You have just started your first job at the Malaysia Steel Work. The manufacturing company produces two products: steel billets and steel bars. You are working on the assembly line that manages two dr

MANAGEMENT SCIENCE

Question 1

You have just started your first job at the Malaysia Steel Work. The manufacturing company produces two products: steel billets and steel bars. You are working on the assembly line that manages two drill presses. As soon as the partially completed products come off the line, they will be lined up to be worked on the drill presses. You have collected the necessary information and you observed that there are 100 units of partially completed products can be processed within an hour. You also observed that each press operator takes an average of 60 units per hour.

The ideal way is to get the partially completed unit to be worked on the drill presses immediately. However, some units will have to wait if the drill press is busy. For each unit that waits in the queue, it will incur an inventory cost of RM50 per unit per day.

Your supervisor is considering proposing a purchase of a third drill press at the cost of RM150 per day. What would be your advice on the proposal?

Question 2

During your third year of study, you work part-time at a printing shop in Perdana Siswa. You are assigned to handle the printing services which also include making new orders whenever the cartridge stock runs down. Usually, it takes about three days between the time you placed an order and the time you receive the cartridges. Some days you can't accept any printing requests because the cartridge is low on ink. You want to avoid frustrating the students who go to your shop to print, but at the same time, you do not want to order too much.

You estimated that the yearly demand for printer cartridges is 20,000 units. The dealer gives a different price for a different batch of cartridges. If you order less than 1,000 units, the price is RM25/unit. If you order between 1,000 to 1,500 units, the price is RM23/unit. If you order more than 1,500 units, the price is RM21/unit.

The transportation cost is RM100 per delivery, regardless of the number of unit purchased. Cartridges are very sensitive to heat and light, so you need to store them in cool, dry storage. The cost of storage is 15% of the cartridge price.

What would be the optimal order quantity each time you want to place an order? Once you have decided the optimal order quantity, what is the total minimum inventory costs?