Chapter 10, Inventory Management and Stochastic Materials Management Video Solutions, Integral Logistics Management: Operations and Supply Chain Management Within and Across Companies,

Problem 1

The ABC Classification

This exercise refers to Section 10.2.2. Perform an ABC classification for the items shown in the table in Figure 10.7.1.1, separately for two $\mathrm{ABC}$ categories 1 and 2. Class A accounts for $75 \%$ of sales turnover, and items in the B class account for $90 \%$ of turnover. Why does it often make sense to perform separate classifications for two or more ABC categories? Is your classification of the items as A, B, or C the only possible solution?
$$
\begin{aligned}
&\begin{array}{|c|c|c|}
\hline \text { Item ID } & \text { Sales (\$) } & \text { ABC category } \\
\hline 4310 & 10 & 1 \\
\hline 4711 & 1 & 2 \\
\hline 5250 & 0 & 2 \\
\hline 6830 & 6 & 2 \\
\hline 7215 & 30 & 1 \\
\hline 7223 & 2 & 1 \\
\hline 7231 & 84 & 1 \\
\hline
\end{array}\\
&\begin{array}{|c|c|c|}
\hline \text { Item ID } & \text { Sales (\$) } & \text { ABC category } \\
\hline 8612 & 70 & 1 \\
\hline 8620 & 13 & 2 \\
\hline 8639 & 1 & 2 \\
\hline 8647 & 3 & 2 \\
\hline 8902 & 4 & 1 \\
\hline 8910 & 0 & 1 \\
\hline 9050 & 1 & 2 \\
\hline
\end{array}
\end{aligned}
$$

Jacquelyn Trost

Numerade Educator

00:32

Problem 2

Combined ABC-XYZ Classification

A combined $\mathrm{ABC}-\mathrm{XYZ}$ classification allows decision making as to the appropriate method of materials management for individual items. Mark the areas (items) in the matrix in Figure 10.7.2.1 for which kanban control would be appropriate. Explain the reasoning behind your answer.
(COLUMN CANT COPY)

Banhishikha Sinha

Numerade Educator

01:20

Problem 3

Safety Stock Variation versus Demand Variation

True or false: The safety stock level increases with increasing demand.

Oluwadamilola Ameobi

Numerade Educator

08:59

Problem 4

Batch Size Depending on Stockout Costs (*)

The carrying costs for a certain article are 2 per unit and year. Stockout costs are 5 per unit. The average annual consumption amounts to 1000 , and the standard deviation of demand during lead time is 10 . No safety stock is intended. Normal distribution is assumed.
a. How large should the batch size be, considering the optimum stockout probability? Can the fill rate target of $99 \%$ be met? What are the carrying costs per year?
b. Assume a batch size of only 250 . What are the values for safety stock and fill rate corresponding to the optimum probability of stockout per order cycle?
c. Now assume a safety stock of 20 units. Again, the batch size is 250 . What are the values for service level and fill rate?

Sinisa Stura

Numerade Educator

Problem 5

Effectiveness of the Order Point Technique

Figure 10.3.1.1 shows the famous saw-tooth-shaped curve that is characteristic of the order point technique. You can view the curve on the Internet, implemented with Flash animation, at the following URL:
www.intlogman.lim.ethz.ch/order_point_technique.html
Explore the changing shape of the inventory curve for continuous and less continuous demand (moving your cursor over the gray icon executes your input choice). Try out different parameters to calculate lot size and service level. Try other consumption values. Observe the effect of the consumption values on the order of the production or procurement batch size. Again, touching the "calculate" icon executes your input choice. The initial demand values are automatically reentered by moving your cursor over the gray demand shape icon.

Check back soon!