Harley davidson has its engine assembly plant in milwaukee

Technology And Information Management

Problem 1: Cycle Inventory: SCM, 4th, D10.1, 10.2, D10.3

Define:

1. Consider a supermarket deciding on the size of its replenishment order from Procter & Gamble. What costs should it take into account when making this decision?

2. Discuss how various costs for the supermarket in Question 1 change as it decreases the lot size ordered from Procter & Gamble.

3. As demand at the supermarket chain in Question 1 grows, how would you expect the cycle inventory measured in days of inventory to change? Explain.

Plan:

Information provided:

All information needed is in the textbook. The lecture notes from class are also useful.

Execute:

1. The most important cost elements for the supermarket’s policy of inventory include holding costs, ordering costs and material cost. Material cost is money paid to P&G for the physical goods. Ordering costs to procure a product are incurred by request of the goods to the supplier & are fixed independent from order size. Holding cost is used to carry one unit in inventory for a specific period of time. This varies and involves capital costs, warehouse space, capital cost, insurance, etc.

2. Lot size is the quantity of product in the supply chain that is being produced or purchased in a specified period of time. As the supermarket decreases its lot size ordered from Procter & Gamble, material cost increases, the supermarket may experience higher material cost when ordering a smaller quantity from Procter & Gamble particularly if the price discount is offered at a larger lot size. Fixed ordering cost will also increase because the supermarket incurs higher expense in trucking and labor costs especially when orders are placed frequently at a smaller quantity. Holding cost decreases also as a result of smaller lot size due to the lesser quantity of product that the supermarket stocks and the lower chance of the product being obsolete or unneeded.

3. Cycle inventory is defined as the average inventory of a particular item that is higher than consumers’ demand. Cycle inventory measured in days reduces as demand grows at the supermarket due to a higher turnover from purchases of customers. Higher demand minimizes the need to frequently track the inventory of each product. Stocking period of each product also declines when demand is high.

Check: The conclusions I’ve arrived to have all be derived from the class notes and text readings so there shouldn’t be any discrepancies.

Learn: I learned about the holding costs, ordering costs, and material costs of the supermarket’s policy of inventory and how lot size factors in. I also learned how cycle inventory works.

Problem 2: Tahoe Salt Forecast demand

Define:

Find Tahoe Salt’s Forecast demand using the Holt and Winter Adaptive Forecasting mewthods.

Plan:

Information provided:

All information needed is in the textbook. The lecture notes from class are also useful.

Execute:

Check: The conclusions I’ve arrived to have all be derived from the class notes and text readings so there shouldn’t be any discrepancies.

Learn: I believe these discussion questions helped me further understand the usefulness of Forecasting and it’s key components MSE, MAD, etc. and their functions in giving the company a competitive advantage. In this particular scenario we focused on the comparison between Holt’s and Winter’s. Judging from the error from the data, the smaller errors in the Winter Model seem to highlight it as the more effective forecasting method.

Problem 3: Hot Pizza

Define:

Estimate demand for the next four weeks using a four-week moving average as well as simple exponential smoothing with α = 0.1. Evaluate the MAD, MAPE, MSE, bias, and TS in each case. Which of the two methods do you prefer? Why?

Plan:

Information provided:

All information needed is in the textbook including the data table. The lecture notes from class are also useful.

Execute:

MAD = 10.88

MAPE = 11.08

MSE = 146.91

Bias = 12.09

TS = 5.38

MAD = 99.31

MAPE = 9.84

MSE = 124.69

Bias = 16.43

TS = 1.23

One can prefer average moving method to calculate the value of MAD, MAPE, TS, MSE because it the easiest method to calculate and understand. Moreover, this method is used when demand has no trend or seasonality.

Check:

I believe so, again I can't check since I don’t have the book however my intuition tells me that the change in data from actual to forecast is a realistic amount of change from one cycle to the next. I also believe my assumption to be reasonable since the results do make sense from what I know of actual demand cycles.

Learn:

I learned the proper steps to take for forecasting. Using the formulas provided from the text I’ve learned how the results are calculated. Simple Exponential Smoothing here is compared to the moving method to calculate the value of MAD, MAPE, TS, MSE. But I found that the moving method is easier to calculate and understand a situation where demand has no trend or seasonality.

