekly periods. The forecast and projected available balance for
the two models follow. The lot size for both models is 1000 dozen. Calculate the
production plan and the MPS for each item.
Model A
Week 1 2 3 4 Total
Forecast Sales 2000 2000 2500 2000
Projected Available
1500
Balance
MPS

Model B
Week 1 2 3 4 Total
Forecast Sales 1000 1500 1000 2000
Projected Available
500
Balance
MPS

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Exercise 13
Complete the following problem. There are 20 on hand. The lot size is 60.

Period 1 2 3 4 5 6
Forecast 20 21 22 20 28 25
Customer Orders 19 18 20 18 30 22
Projected
Available Balance 20

MPS
ATP

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Exercise 14
The Acme Widget Company makes widgets in two models, and the bottleneck operation is
in work center 10. Following is the resource bill (in hours per part).
Hours per Part
Work
Model A Model B
Center
10 2,5 3,3

The master production schedule for the next 5 weeks is:

Week 1 2 3 4 5
Model A 70 50 50 60 45
Model B 20 40 55 30 45

a. Using the resource bill and the master production schedule, calculate the number of
hours required in work center 10 for each of the 5 weeks.
b. If the available capacity at workstation 10 is 260 hours per week, suggest possible ways
of meeting the demand in week 3.

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CHAPTER 4
Material Requirement
Planning

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Case Study N°1

A company makes tables (servantes); the bill of material for table A is as follows:

Period W1 W2 W3 W4 W5 W6
The MPS for the table A is as follow: MPS 65 70 55 60

For each product, we know the following :

Product On Hand Scheduled Receipt Lead Time (weeks) Lot Size

Servante A 25 70 on W2 1 Batch of 70

Support B 0 105 on W1 2 Lot for Lot

Plateau C 100 1 Lot for Lot

Grande traverse D 50 1 With a Safety Stock of 50 Minimum of 100

Petite traverse E 120 1 Batch of 100

Pied F 400 2 Batch of 200

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Case Study N°1

Fill the following grids
Weeks 1 2 3 4 5 6
Gross requirements
Scheduled receipts
Servante A Projected available balance
Planned order receipt
Planned order release

Weeks 1 2 3 4 5 6
Gross requirements
Scheduled receipts
Support B Projected available balance
Planned order receipt
Planned order release

Weeks 1 2 3 4 5 6
Gross requirements
Scheduled receipts
Plateau C Projected available balance
Planned order receipt
Planned order release

Weeks 1 2 3 4 5 6
Gross requirements
Grande Scheduled receipts
traverse D Projected available balance
Planned order receipt
Planned order release

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Case Study N°1

Weeks 1 2 3 4 5 6
Gross requirements
Petite Scheduled receipts
traverse E Projected available balance
Planned order receipt
Planned order release

Weeks 1 2 3 4 5 6
Gross requirements
Scheduled receipts
Pied F Projected available balance
Planned order receipt
Planned order release

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Case Study N°2

The BonneRoute SA company manufactures two models of GPS. The entry-level
model G1000 is aimed at the general public, while the sophisticated model G2000
is aimed at delivery professionals.
• The G1000 consists of one unit of "A" and 2 of "B".
• The G2000 consists of 3 units of "A", one of "C" and 4 of "D".
• "A" is made from 4 units of "E" and one of "F". "B" is made up of 2 units of "G"
and one of "F". Finally, "D" is made up of two units of "H" and 3 of "G".
Since the holidays are coming, the company expects large orders in the next few
weeks, especially for the G1000 model. According to production schedules, the
demands for the G1000 will be 400 units in week 8 and 280 units in week 9. For the
G2000 model, it will be 150 units in week 8 and 160 units in week 10.
Final assembly takes a week for the entry-level model and two weeks for the
sophisticated model. The rule size for both models is lot for lot.
Information about the different items used for the manufacture of the two models
can be found in the table below:

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Case Study N°2

Component Lead time (LT) Lot size On Hand Scheduled Receipts
A 2 Lot for Lot - -
B 2 Lot for Lot - -
C 2 60 10 -
D 1 80 40 -
E 1 Lot for Lot - 100 in week4
F 3 Lot for Lot 80 -
G 2 Lot for Lot - 160 in week2
H 1 30 100 90 in week 3
Draw the tree bill of material for product G1000 and G2000 and fill in the following grids:
Week 1 2 3 4 5 6 7 8 9 10
Gross Requirements
Scheduled Receipts
G1000
Projected Available
Planned Order Receipt
Planned Order Release
Week 1 2 3 4 5 6 7 8 9 10
Gross Requirements
Scheduled Receipts
G2000
Projected Available
Planned Order Receipt
Planned Order Release
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Case Study N°2

Week 1 2 3 4 5 6 7 8 9 10
Gross Requirements
Scheduled Receipts
A
Projected Available
Planned Order Receipt
Planned Order Release
Week 1 2 3 4 5 6 7 8 9 10
Gross Requirements
Scheduled Receipts
B
Projected Available
Planned Order Receipt
Planned Order Release
Week 1 2 3 4 5 6 7 8 9 10
Gross Requirements
Scheduled Receipts
C
Projected Available
Planned Order Receipt
Planned Order Release
Week 1 2 3 4 5 6 7 8 9 10
Gross Requirements
Scheduled Receipts
D
Projected Available
Planned Order Receipt
Planned Order Release

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Case Study N°2

Week 1 2 3 4 5 6 7 8 9 10
Gross Requirements
Scheduled Receipts
E
Projected Available
Planned Order Receipt
Planned Order Release
Week 1 2 3 4 5 6 7 8 9 10
Gross Requirements
Scheduled Receipts
F
Projected Available
Planned Order Receipt
Planned Order Release
Week 1 2 3 4 5 6 7 8 9 10
Gross Requirements
Scheduled Receipts
G
Projected Available
Planned Order Receipt
Planned Order Release
Week 1 2 3 4 5 6 7 8 9 10
Gross Requirements
Scheduled Receipts
H
Projected Available
Planned Order Receipt
Planned Order Release

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CHAPTER 6
Inventory
Management

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Exercise 15
An importer operates a small warehouse that has the following annual costs.
Wages for purchasing are $45,000, purchasing expenses are $30,000, customs and
brokerage costs are $25 per order, the cost of financing the inventory is 8%, storage
costs are 6%, and the risk costs are 10%. The average inventory is $250,000, and
5000 orders are placed in a year.
a. What is the annual ordering costs?
b. What is the annual carrying costs?

Exercise 16
If the annual cost of goods sold is $12,000,000 and the average inventory is
$2,500,000:
a. What is the inventory turns ratio?
b. What would be the reduction in average inventory if, through better materials
management, inventory turns were increased to 10 times per year?
c. If the cost of carrying inventory is 20% of the average inventory, what is the
annual savings?
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Exercise 17
An SKU costing $10 is ordered in quantities of 500 units, annual demand is 5200
units, carrying costs are 20%, and the cost of placing an order is $50. Calculate the
following:
a. Average inventory.
b. Number of orders placed per year.
c. Annual inventory carrying cost.
d. Annual ordering cost.
e. Annual total cost.

Exercise 18
A regional warehouse orders items once a week from a central warehouse. The
truck arrives 3 days after the order is placed. The warehouse operates 5 days a
week. For a particular brand and size of chicken soup, the demand is fairly steady
at 20 cases per day. Safety stock is set at 2 days’ supply.
a. What is the target level?
b. If the quantity on hand is 90 cases, how many should be ordered?
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