Inventory Management - Assignment Example

Name: Professor: Institution: Course: Date: Question 1 - Inventory Management Part A: The economic order quantity = Units per day * days working week * working weeks a year = 640 units * 5 days * 50 weeks = 160,000 Units The total cost for this policy = Total cost of sales + Total cost of holding + Cost of order = (20 * 160,000) + (640/2) 4 + (160,000/640) 200 = 3,200,000 + 1,280 + 50,000 = $ 3,251,280 per year The total cost for this policy (InfoSys Parts) = (19 * 160,000) + (10,000/2) 4 + (160,000/10,000) 200 = 3,040,000 + 20,000 + 3,200 = $ 3,063,200 per year N/B: Therefore, it is recommended that the item be bought from InfoSys Parts. Part B: The Economic Order Quantity has been applied as a mathematical model in solving the above question; the same model can be altered when there is uncertainty in the overall demand of the item in question. This implies that when the demand of an item ceases to be constant and its values keep on varying, one is supposed to ensure that the issue of stock-outs is not encouraged, which is considered to be a common issue in businesses, and this can be achieved through the process of holding the additional inventory. The additional inventory that held for the purpose of protecting against the existence of variations in the item demand is referred to as safety stock. Therefore, to ensure that protection is issued against the projected variation, especially in the case of demand uncertainty, a strategic measure is put in place to ensure that safety stock is put in place; hence it involves the process of increasing the Reorder Point. The following formula is applied in the case of reorder point (Bozarth & Handfield, 2008): Reorder Point = R = (d * L) + (z * σL), where z = the z-score of the normal allotment within a desired service degree σL = the standard deviation (demand that takes place during the lead time) d = the standard deviation for demand that happens on daily basis (demand deviation) σd = STDEV(daily demand times) when using Excel p = the probability of not stocking out When applying Microsoft Excel, within a given desired service level of the z-score during the lead time (σL), p and the standard deviation of demand is: z = NORMSINV(p) σL = SqRoot(L * σd^2) Reorder Point = R = (d * L) + (NORMSINV(p) * [SqRoot(L * σd^2)]) Quantity to Order = EOQ = Square Root of ((2*D*S)/H) When involving features of safety stock in an Economic Order Quantity model for the purpose of accommodating different variation in values, the sum of the safety stock normally increases the quantity of the average inventory that is placed on hand, which is represented by Q/2. Therefore, to obtain the total cost of the inventory the current sum average inventory is multiplied by the identified annual holding cost, which results to the following formula (Bozarth & Handfield, 2008). TC = DC + (D/Q)*S + [(Q/2) +SS]*H, where: SS is equivalent to total amount of the Safety Stock Part C In the actual application of inventory control measures, there is a wider scope of modern inventory control methodologies that have been approved to effective and efficient in their operational procedures. Nevertheless, a few of the vast moving organization have adopted them and are experiencing a huge change in various measures as per the benefits derived. Some of the reasons as to why most of the organizations have not yet incorporated such control measure in their inventory practices is because most of the gigantic manufacturing and distribution firms are going through a difficult time with the aspect of having lower customer service, experiencing higher costs in the process of implementing and absorbing such inventory control measures, and also having excessive inventories than are considered to be necessary and yet it is hard to operate them simultaneously (Palepu, Healy & Benard, 2008). Such inventory control issues that have caused many organizations to shun off or avoid them are normally as a result of incorporating poor processes, deprived practices and also installing outdated support systems, which may turn out to be incompatible. In the real sense, the inventory management process is normally considered to be the most complex process in most of organizations. For instance, in most of the organization the inventory control section is taken to be more complex than a clerical function. Therefore, the most likely reason as to why the inventory control application has not been adopted by many organizations is because of the material shortages, high operational costs, cases of excessive inventories incorporated, and poor service provision in relation to customers. However, the adoption of an effective inventory control is considered to be a significant function that assists in indemnifying the overall success of manufacturing and distribution organization. Measures like low inventory investment, having better customer service, low costs and maximum income are the main measure of having an effectiveness inventory control methods and systems. Question 2: Project Management Part A Ideally the overall management of this construction project will involve five elements which are also referred to as process groups, and also one control system. The main group incorporated within the project will include the following phases; a. The initiation phase In this phase, the main purpose of the project will be stated (which has already been done) and the identification of significant areas to be handled within the project. This is a phase that consist all activities that are supposed to be achieved in relation to the building that has been designed and documented. b. Planning or development In this project planning of development, major issues are brought together with a highlight of making the whole structure to be dynamic, so that it is able to absorb any changes that may arise on the way of project execution. c. Production or execution Production or execution of the project involves the phase of implementing the project in relation to the stated goals and objectives. In this case, this will be the actual phase of letting the project to be processed within the structure designs. d. Monitoring and controlling This is a procedure that will involve a number of processes that are designed with an aim of overseeing the execution of the overall project and the probable issues that may arise in the process of initiating the project. e. Closing of the project It is a termination phase of the project, where a report will be required to give a clear outlook of what has been achieved in relation to the initial stated needs. Part B Monitoring and controlling of this project will involve a number of processes that are designed with an aim of overseeing the execution of the overall project and the probable issues that may arise in the process of initiating the project. The process of monitoring and controlling will involve procedures like: a. Determining the ongoing activities of the project that have been stated in the above Gantt chart. b. Monitoring and controlling the project variables such as the cost, working effort, and the overall scope of the project, and