Question

3. A two-workstation cell uses a kanban system to produce 200,000 parts per year. Expected leadtime to replenish a container is 0.75 hours (i.e. 45 minutes). Parts cost $100 and have an inventory opportunity cost of 15%. There are three material handling options available:

            Manual - annual fixed cost of $25,000, cost per trip = $0.10, Max load size = 5;

            Push Cart - annual fixed cost of $25,000 + $5,000 initial investment (must be amortized over 5 years), cost per trip = $0.15, Max load size = 50; and

            Forklift - annual fixed cost of $25,000 + $60,000 initial investment (must be amortized over 8 years), cost per trip = $0.50, Max load size = 1000.

    Note: The company uses a MARR of 20% for all investments.

a) (25%) Specify the following system design parameters: container size, material handling type, # kanban that will be feasible and minimize material handling cost.

b) (5%) How would the system be different if it was controlled by CONWIP versus Kanban? Provide a conceptual example.

Answer 1

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Three material handling option available, from that best option will be :
1. Manual
Annual Fixed cost		25000
cost per trip		0.10
Max Load Size		5
Total Parts		200000
No. of Trip (200000/2)		100000
cost for trip (100000*0.12)		12000
Total cost (+25000+12000)		37000
2. Push Cart
Annual Fixed cost		25000
cost per trip		0.15
Max Load Size		50
Total Parts		200000
No. of Trip (200000/20)		10000
cost for trip (10000*0.15)		1500
Initial Investment		5000
MARR		15%
Return (5000*15%)		750
Amortized Cost (5000/5)		1000
Total cost (25000+1500-750+1000)	26750
3. Forklift
Annual Fixed cost		25000
cost per trip		0.5
Max Load Size		1000
Total Parts		200000
No. of Trip (200000/500)		400
cost for trip (10000*0.50)		200
Initial Investment		60000
MARR		15%
Return (5000*15%)		12000
Amortized Cost (80000/8)		10000
Total cost (25000+200-12000+10000)	23200
Here, Machine Handling Cost for option,
Manual	37000
Push Cart	26750
Forklift	23200
So it advisable to go with option Forklift as it will cost lower than other option.