PROCUREMENT & SUPPLY MGMT $($MGSC$-5123)$

Assignment $2$

Question $1$ We assume that

$$ One end item needs $2$ units L$,1$ unit C and $3$ units K$.$

$$ One unit L needs $2$ units B and $3$ units J$.$

$$ One unit C needs $2$ units G and $2$ units B$.$

$$ One unit K needs $4$ units H and $2$ units B$.$

Two orders of $40$ units and $60$ units will be sent at the week $8$ and $9.$ The manager knows that

$15$ units of B are scheduled to arrive at the beginning of week $4$; $10$ units of C are scheduled to

arrive at the beginning of week $2.$ Only the component B should be ordered by lot and the lot

size is $30.$ Use tables to make MRPs for end products and components.

Question $2$ The operations manager of a large manufacturer received a certain number of

complaints during the last two weeks.

Day

$1234567891011121314$

Number of

complaints

$4101489651213764210$

a$)$ Under a three$-$sigma control limits$,$ choose the suitable control chart to judge whether

or not the process is in control.

Question $3$ The company plans to get a new machine to increase its capacity. There are two

machines can be selected: A and B$.$ The lifetime of machine A or B is $4$ years $($value decrease to

$0$ at the end of year $4).$ The cash flows are shown below:

Cash flows $($$$)$

Machine Year $0$ Year $1$ Year $2$ Year $3$ Year $4$

A $-5000010000200003000020000$

B $-5000010000400001000010000$

a$)$ Based on the payback rule, which Machine should the company buy?

Item Lead time Amount on hand

End item $1-$

L $210$

C $315$

K $320$

B $230$

J $330$

G $35$

H $2-$

b$)$ Based on the net present value, which Machine should the company buy? $($Assume the

required rate of return k is $5\%).$

c$)$ For the $$50000$ investment, the company has two plans:

$$ Plan A: use $$10000$ from the company and borrow $$40000$ from the bank to buy the

machine. The borrowed money will be paid annually back to the bank $($Equal loan

payment$)$ with an annual interest of $5\%$ in $4$ years. The maintenance is $$1000$ for

each year paid by the company.

$$ Plan B: lease the machine from the supplier with an annual payment of $$15000$ for

two years and purchase the machine at the end of year $2$ for $$20000.$ The

maintenance fee for the first two years is paid by the supplier and for the last two

years is $$1200$ annually $($paid by the company$).$

The tax rate is $40\%$ and the depreciation is a straight line $($same amount every year$).$

Based on the total present value cost $($assume the discount rate is $5\%),$ which plan

should the company use?