this will done in relation to avoiding variable going against the determined project management plan and also the baseline for the project performance. c. Identifying the best actions that are supposed to address the stated issues and potential risks in an effective way. d. Manipulating the existing factors that also following the integrated change measure control for the purpose of implementing the approved changes. Since this is a multi-phase project, the overall process of monitoring and controlling are also designed to provide critical feedback between the highlighted project phases. This is considered to be of significance as it helps in implementing counteractive or precautionary measures that allows the project to be brought into conformity with the developed project management plan. Therefore, there is need to have a process of Project Maintenance, which is considered to an ongoing process that will include: a. The continuing support of the selected end users of the project b. The existing corrective measures of various errors and setbacks c. Provision of updates for the identified software, and this is supposed to be done more often for the purpose of remaining updated Within the course of this construction project, the overall scope of the project is bound to change, and hence it has been developed with incorporation of dynamism measures by considering the fact that change is a typical and an anticipated part of the process of construction. The anticipated changes in this construction project can be as the result of: a. The conflicting site conditions, b. The indispensable design modifications, c. Availability of material d. Changes that are implemented after the request from the contractor e. Value engineering and possible impacts from other parties Further than implementing the change in the actual field of construction, documentation of such changes is important in showing the real features that have been incorporated within the construction, thus referred to as change management. Therefore, the top management team will require having a record of initiation, project implementation, project monitoring and controlling, and project termination measures (Hu & Debing, 2007). In this case, one will also be required to record all significant changes that are found to be modifying the existing tangible portions of the completed work. Such kinds of records are developed on the contract documents, which are not necessarily restricted to the intended drawings of the plan. During the process of introducing changes in the overall project, a re-assessment of the viability of the project is supposed to be initiated for the purpose remaining on the main target. Question 3: Transportation problem Part A Weekly shipments from each blood bank to each hospital Bank/Hosp 1 2 3 4 Totals (Supplies) 1 60 40 Nil Nil 100 2 20 30 30 Nil 80 3 Nil Nil 10 30 40 Total (Demand) 80 70 40 30 Implication of the solution Hospital (1) will have the following supplies from the three different banks: bank (1) will issue 60 shipment of blood equivalent to $480 (60 * 8); 20 shipment of blood equivalent to $240 (20 * 12) from bank (2); and no shipment from bank (3). This will total to a cost of $720 (240 + 480) in total. Hospital (2) will have the following supplies from the three different banks: bank (1) will issue 40 shipment of blood equivalent to $360 (40 * 9); 30 shipment of blood equivalent to $210 (30 * 7) from bank (2); and no shipment from bank (3). This will total to a cost of $570 (210 + 360) in total. Hospital (3) will have the following supplies from the three different banks: bank (1) will issue none of the blood; 30 shipment of blood equivalent to $150 (30 * 5) from bank (2); and 10 shipment of blood equivalent to $60 (10 * 6) from bank (3). This will total to a cost of $210 (150 + 60) in total. Hospital (4) will have the following supplies from the three different banks: no shipment from bank (1) and (2); 30 shipment of blood equivalent to $210 (30 * 7) from bank (3). The demand in three hospitals (1), (3), and (4) will be made with the adoption of this mode of supply, while hospital (2) will have a deficit of 10 shipments caused by low supplies of blood than the demand. Part B In the recent years, the application of the mathematical models have been on the increase and the main purpose of such an increase was the need to increase the efficiency of predicting the overall impact of various factors that are on the predominance of resistance. As such models become more realistic to their function, they also become more complex as they putting into consideration the accounting of more variables and other parameters that are found to affect the overall frequency and distribution of the existing resistance. Therefore, factors that are considered in creating a more realistic mathematical model are variable and existing parameters that are applied; and the overall frequency and distribution of the existing resistance (Cleland & Ireland, 2006). In the process of creating more realistic mathematical models, it is advisable to modify the already existing transportation model by adding more new parameters and other measures and procedures. In this process, the resultant model will be designed both to determine and effectively work with population dynamics that have been put into an enclosed setting, such as hospitals, and also within the community setup. In the process of assessing the overall predictions of the redesigned mathematical models, it is of significance to put into consideration that such designs of models are custom made for a specific situation. Especially by applying the available data and in coming up with different assumptions where data is unavailable (Heizer & Render, 2008). In the process of modifying the existing transportation model, there are specific steps that are supposed to be followed in ensuring that the model is effective, and this consists of the following; a. Identify the issue at hand so that the solution becomes custom made. b. Making the issue to be straightforward by coming up with different assumptions and noting various features within the model that needs to be ignored. c. Develop the desired model and critically find the solution to the existing problem. In this case, one will be describing features by the application of mathematical terms that forms a relationship to the issue. References Bozarth, C. & Handfield, R. (2008). Introduction to Operations and Supply Chain Management (2nd edn). Upper Saddle River, New Jersey: Pearson Prentice Hall, pp. Heizer, J. & Render, B.R. (2008). Operations management (9th edn). New Jersey: Pearson Prentice Hall. Weiss, H. (2006). POM/QM for Windows Version 3. New Jersey: Pearson Prentice Hall, Cleland, D. and Ireland, L. (2006). Project management: strategic design and implementation. New York: McGraw-Hill Professional. Palepu, K. G., Healy, P. M. and Benard, V. L. (2008). Business Analysis and Valuation: Using Financial Statements, Text and Cases. New York: Thomson South-Western. Hu, B. and Debing, Z. (2007). Cellular –Automata Based Qualitative Simulation for Nonprofit Group Behavior. Jasss vol.10, No.1. Read More