Three of the components above are produced on the Injection Molding #1 machine in batches before they are used in the final assembly process. The company wants to set their appropriate production lot sizes, trigger points and the inventory levels so as to best serve the assembly process with minimum level of stock. The Injection Molding process also operates 432 minutes a day. The average downtime on Injection Molding per day is about 60 minutes. Bin size for components is 24. Each changeover takes 40 minutes.

Product ID	A1	A2	B1
Daily Demand ~ N(mean, variance*)	(144, 200)	(120,200)	(48,50)
Cycle time	60 sec	50 sec	40 sec
Scrap %	3%	3%	3%

*Note that the variance for the internal demand (seen by the Injection Molding process) for these products is reduced due to the use of finished goods supermarket.

1. What is an appropriate production order quantity and the trigger point for each of these components?
2. If the company is targeting 99.4% first-fill-rate performance at its assembly process, what should be the supermarket size for these components? First fill rate refers to the probability that the components will be available for assembly the first time they are needed.
3. What would be the impact of reducing the daily downtime to 30 minutes on the component inventories? What other recommendations would you have to further reduce the component inventories and why?

Note 2: For k= 2, 2.5 and 3 the p values are 0.9772, 0.9938 and 0.9987, respectively, where Prob{z≤k}=p.

Answer rating: 100% (QA)

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