Question

sement 5. [Lot Sizing in Material Requirement System (MRP) (10 pts) Type: C Michael Jordan, senior in the department of management at ISU, recently got a job as a production planner at Honda Automotive Assembly Plant in Lincoln. Alabama. His first task on the job training is to review the master production plan shown below. (Initial inventory = 160 units, Ordering cost = $200 per order Lead time = 1 week, Holding cost = $1 per unit per week. No penalty cost for shortage/stock-outs.) Part: Period 0 1 2 3 4 5 6 Gross requirements 90 160 170 1300 110 Develop an ordering plan and costs for this plant using the following techniques (a) Develop the lot-for-lot MRP table and calculate the total relevant costs. 3 points Part: Period Lot for Lot Strategy 1 2 3 4 5 Gross requirements 90 160 170 1300 110 Scheduled receipts Projected available (Beg.) 160 Inv. On hand (End of period) Net requirements Planned order receipts Planned order releases Lead time 1 w Lot size Holding Cost = Ordering Cost = Total Cost = b Develop the Economic Order Quantity (EOQ) lot sizing technique. (Assume EOQ = 200) (3 points) Part: Period EOQ Lot Sizing (EOQ = 200) 0 1 2 3 4 5 Gross requirements 90 160 170 1300 110 Scheduled receipts Projected available (Beg.) 160 Inv. On hand (End of period) Net requirements Planned order receipts Planned order releases Lead time = 1 w Lot size Holding Cost = Ordering Cost = Total Cost = (c) Develop the Periodic Order Quantity (PO) lot sizing technique. (POQ Interval= 2 weeks) (3 points) Part: Period POQ Lot Sizing 0 1 2 3 4 Gross requirements 90 160 170 1300 110 Scheduled receipts Projected available (Beg.) 160 Iny. On hand (End of period) Net requirements Planned order receipts Planned order releases Lead time 1 wk L ot size Holding Cost = Ordering Cost = Total Cost = be three lot szig technques above, which one is the best strategy with the lowest cost?

Answer 1

a)

Part :	Period
Lot for lot strategy	0	1	2	3	4	5	6
Gross requirements		90	160	170	130	0	110
Scheduled receipts
Projected available (beg.)	160	160	70	0	0	0	0
Inv. On hand (End of period)		70	0	0	0	0	0
Net requirements			90	170	130	0	110
Planned order receipts			90	170	130	0	110
Planned order releases		90	170	130	0	110
Lead time	1 wk	Lot size	lot for lot

Holding cost = 70*1 = 70

Ordering cost = 4*200 = 800 [As there has been 4 orders]

Total cost = 70+800 = 870

b)

Part :	Period
EOQ lot sizing (EOQ=200)	0	1	2	3	4	5	6
Gross requirements		90	160	170	130	0	110
Scheduled receipts
Projected available (beg.)	160	160	70	110	140	10	10
Inv. On hand (End of period)		70	110	140	10	10	100
Net requirements			90	60			100
Planned order receipts			200	200			200
Planned order releases		200	200			200
Lead time	1 wk	Lot size	200

Holding cost = (70+110+140+10+10+100)*1 = 440

Ordering cost = 3*200 = 600

Total cost = 440+600 = 1040

c)

Part :	Period
POQ lot sizing	0	1	2	3	4	5	6
Gross requirements		90	160	170	130	0	110
Scheduled receipts
Projected available (beg.)	160	160	70	240	70	70	70
Inv. On hand (End of period)		70	240	70	70	70	70
Net requirements			90		60		40
Planned order receipts			330		130		110
Planned order releases		330		130		110
Lead time	1 wk	Lot size	POQ

Holding cost = (70+240+70+70+70+70) = 590

Ordering cost = 3*200 = 600

Total cost = 590+600 = 1190

d) Lot sizing is best as it costs least