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exam2009 - THE UNIVERSITY OF HONG KONG B.ENG LEVEL II/III...

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Unformatted text preview: THE UNIVERSITY OF HONG KONG B.ENG. LEVEL II/III EXAMINATIONS DEPARTMENT OF INDUSTRIAL AND MANUFACTURING SYSTEMS ENGINEERING SUPPLY CHAIN DESIGN AND DEVELOPMENT (IMSE0201) Answer Question 1 in Section A and any two questions in Section B. Electronic Calculators: Candidates may use any calculator which fulfils the following criteria: (a) it should be self-contained, silent, battery-operated and pocket-sized; (b) it should have numeral-display facilities only and should be used only for the purpose of calculation. (0) it should not have any printing device, alphanumeric keyboard, or graphic display; and (d) it should not contain any recorded data or program. It is the candidate's responsibility to ensure that the calculator operates satisfactorily and the candidate must record the name and type of the calculator on the front page of the examination scripts. Lists of permitted/prohibited calculators will not be made available to candidates for reference, and the onus will be on the candidate to ensure that the calculator used will not be in violation of the criteria listed above. SECTION A (Compulsory) Question 1 (50 marks) Sonic Corporation (SC) designs, manufactures, markets and sells notebook computers. SC has been financially successful for many years and sales are growing. The notebook computer industry is characterized by short product lives and complex products. SC launches several new products each year and some are relatively sophisticated. SC’s design and manufacturing process is representative of the high end of the notebook computer industry and SC’s products have a reputation in the market for being high quality, but also high priced. SC’s product line comprises two basic product groups, each of which is offered in a variety of configurations, with different CPU speeds, optical disk drives and hard disk sizes. SC business is truly global: the sales in each of its three major markets, US, Europe and Asia, accounts for one third of its annual sales. Each market sells the same product line, though the product mix varies. SC has three manufacturing plants: in Osaka (a thirty-minute drive from SC J apan’s corporate headquarter), in Spain (Europe) and in Korea. Each facility specializes in producing a certain product group. The Osaka plant only manufactures Product Group 1, the state-of—the-art product group, and ships to SC’s three major markets by air through its mega distribution centre next to the plant. SC’s Spain and Korea plant focuses on manufacturing the products in Product Group 2. The unit production cost and weekly production capacities of the two plants are given in the table below. Spain plant Korea plant Weekly production capacity (units) 10,000 15,000 Unit product cost ($/unit) 2,000 2,000 Each manufacturing plant performs two main operations, printed circuit board assembly (i.e., stuffing bare boards with electronic components) and system assembly (i.e., combining a printed circuit board assembly with other components such as control cards, a hard disk, a power supply subassembly, a LCD display panel and an outer metallic body). SC’s manages two distribution centres in Singapore and Hong Kong to distribute Product Group 2 by sea to its two Asia sales regions, namely, North East Asia and South East Asia. The retailers in the two Asia sales regions generally hold little inventory and expect SC to be responsive in meeting their demand. The weekly demand of the two sales regions can be approximated by normal distributions with means and standard deviations given in the following table. —— Standard Deviation North East Asia 10,000 550 South East Asia 8,000 700 SC has a service level target of 95% for the two distribution centres. The table below shows relevant data of the two distribution centres. Hong Kong Singapore Weekly handling capacity (units) 20,000 20,000 Unit transportation cost to North East Asia ($/unit) 40 55 Unit transportation cost to South East Asia ($/unit) 45 35 Unit transportation cost from the Spain plant ($/unit) 100 70 Unit transportation cost from the Korea plant ($/unit) 45 75 Delive lead time from the S ain lant weeks 3 2 Delivery lead time from the Korea plant (weeks) 2 3 (a) Identify the order winners of Product Groups 1 and 2. Explain briefly. [5 marks] (b) SC is planning to form a strategic alliance with several major retailers in Asia. Discuss two common types of strategic alliance that are suitable to SC. [5 marks] (0) SC’s logistics department is planning to outsource