Part A
DBS is a manufacturer of hi-tech digital devices in Melbourne. It uses a special part to make its
devices. DBS requires an average of 24,000 units of this special part every year in its manufacturing
process. The major supplier of the special part that DBS has been dealing with, is a preferred supply
chain partner who charges a price per unit of $9000 for the part. Each order costs $1700 to process.
Because of limited storage space, the operations manager wants to factor in inventory holding cost
at 34.5% of unit cost. You have been asked to:
(1) Determine the economic order quantity (EOQ) and annual total cost assuming no waste disposal
(4 marks)
(2) Environmental considerations, material losses and waste disposal can be included in the EOQ
model to improve inventory management practices. Assume that on an average 12.25% of the parts
that DBS purchases are damaged in transit thus becoming unusable and have to be disposed of.
Disposal cost is $640 per unit. Find the new EOQ and total annual cost when the disposal cost is
considered. What implications does this have for DBS’ sustainability practices?
(4 marks)
(3) Explain the implications to the operations manager of DBS if estimates of inventory holding costs
include fixed, semi-variable, and pure variable costs while setup (order) costs include only pure
variable costs.
(4 marks)
Part B
Year Forecast Actual Requirement
1 15010 17090
2 22045 22930
3 20580 19210
4 25620 24100
5 25070 23800
6 26090 21010
7 27030 22530
8 28010 17960
9 28005 17995
10 29333 19021
11
In the above data table, the operations manager of DBS Manufacturing Company has provided you
historical data on their annual requirement of the special component over the past ten years.
(4) What is the forecast requirement for next (i.e., eleventh) year using a two-year and three-year
simple moving average? Compute the MSE for each of those two moving averages and compare
your results.
(4 marks)
(5) Using the same data table, find the best single exponential smoothing model by evaluating the
MSE, starting with an alpha of 0.10 and changing alpha in increments of 0.10. How does the best
single exponential smoothing model compare with the best moving average model you found in (4)?
(4 marks)
(6) If the DBS operations manager asked for your advice as to whether it is better to use regression-
based forecasting models or time-series forecasting models, what would your advice be and why?
(4 marks)
Part C
(7) DBS is evaluating the alternative of manufacturing a part that is currently being outsourced from
an outside supplier. The relevant information is provided below:
(i)
For in-house manufacturing:
Upfront fixed cost = $53,000,000
Variable cost per part = $6750
For purchasing from supplier:
Purchase price per part = $9000
What will the demand need to be in order to justify making the components in-house?
(2 marks)
(ii) In the event that a forecasted increase in demand does not materialize and the
marketing department rather expects the demand to drop to 17,500 units next year, then
what will be the maximum price per part that DBS would be willing to pay to the supplier?
(2 marks)
(8) Going forward, if it is eventually found to be a better decision to make the components in-house,
DBS will then need to select an optimal location point to set up its manufacturing facility. Given the
following location information and expected material movements between several retail outlets and
the intended manufacturing facility, find and plot the best location using centre-of-gravity method:
Retail outlets x Y Material movements
1 13 16 23000
2 15 8 16000
3 10 12 10800
4 7 6 30000
5 5 13 44000
(4 marks)
(9) Using one or more relevant examples, explain to the DBS operations manager some of the
potential consequences of not understanding or considering non-quantifiable factors like local
culture and practices when taking location decisions.
(4 marks)
The Economic Order Quantity (EOQ) model is a useful tool for determining the optimal quantity of inventory that should be ordered at one time in order to minimize holding costs and ordering costs. To calculate the EOQ, we need to know the following information: total annual demand (D), unit cost of each item ($P), processing cost per order ($F), and inventory carrying cost as a percentage of the unit price (C). In this case, D = 24,000; P = $9000; F = $1700; C= 34.5%.
Using these values, we can calculate EOQ by dividing square root of 2DF by CP: √(2 x 24,000 x 1700)/(0.345 x 9000) = 847 units.
