Inventory Management

Question:

(i) An item is required in 5000 units/ year. The consumption rate is constant. The rate of inventory carrying cost is 25% of the average inventory value per year. You have two options to meet this requirement.

Option A: The supplier supplies the item at Rs. 200/ unit and charges Rs. 2000 per delivery as packing and transportation cost.

Option B: The supplier supplies the item at Rs 190/ unit and charges Rs 4000 per delivery as packing and transportation cost. The item supplied by this vendor has r% rejection. (To get r divide your roll number by 5. r = 5 if your roll number is divisible by 5 else it is equal to the remainder). Assume that you pay for the rejected items also.

Which option is better and why? (After showing all the calculations, you must write a concluding paragraph of about 3-4 sentences clearly mentioning the better option and giving the values of your decision parameters).                                                          

(ii) Assume that items received pass through the quality check and only good items are stored. What should be the minimum reorder point to keep the probability of shortage below 0.3, if the consumption during lead time is variable and uncertain with mean 600 units and standard deviation 100 units? 

Answer: It has two parts. Answers to them are discussed in 2 different videos given below.

Part (i):

Part (ii):

Mutually Conflicting Objectives

Question :

Customers arrive at a service centre with a mean arrival rate (ʎ) of 20 per hour. Service facility has been created to serve the customers at a mean rate (µ) of 25 per hour. Assume that arrival and service completion both follow Poisson distribution.  

Probability that there are n customers in the system is given by P_n = (ʎ/µ)*P_n-1.

Probability that there is no customer in the system can be derived as P₀ = 1- (ʎ/µ).

(i) What is the probability of the service facility being idle?                              

(ii) What is the probability that there are more than 4 customers in the system? 

(iii) What should be the mean service rate to make the probability of service facility being idle as 0.1?                                                                                                  

(iv) Will this change in service rate increase or decrease the probability of having more than four customers in the system? Write this answer in 2 sentences only. No need to give numerical values. 

Answer: Answer is discussed in the below video.

Sequencing Rules

 Question : Name any 3 popular sequencing rules, explain them in not more than 2 sentences each and mention one advantage of each of them.

Answer: This video discusses the answer.