its outbound logistics involved in the distribution of Product Group 2 and it is negotiating with freight forwarders on the outsourcing cost. (i) What are the advantages and disadvantages of outsourcing its outbound logistics? [5 marks] (ii) Propose and discuss a method for SC to estimate its outbound logistics cost. [5 marks] (ii) Propose a mathematical program to determine the minimum sum of weekly production and transportation cost of Product Group 2. [10 marks] (d) SC’s logistics manager is studying the optimal arrangement for producing and distributing Product Group 2 and has decided that Product Group 2 should only be produced at the Korea plant. The manager is now evaluating the following two alternatives: Alternative 1 — each distribution centre should serve only one sales region. Alternative 2 — set up a centralized distribution centre in China to replace the two existing distribution centres. (i) Identify and discuss the important factors, in addition to the cost factor, that need to be considered when selecting the location for the centralized distribution centre. [5 marks] (ii) Suppose that the delivery lead time from the Korea plant to the centralized distribution centre in China is 2 weeks. Determine the alternative that minimizes the total amount of safety stock needs to be kept in the distribution centre(s). [15 marks] SECTION B (Answer any two questions in this section) Question 2 (a) 0)) Consider the supply chain of Pampers consisting of P&G, the manufacturer, and Wal- Mart, the retailer. Which member of the supply chain faces a higher level of fluctuating demand? Explain how the supply chain members can reduce the level of demand fluctuation. [7 marks] Prosperity Bakery, a local bakery specializing in mooncake production, produces mooncakes for the coming Mid-Autumn festival at a cost of $50 per box and sells the mooncakes to Maxima, a local restaurant chain, at a price of $70 per box. Maxima can sell each box at a price of $130 to its customers before the festival and dispose of any unsold mooncakes at a price of $20 per box each after the festival. The demand for the mooncakes before the festival is given below: Demand (boxes) Probability 10000 0.15 20000 0.40 30000 0.25 40000 0.20 (i) Determine the purchase quantity of mooncakes that maximizes the expected profit of Maxima. [6 marks] (ii) Maxima has made a proposal of sharing 15% of its sales revenue of mooncakes with Prosperity Bakery on the condition that its selling price is reduced from $70 to $50 per box. Should Prosperity Bakery accept the proposal? Why? [8 marks] (iii) Suppose that Maxima and Prosperity Bakery work together to maximize the sum of their expected profits. Determine the maximum sum. [4 marks] Question 3 Wal-Mart and Dell are two well-known companies with world-class supply chain management strategies and practices. Wal-Mart’s competitive strategy is to provide a large variety of reasonable quality products at low prices whereas Dell’s competitive strategy is to provide a large variety of customizable products at reasonable prices. (a) (b) (C) Supply chain management of both Wal-Mart and Dell revolves around efficient integration of different members in their supply chains. Among the three supply chain integration strategies — push-based, pull-based and push-pull, identify and discuss the most suitable supply chain integration strategies for Wal-Mart and Dell. Explain how the identified integration strategies can support their competitive strategies. [10 marks] In addition to the supply chain strategy identified in part (a), discuss the logistics strategy adopted by Wal-Mart to change its distribution centres from inventory storage points to inventory and flow coordination points and integrate its suppliers, distribution centres and stores together so as to deliver shipments to its stores as frequently as possible. Discuss the strategy's characteristics and operational requirements. [8 marks] For the integration strategy identified in part (a), discuss how Dell can apply the risk pooling concept in its supply chain to cope with highly uncertain demand. [7 marks] Question 4 (a) (b) Standardization is one of the key approaches to facilitate design for logistics. Discuss the four common types of standardization. [8 marks] Alpha Manufacturing (AM) produces 2 similar products, P1 and P2. AM has heard about the benefits of delayed product differentiation and is currently evaluating the costs and benefits of such a strategy. It is found that the weekly demand of each product approximately follows a normal distribution with mean and standard deviation given as follows: Product Mean Standard deviation A 200 100 