QM6616: Business Process & Operations Analysis FINAL EXAM - SPRING 2021

Part 3. SUPPLY CHAIN MANAGEMENT (30 POINTS TOTAL)

HIGH.CV is a company that produces AED defibrillators, among them the model CV1, which has an annual demand of 15,000 units.

A central warehouse in Charlotte, NC sends shipments nationwide to satisfy customer demand. The average weekly demand is 300 AEDs and the standard deviation of weekly demand of 120. Currently, the warehouse policy is to order 2,400 CV1s at a time to a contract manufacturer in Miami, whenever they need more AEDs. The manufacturing company produces CV1s at a rate of 800 units per week and currently produces lots of 2,400 in each production run to meet warehouse demand. The holding cost at the warehouse per defibrillator per year is $5, and the ordering cost is $685. Assume that the company works 250 days per year, 50 weeks.

c3) The supplier is willing to deliver in one week if the warehouse places orders of less than 1600 units at a time. Is it worthwhile? What order quantity would you recommend to HIGH.CV? Please explain all costs and benefits of the two options. Show all calculations