Problem 4: Flower Wholesaler

Define:

Quarterly demand for flowers at a wholesaler are as shown. Forecast quarterly demand for year 5 using simple exponential smoothing with α = 0.1 and β = 0.1. Which of the two methods do you prefer? Why?

Plan:

Information provided:

All information needed is in the textbook including the table. The lecture notes from class are also useful.

Execute:

Winter:

MAD Measure the accuracy of the forecast. MAD of exponential smoothing model with α = 0.1 is 16 while MAD for Holt’s model with α = 0.1 and β = 0.1 is 8. It can be concluded that Holt’s model is a better approach than the simple exponential smoothing model and is more accurate in evaluating forecasts.

Check:

I believe so, again I can't check since I don’t have the book however my intuition tells me that the change in data from actual to forecast is a realistic amount of change from one cycle to the next. I also believe my assumption to be reasonable since the results do make sense from what I know.

Learn:

I learned the proper steps to take for Holt’s Model and how it is set apart and superior to simple exponential smoothing. Using the formulas provided from the text I’ve learned how the results are calculated.

Problem 5: ABC Corporation

Define:

Consider monthly demand for the ABC Corporation as shown in Table 7-3. Forecast the monthly demand for Year 6 using Winter’s Model. Evaluate the Bias, TS, MAD, MAPE, MSE.

Plan:

Information provided:

All information needed is in the textbook including the table. The lecture notes from class are also useful.

Execute:

Winter’s model would likely be the most preferable in these for its low MAD value meaning low forecast error. Winter’s model is also the only one that incorporates level, trend, and seasonality that further leads to the most accurate result.

Check: The conclusions I’ve arrived to have all be derived from the class notes and text readings so there shouldn’t be any discrepancies.

Learn:

I learned how all the different methods compare to and how Winter’s model advantage in having more provided information therefore leading to more accurate results.

Problem 6: Harley Davidson 10.1, 10.2

Define:

1. Harley-Davidson has its engine assembly plant in Milwaukee and its motorcycle assembly plant in Pennsylvania. Engines are transported between the two plants using trucks, with each trip costing $1,000. The motorcycle plant assembles and sells 300 motorcycles each day. Each engine costs $500, and Harley incurs a holding cost of 20 percent per year. How many engines should Harley load onto each truck? What is the cycle inventory of engines at Harley?

2. As part of its initiative to implement just-in-time (JIT) manufacturing at the motorcycle assembly plant in Exercise 1, Harley has reduced the number of engines loaded on each truck to 100. If each truck trip still costs $1,000, how does this decision impact annual inventory costs at Harley?

Harley-Davidson has its engine assembly plant in Milwaukee and its motorcycle assembly plant in Pennsylvania. Engines are transported between the two plants using trucks, with each trip costing $1,000. The motorcycle plant assembles and sells 300 motorcycles each day. Each engine costs $500, and Harley incurs a holding cost of 20 percent per year. How many engines should Harley load onto each truck? What is the cycle inventory of engines at Harley?

Plan: Using notes and textbook formulas I will mathematically solve the problems with provided equations.

Execute:

1. Cost each trip (S) = $1000, Demand for motorcycles (D) = 300, Cost per engine = $500, Holding cost (h) = 20% * $500 = $100

Economic Order Quality =

= = 1,341.6 engines Cycle inventory = EOQ/ 2 = 1341.6/2 = 670.82 engines

2. Annual Demand, D = 300 * 365 Order cost per lot, S=1,000 Unit cost per engine, C=500

Holding cost per year as a fraction of cost, h = 20% Order Quantity = 100

Optimal lot size, Q* = = = 1479.86 units

Total inventory cost = (D/Q)S+(Q/2)hC = ((300*365)/100)*$1000+(100/2)*0.20*$500 = 1,100,000

Impact of decision = $1,100,000-147,986.4 = $952,013.4

Total inventory cost (EOQ) = Total inventory cost (100)

$147,986.4 = ((300*365)/100)*S+(100/2)*0.20*$500

S = $130.58

With each truck costing $130.58, the 100 units ordering policy will be optimal.

Check: The conclusions I’ve arrived to have all be derived from the class notes and text readings so there shouldn’t be any discrepancies.

Learn:

I learned how the different factors relate to one another mathematically and better understand how to calculate economic order quality, optimal lot size, and total inventory costs.