B 400 200 It is estimated by AM's production department that a generic product with all the features of products A and B can be produced at an additional cost of $10 per unit. The respective set-up costs for producing product A, product B and the generic product are $10,000, $15,000 and $20,000. The holding cost of each product is $100 per unit per year and the target service level is 97%. An (s,S) policy is used to control the inventory of all AM's products. (i) Assume that the production lead time of products A and B is 8 weeks and that of the generic product is 10 weeks. Should the company produce the generic product instead of products A and B? [12 marks] (ii) Suppose that a special machine needs to be purchased in order to reduce the lead time for producing the generic product to 8 weeks, the holding cost of the generic product will increase to $150 per unit per year and the annual depreciation cost of the machine is $100,000. Should AM purchase the machine? Why? [5 marks] — End of Paper — Suggested Solutions Question 1 (C) (iii) Decision variables: Aij amount of Product Group 2 flows from Plant i (i = 1 for Spain, i = 2 for Korea) to DC j (j = l for Hong Kong, j = 2 for Singapore) Bij amount of Product Group 2 flows from DC j (j = l, 2) to market k (k = l for North East Asia, k = 2 for South East Asia) Objective: Minimize the annual total production and transportation cost Minimize 2000(A11 + A12) + 2000(A21 + A22) + 100A11 i 70A12 i 45A21 i 75A22 i 40B11 i 45B12 i 55B21 + 35B22 Subject to A11" A12 <= 10,000 A21 -- A22 <= 15,000 B11" B12 <= 20,000 B21 -- B22 <= 20,000 B11 B12 — A11 A21 321 “ 1322 2 A12 “ A22 B11" B21: 10,000 B12 -- B22 = 8,000 Aij, Bij >= 0 for all i, j and k ((1) (ii) Alternatives Safety stock Alternative 1— Hong Kong serves North 1.64*\/(2)*550--1.645*\/(3)*700=3264 East Asia & Singapore serves South East Asia Alternative 1— Hong Kong serves South 1.64*\/(2)*700--1.645*\/(3)*550=3196 East Asia & Singapore serves North East Asia Alternative 2 — Centralized DC 1.64*\/(2)*\/(700*700+550*550) = 2064 Therefore, SC should set up the centralized DC. Question 2 (b) (i) Q = purchase quantity D = demand For given Q and D, Maxima's profit = 130*min(D,Q) _ 70*Q + 20*max(Q-D,0) Q 10000 20000 30000 40000 Expected profit 600000 103 5000* 1030000 750000 Therefore, the optimal purchase quantity is 20000 boxes. 0)) (ii) Supply Contract For given Q and D, Maxima's profit = 0.85*130*min(D,Q) —50*Q + 20*max(Q-D,0) “ 10000 20000 30000 40000 605000 1074250 1181500* 1062500 Maxima should purchase 30000 boxes. For given Q and D, Prosperity's profit =(50-50)*Q+ 0.15*l30*min(D,Q) Prosperity's expected profit under the proposed supply contract = $448500 Prosperity's profit under the original scenario = (70-50)*20000 = $400000 Therefore, Prosperity should accept the proposal. (iii) The sum oftheir urofits = 130*min D,Q — 50*Q + 20*max Q-D,0 expected profit 800000 1435000 1630000 1550000 The maximum sum is $163 0000. Question 4 (b) 0) Safety stock ofproduct A = \/8*100*1.88 = 532 units EOQ ofproduct A = \/[(2*10000*52*200)/100] = 1442 units Average inventory level of product A = 532 + 1442/2 = 1253 units Annual holding cost = 1253*100 = $125300 Annual ordering cost = (10000*52*200)/1442 = $72122 Annual total cost = $197422 Safety stock of product B = \/8*200*1.88 = 1064 units EOQ of product B = \l[(2*15000*52*400)/ 100] = 2498 units Average inventory level of product B = 1064 + 2498/2 = 2313 units Annual holding cost = 2313* 100 = $231300 Annual ordering cost = (15000*52*400)/2498 = $124900 Annual total cost = $356200 Annual total inventory cost of products A and B = $553622 Safety stock of the generic product = V10*223.6*1.88 = 1329 units EOQ of the generic product = \/ [(2*20000*52*600)/ 100] = 3533 units Average inventory level of the generic product = 1329 + 3533/2 = 3096 units Annual holding cost = 3096*100 = $309600 Annual ordering cost = (20000*52*600)/3533 = $176620 Annual total inventory cost = $486220 Difference in total cost = 553622 - 486220 — (200+400)*52* 10 (due to extra production cost) = -244598 Therefore, the company should not produce the generic product. (ii) Safety stock of the generic product = ‘18*223.6*1.88 = 1189 units EOQ of the generic product = \/ [(2*20000*52*600)/ 150] = 2884 units Average inventory level of the generic product = 1189 + 2884/2 = 2631 units Annual holding cost = 2884*150 = $394683 Annual ordering cost = (20000*52*600)/2884= $216366 Annual machine depreciation cost = $100000 Annual total cost = $711049 Cost difference = 553622 - 711049 —(200+400)*52*10 = -469427 Hence, AM should not purchase the machine. ...
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