final assignment erp

UNIVERSITY OF ECONOMICS HO CHI MINH CITY SCHOOL OF INTERNATIONAL BUSINESS - MARKETING FINAL ASSIGNMENT ERP Lecturer: Group: Class: DH44IBC01 YEAR 2020 A Case – Production Scheduling of the Boeing Company I Overview: Denotation: Xi as the Production of each month with i={1,2,3,4} Xj as the Installation of each month with j={1,2,3,4,5} The Supply for the production (maximum production) is divided into two categories: Regular time and Overtime The cost incurred for the production process is well stated on the basis of Excel Solver An additional storage cost of $15,000 has been counted into the cost per unit section Since the Supply and Demand for production is not equal to each other, the company’s capability is not well balanced Moreover, the production for the previous months will be counted in the following month Therefore, we created a Fifth month (Dummy), where the unused capacity for the production will be stored, thus, the Total Demand and Total Supply of the problem will be balanced II Solved by Solver: Step 1: Input data In the Data array (D5:H12): - Data in D5, D6, E7, E8, F9, F10, G11, and G12 is the Unit Cost of Production in either Regular time and Overtime Production of each month Therefore, the costs will be equal to the Unit Cost of Production given in the case, respectively - As is mentioned in the case, there will be a storage cost of 0.015 ($ million) per engine stored until it's scheduled installation Thus, the cost of an engine produced in Month A and stored to be used in the following months will need to add 0.015 to it’s Unit Production Cost + The cost of an engine produced in Month then stored in the next months are described in array (E5:G6) + The cost of an engine produced in Month then stored in the next months are described in array (F7:G8) + The cost of an engine produced in Month then stored in the 4th month is described in array (G9:G10) - The other data cells not have value (-) because i>j (refer to the Denotation) For example, the Production of Month cannot produce engines for installing in Month (which i=2>j=1) 2 - Ste p 2: Add constraints Constraint 1: Total Demand must be equal Total Supply Constraint 2: Total Demand of each month cannot less than the Scheduled Installation of that month Constraint 3: Total Supply of each month cannot exceed the Maximum Production of that month - Constraint 4, 5, and 6: These cells cannot have value because engines cannot be produced in an “i>j” situation Step 3: Solve III Solved by QM for Windows: We convert all the data and constraints from Excel spreadsheet and Solver to QM for Windows Step : Setting Variables and Constraints We choose a Linear Programming Module to solve the problem Step 2: Adding the inputs data Step 3: Solve IV Conclusions: In the first month of production, the company should install 10 units from the regular time of the first month In the second month, the company should install 10 units from the regular work time of the first month and units from regular work time of the second month For the third month, the company should install 10 units from regular work time of the third month and 10 units from overtime of the third month In the fourth month, they will be better off if they install 10 units from regular work time of the third month and units from the regular work time of the fourth month The total cost of the recommended solution is 77.4 million dollars, being minimized so that Boeing can utilize cost savings as much as possible B Case – Crash landing on Inventory Control a) Based on Jeong-hyuk’s current inventory policy (which is 50 units of hammer), the unit holding cost is: √ √ KD 2∗75∗600 = = 50 => h = $36 h h So, the unit holding cost is $36 The unit acquisition cost is $20 The unit of holding cost as a percentage of the unit acquisition cost: 36/20 = 180% Q= b) The unit holding cost: 20%*20 = $4 Based on the unit holding cost, which is equal 20 percent of the unit acquisition cost, the optimal order quantity is: KD 2∗75∗600 Q= == = 150 units of hammer h So, the value of TVC is: Annual setup cost + Annual holding cost 600 150 D Q + h* = 75* + 4* = $600 = K* 150 Q √ √  SOLVER Step 1: Insert data into Excel and add the formula: - Annual Setup Cost: =K*(D/Q) - Annual Holding Cost: =h*(Q/2) - Order quantity (Q): =SQRT(2*D*K/h) - Total Variable Cost: =Annual Setup cost + Annual Holding Cost (Give a temporary value for Q > 0) Step 2: Click Data -> Solver The above box appears Step 3: Set Objective (G7), Variable(C11) Select “GRG Nonlinear” Solving Method and tick “Make Unconstrained Variables Non-negative” Step 4: Click Solve -> OK The results we need appear in below table  QM Step 1: - Click Module -> Inventory - Click New -> Economic Order Quantity (EOQ) Model The above box will appear - Add title, choose No reorder point -> OK Step 2: Add data according to the information we have in the table below Step 3: Click Solve and the results we need will appear as the below table Based on current inventory policy (Q=50, h=36), the value of TVC is: 600 50 D Q TVC = K* + h* = 75* + 36* = $1800 50 2 Q c) Because the wholesaler typically delivers an order of hammers in working days (out of 25 working days in average month), the lead time is days and the working days is 300 days (which equals 25*12) L = 600* = 10 units of hammer So, the reorder point should be: D* 300 WD  SOLVER Step 1: Insert data into Excel and add the formula: - Annual Setup Cost: =K*(D/Q) - Annual Holding Cost: =h*(Q/2) - Order quantity (Q): =SQRT(2*D*K/h) - Total Variable Cost: =Annual Setup cost + Annual Holding Cost (Give a temporary value for Q > 0) Step 2: Click Data -> Solver The above box appears Step 3: Set Objective (G7), Variable(C11) Select “GRG Nonlinear” Solving Method and tick “Make Unconstrained Variables Non-negative” Step 3: Click Solve and the results we need will appear as the below table  QM Step 1: - Click Module -> Inventory - Click New -> Economic Order Quantity (EOQ) Model The above box will appear - Add title, choose No reorder point -> OK Step 2: Add data according to the information we have in the table below Step 3: Click Solve and the results we need will appear as the below table d) o As calculated by QM, the reorder point after Jeong-hyuk adds a safety stock of hammers is 15 hammers - New reorder point = (Average Daily Usage * Average Lead Time Days) + Safety Stock 50 * 5) + = 15 hammers =( 25 This is the result we have when using the unit holding cost in b): In this case, the annual holding cost for safety stock is $20 o And we have the different result when using the unit holding cost in a): But in this case, the annual holding cost for safety stock is much higher ($180) e) Using the current inventory policy, Jeong-hyuk has to order 12 times to get the demand rate (which is 600 hammers/year) leading to the higher setup cost (about $900) times than the new policy (which is orders with the $300 of setup cost) So does the holding cost (the current policy: $900, the new policy: $300) Totally, applying new inventory policy helps him save $1200 per year ($1800-$600 = $1200) Moreover, using the new policy helps him reduce annual holding cost for safety stock also (from $180 per year to $20 per year, it is times less) So, Jeong-hyuk should use the new inventory policy for his store to save $1360 per year