This means that DBS should place orders for 847 units at a time to minimize its annual total costs associated with ordering and carrying those items in stock. The annual total cost is calculated using the following formula: Annual Total Cost = [(D/E)F + (E/2)CP], where D is demand per year, E is economic order quantity value found from above calculation and F and P are fixed values based on context given in problem statement.
In this case, Annual Total Cost = [(24000/847)*1700 + ((847/2)*0.345*9000)] = $307374 . This indicates that if DBS decides to use 847 as its optimal number of items per order then it would incur an annual total cost of $307374 which includes both fixed ordering costs and variable holding costs associated with maintaining adequate levels of inventory.
Therefore, based on our calculations it appears that placing orders for 847 items every time would result in minimum overall expenses incurred by DBS over a given year period while still being able meet their demand requirements.
Section I: INTRODUCTION TO THE STUDY Introduction The country is encountering a basic deficiency of medical care suppliers, a lack that is supposed to increment in the following five years, similarly as the biggest populace in our country’s set of experiences arrives at the age when expanded clinical consideration is vital (Pike, 2002). Staffing of emergency clinics, facilities, and nursing homes is more basic than any time in recent memory as the huge quantities of ‘gen X-ers’ start to understand the requirement for more continuous clinical mediation and long haul care. Interest in turning into a medical caretaker has disappeared lately, likely because of the historical backdrop of the extraordinary and requesting instructive cycle, low compensation, firm and extended periods of time, and fast ‘wear out’ of those rehearsing in the calling (Wharrad, 2003).
A complex oversaw care climate in this country is restricting the dollars accessible to be spent on nursing care. Numerous wellbeing callings, particularly nursing, have the standing of ‘eating their young’ as opposed to offering compelling coaching to develop future medical services suppliers. Because of these variables, the quantity of medical attendants has diminished and businesses regard themselves as understaffed and seeking able work force. Before 2001 the decay had been apparent for a considerable length of time (Sadler, 2003). Nursing schools, public pioneers, medical services pioneers and the overall population is impacted by the absence of Registered Nurses (RNs) accessible.
As the populace ages, the assumption is that a rising number of RNs will be required essentially to keep up with the ongoing degree of medical care. Furthermore, the momentum ecological and political worries of expanding pandemic sickness, event of synthetic and catastrophic events, and expanding dangers of war, requires critical expansions in the medical services labor force (Jefferys, 2001). The public nursing lack and factors that increment the interest for expanding the nursing labor force notwithstanding public, state, and nearby debacles make the potential for a general wellbeing emergency. Nursing programs have endeavored to satisfy need for medical attendants by expanding enlistment and campaigning effectively for expansions in program subsidizing by schools and states for understudies.
Tragically, the issue of nursing understudy weakening hampers the best endeavors of nursing programs and irritates the public lack of Registered Nurses in the United States (Ofori, 2002). In 2003, the National League for Nursing revealed a positive vertical pattern in the nursing labor force supply in any case, the American College of Healthcare Executives (2006) detailed that in 2005, 85% of emergency clinic directors decided medical clinics needed more enlisted medical attendants to fulfill patient consideration needs. The United States Bureau of Labor insights showed by 2014, more than 1.2 million new and substitution nursing positions would be expected to meet the public medical services needs (Ramsburg, 2007).
Various broad endeavors to diminish weakening have been made by nursing programs including reinforcing affirmation methods and executing maintenance programs. Unfortunately, the issues of weakening keep on continuing nursing schools the nation over. Admission to a nursing program is serious and numerous potential understudies are denied confirmation every semester. Steady loss from nursing programs influences not just the particular understudy who is acknowledged to a nursing program and ineffective, yet in addition the understudy denied confirmation that might have been effective. Steady loss rates are expensive to understudies, nursing projects, and medical services the same by diminishing the quantity of likely alumni from schools of nursing and adding to the nursing lack. Many examinations feature the a lot higher than wanted whittling down rates for nursing understudies