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The University of Nottingham
BUSINESS SCHOOL
A LEVEL D MODULE, AUTUMN SEMESTER 2009-2010
SUPPLY CHAIN PLANNING AND MANAGEMENT
Time allowed TWO Hours
_________________________________________________________________________
Candidates may complete the front cover of their answer book and sign their desk card but
must NOT write anything else until the start of the examination period is announced.
Answer any FIVE questions from Section A, and ONE question from Section B and
ONE question from Section C.
All sections carry equal marks.
Only silent, self contained calculators with a Single-Line Display or Dual-Line Display are
permitted in this examination.
Dictionaries are not allowed with one exception. Those whose first language is not English
may use a standard translation dictionary to translate between that language and English
provided that neither language is the subject of this examination. Subject specific translation
dictionaries are not permitted.
No electronic devices capable of storing and retrieving text, including electronic dictionaries,
may be used.
DO NOT turn examination paper over until instructed to do so
ADDITIONAL MATERIAL:
Formula Sheet
Table Standard Normal Distribution
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SECTION A
1. Short questions: (answer five parts only of this question and use diagrams where
appropriate)
(a)
Identify the main reasons for making forecasts in supply chain management.
[20%]
(b)
Explain briefly the principles of MRP-based planning.
[20%]
(c)
Explain the POQ model and illustrate with an appropriate diagram.
[20%]
(d)
A supplier of instrument gauge clusters uses a kanban system to control material
flow. The gauge cluster housings are transported five at a time. A fabrication
centre produces approximately 10 gauges per hour. It takes about three hours
for the housing to be replenished. Due to variations in processing times,
management has decided to keep 20 percent of the needed inventory as safety
stock. How many kanban cards are needed and what is the maximum amount of
gauge cluster housings in the system?
[20%]
(e)
Describe briefly how the Delphi forecasting technique works and indicate when
this method can be applied.
[20%]
(f)
Explain briefly what is meant by the customer order decoupling point. [20%]
(g)
For the time series below, determine the one step-ahead forecasts for month 9
up until month 12 using simple exponential smoothing with  = 0.1. Assume
that F8 = 248. Calculate the Mean Absolute Percentage Error (MAPE) based on
demands and forecasts for month 8 to month 12. Briefly comment on the results
and on whether or not exponential smoothing is an appropriate forecasting
method for this series.
Month
Demand
1
89
2
57
3
144
4
221
5
245
6
280
7
282
8
300
9
312
10
320
11
341
12
352
[20%]
(g)
Dave Grubbs of Grubbs Auto Body has five cars waiting for a wash and wax.
Cars cannot be waxed until they are washed. The washing and waxing times (in
hours) for each of the five cars are shown in the table below:
Job
Car
Car
Car
Car
Car
1:
2:
3:
4:
5:
Jaguar
Audi
Peugeot
Honda
Lexus
Wash (hours)
3
5
1
2
4
Wax (hours)
5
3
2
1
4
What schedule produces the shortest time span (makespan) in which these 5
jobs can be completed? Calculate the minimum makespan and determine when
Dave will finish the Audi.
[20%]
3
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SECTION B
2. The Bi-Product Company produces two products (A and B) that are similar in terms of
labour content and skills requirement. The table below shows the demand forecasts for
the next four quarters, the inventory levels at the start of quarter 1, and the number of
working days in each quarter. The company currently employs 15 workers. The cost of
hiring a worker is £1000; the cost of firing a worker is £2000; the salary of a worker is
£4500 per quarter.
Quarter
1
2
3
4
Demand Forecast
Product A
Product B
9,800
14,500
12,000
22,000
13,000
19,500
31,000
25,000
Beginning
inventory:
2,400 units of product A
900 units of product B
Working Days
62
58
69
52
The production rate per employee per day is 25 units (of either product). The inventory
holding cost is £10 per unit per quarter (either product).
(a)
Convert the demand forecasts of the individual products into a forecast for the
net aggregated demand. Briefly comment on the aggregation scheme you
applied.
[20%]
(b)
Suppose the company wishes to ‘level’ the number of employees needed so that
no hiring or layoffs will be required during the year (except perhaps at the
beginning of the year). Determine how many employees will be required such
that all demands can be satisfied without backorders. Calculate also the
production and inventory levels for each quarter. What is the cost of producing
according to this plan?
[40%]
(c)
The company is not interested in a pure chase strategy (or zero inventory
plan), but is willing to consider alternatives. Develop your own ‘compromise
plan’ (a compromise between a pure workforce levelling plan and a pure chase
strategy). Support your reasoning with appropriate diagrams and calculations
and determine the production and inventory levels for each quarter. What is the
cost of producing according to this plan?
[40%]
3. A department store is using the “reorder level-order quantity” inventory control policy
to manage its plasma TV stocks. The store sells an average of 10 TVs each week. Their
demand analysis revealed that the weekly demand follows a normal distribution with
variance 26. The store pays £200 for each TV, which it sells for £750. Fixed costs of
replenishment amount to £280. The store’s estimated interest rate for the cost of
capital is 25 percent per year. If a customer demands a TV when it is out-of-stock, an
expedited order is placed. The store incurs an extra cost of £800 per unit shortage of
TV due to the expedited order. Replenishment lead-time is thirteen weeks.
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Turn over
(a)
If the lot sizes are determined using the EOQ formula, what reorder level should
be used for the TVs? (Use a managerial approach.)
[30%]
(b)
Draw the evolution of inventory over time for policy (a) and indicate all relevant
parameters on your plot.
[20%]
(c)
Find the optimal values of reorder level and order quantity.
(d)
Compare the average annual costs of holding, ordering and stock-out for the
replenishment plans that you found in (a) and (b).
[20%]
[30%]
SECTION C
4. For one of the following articles that you have studied for your assignment, answer the
corresponding question below:
Article 1: Brown, A.O., Lee, H.L. and Petrakian R.(2000): Xilinx Improves its
Semiconductor Supply Chain using Product and Process Postponement, Interfaces 30,
July-August 2000, p65-80.
Question based on Article 1: Explain what is meant by product and process
postponement, and how these ideas may enable cost-effective mass customization.
Describe also how Xilinx’ supply chain works and how product and process
postponement was implemented.
Article 2: Cohen, M.A., Cull, C., Lee, H.L. and Willen D. (2000): Saturn’s Supply-Chain
Innovation: High Value in After-Sales Service, Sloan Management Review, Summer
2000, p93-101.
Question based on Article 2: Discuss the key characteristics and challenges in the
after-sales service business, focusing particularly on issues related to forecasting
product demand, inventory control and distribution network design. Describe also how
Saturn’s parts supply chain works and what the company did to make it work.
Article 3: Fisher, M.L., Hammond J.H., Obermeyer, W.R. and Raman, A. (1994):
Making Supply Meet Demand in an Uncertain World, Harvard Business Review, MayJune 1994, p83-93.
Question based on Article 3: Discuss the difficulties in forecasting, planning, producing
and distributing short life-cycle products and/or products with a highly seasonal
demand such as fashion apparel. Describe also how Sport Obermeyer improved their
forecasts and how they simultaneously redesigned their planning processes so as to
minimise the impact of inaccurate forecasts.
[100%]
5. Outline the main types of constraints indentified in Theory of Constraints (TOC).
Describe the typical steps required in conducting a TOC analysis of an operational
system and explain the Drum-Buffer-Rope approach used in managing a constrained
resource.
[100%]
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