M&IS 44062-001 Supply Chain Management Examination I - Spring 2016 Dr. A. L. Guiffrida Directions: 1) In completing the examination, students may work individually or in groups. If working in a group the maximum group size is five students. For a group examination submission, submit one examination solution document for the group with the names and emails addresses of each group member identified. All students in the group will receive the grade that is assigned to the single examination solution document that is submitted. 2) Office hours for Exam I My usual office hours are held on Tuesday and Thursday, however I cannot hold office hours on this Thursday the 25th. I have added make-up office hours for Thursday on Wednesday the 24th and Monday the 29th. Office Hours During Exam I (my office is A411) Tuesday February 23 from 10:15 am to 1:45 pm Wednesday February 24 from 11:00 am to 1:30 pm Monday February 29 from 1:00 pm to 3:00 pm 3) Examination solution documents may be submitted in either hardcopy or electronic form. Hardcopy: submit your hard copy in the lecture classroom at 12:30 PM on Tuesday March 1 2016 or submit your hard copy during my office hours (my office is A411, see above for office hours) Electronic copy: submit as a PDF file to my email aguiffri@kent.edu by 12:30 PM on Tuesday March 1 2016. Hardcopy and electronic copy answer submission documents must have the following cover page: M&IS 44062-001 Supply Chain Management Examination I – Spring 2016 Dr. A. L. Guiffrida Submitted by Name; email address (If a group submission please list names & emails vertically) 4) Your examination solution document must be typed. When answering a question clearly label the question number in your answer submission document. 5) The points per question are listed for each question. 6) You do not need to submit any supporting Excel files that you constructed in answering a given examination question – just present your solution results. Be sure to keep a permanent copy of all Excel files you created in answering questions for your future reference and for consideration for partial credit. Question 1 (20 points) In today’s competitive global marketplace, supply chain executives are actively concerned with the resiliency of their supply chains. Stanford University Professor Hau Lee has coined the phrase “The Triple A” supply chain [Agility; Adaptability and Alignment] as a framework to understand supply chain operations. As the new hire in supply chain management, the supply chain manager has tasked you with the preparation of a briefing memo on the how and the why of the Triple A supply chain framework. Prepare a briefing memo (maximum of one page length – single spaced, use normal margins and an 11 or 12 size font) in which you explain how the Triple A framework relates to supply chain resiliency. Remember, managers do not like to read voluminous lines of verbal discussion. Present key concepts using bulleted points and use short paragraphs to support the key bulleted concepts. Do not exceed the page limit. Question 2 (30 points) Consider the multi-stage supply chain illustrated below which consists of two production plants (nodes 1 and 2), two warehouses (nodes 3 and 4) and four customers (nodes 5, 6, 7 and 8). A single product flows between the nodes in this network in the direction as defined by the directed arcs. The plant production capacities and customer demands are given in Table 1. There are no capacity restrictions on the warehouses. Total plant capacity equals total customer demand. Table 1 Network Capacity and Demand Node Units of Capacity Units of Demand 1 Plant 1200 2 Plant 800 3 Warehouse unlimited 4 Warehouse unlimited 5 Customer 400 6 Customer 900 7 Customer 500 8 Customer 200 The shipment cost per unit from node to node are given in Table 2. For example, the shipment cost from node 2 to node 3 is $7 per unit. Table 2 Network Shipment Costs per Unit. Node To 3 To 4 To 5 To 6 To 7 To 8 From 1 3 5 From 2 7 2 From 3 5 4 7 6 From 4 2 6 4 5 a) In the current operation of this network supply chain management has allocated the 2000 units of plant capacity to meet the 2000 units of customer demand according to the shipping schedule in Table 3. Table 3 Current Shipment Schedule. From To Units Shipped Plant 1 Warehouse 3 500 Plant 1 Warehouse 4 700 Plant 2 Warehouse 3 500 Plant 2 Warehouse 4 300 Warehouse 3 Customer 5 0 Warehouse 3 Customer 6 800 Warehouse 3 Customer 7 0 Warehouse 3 Customer 8 200 Warehouse 4 Customer 5 400 Warehouse 4 Customer 6 100 Warehouse 4 Customer 7 500 Warehouse 4 Customer 8 0 Determine the total shipment cost for the current shipment schedule that is defined in Table 3 [10 points]. b) The percentage cost penalty (PCP) for using the current shipment schedule instead of the optimal cost minimum shipment schedule is defined as: ??? = ([????? ???? ??????? ????????] − [????? ???? ??????? ????????])(100%) [????? ???? ??????? ????????] Determine the PCP for using the current shipment schedule (Table 3) instead of the optimal cost minimum shipment schedule for this supply chain network. Recall that in Homework 2 you verified the Solver solution for the optimal cost minimum shipment schedule. Round your final PCP value to the nearest tenth of a percent [10 points]. c) Prepare a list of the recommended node-to-node changes in shipment quantities that is needed to change the non-optimal current shipment schedule into the optimal cost minimum shipment schedule [10 points]. Question 3 (30 points) Consider the two alternative lot sizing schedules (schedule I, schedule II) for the sourcing of a product for the next 12 weeks. Assume that there is zero beginning inventory. Week 1 2 3 4 5 6 7 8 9 10 11 12 Units to be Sourced 400 120 300 60 210 480 200 70 120 240 260 240 Lot Sizes for Schedule I (units) 520 360 690 270 360 500 Lot Sizes for Schedule II (units) 400 120 360 210 480 200 190 240 260 240 The cost to place an order is $85. The inventory holding cost per unit per week is $3.20. Each unit of the product weighs 2.4 pounds. Purchasing costs for the product are given per the quantity discount schedule of Table 4; transportation costs for the product are given per the less than truckload freight tariff of Table 5. Table 4 Quantity Discount Schedule Quantity of Lot Size Unit Price 299 units or less $3.20 300 to 499 units 3.18 500 to 599 units 3.13 600 units or more 3.04 Table 5 Less Than Truckload Freight Tariff X = Shipping Weight (pounds) Freight Rate ($/hundredweight) X < 150.0 $200.00 min charge 150.0 ≤ X < 500.0 21.90 500.0 ≤ X < 1000.0 20.20 1000.0 ≤ X < 2000.0 19.75 2000.0 ≤ X < 5000.0 18.58 5000.0 ≤ X < 10000.0 17.05 10000.0 ≤ X < 20000.0 16.20 20000.0 ≤ X < 30000.0 15.30 30000.0 ≤ X < 40000.0 14.30 Determine the total cost (order cost + holding cost + purchase cost + transportation cost) for each schedule. Present your results in the cost summary table as outlined below. Identify which lot sizing schedule (I versus II) you recommend if management is interested in the lowest total cost schedule. Cost Summary for Lot Sizing of Weeks 1 to 12 Lot Sizing Schedule I II Order Cost Holding Cost Purchase Cost Transportation Cost Total Cost Note: there are many alternative methods in accounting and finance for evaluating inventory holding costs. In answering this question use the inventory holding cost calculation method that was illustrated in our class lecture notes. Note: you do not need to submit your detailed cost calculations; just submit the above summary table and your recommended schedule. Save your detailed cost calculations in the event I need to evaluate them to support the awarding of partial credit. Question 4 (20 points) Refer to the reading “ Procurement 2025:10 Challenges that Will Transform Global Sourcing” which is found in the Exam I subfolder Paper to Read for Exam I. Read this paper as the fourth question of the exam. To answer and receive the 20 points for question 4, give as your answer to question 4 an acknowledgement statement that you (we if a group submission) have completed reading the paper.