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Cases on Material Requirements Plan, Optimal Order Quantity, Spare Part Cost and Productivity Change

## Case 1: Material Requirements Plan

Case 1

The procurement team needs to plan for the purchase of parts and based on assembly. The purchase lead time for any order is one workday, except metal plates have 2 days lead time. Also, the company has some inventory of parts from previous purchases: 20 top boards, 160 legs, 40 metal plate, and 90 metal screws. The procurement team knows top board, leg, and metal plate are purchased in lot-for-lot, metal screw in a lot size of 200, leg extender in a lot size of 80.

Assuming it takes one day to make a table.

a) Develop the material requirements plan for this order. (10 marks)
b) Suppose the table is not assembled in a work center. In one small paragraph, identify the production process strategy for the table. Explain why you would choose this process strategy.

Case 2: 12 marks possible

The Law Office of Barnes & Smith have a policy to order ink cartridges 60 units at a time. The firm estimates that carrying cost is 40% of the \$10 unit cost and that annual demand is about 240 units per year.

a) For what value of ordering cost would its action be optimal?
•  Define optimal order quantity (2 marks)
•  Calculate the holdihng and set up costs (4 marks).

b) If the true ordering cost turns out to be much greater than your answer to part (a), what is the impact on the firm’s ordering policy?
•  Calculate EOQ (3 marks)
•  Provide a logical conclusion

Case 3: 12 marks possible

Myriah Fitzgibbon, of L.A. Plumbing, uses 1200 of a certain spare part that costs \$25 for each order, with an annual holding cost of \$24.

a) Calculate the total cost for order sizes of 25, 40, 50, and 100. (8 marks)
b) Identify the economic order quantity and describe the implications for making an error in calculating economic order quantity.

Case 4

a) Using the following costs: labour \$10 per hour; capital: 0.83% per month of investment; energy: \$.60 per  BTU, determine the multifactor productivity for both years.   (5 marks)
b)  Calculate the overall increase or decrease in productivity.  (2 marks)
c)  In a short paragraph, describe the productivity change and why the change occurred.