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Question:
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CASE ANALYSIS IN MATERIALS MANAGEMENT
Proposed Solution
They may have thought of needing the new materials but since
they needed the order badly, they should try to come up with
something to think which is “out-of-the-box”.
In this proposal, let us say that Rogers will estimate the cost of
shipbuilding based on their previous experience of building similar
ships which are nearly of the same type and size. Apart from previous
estimates the knowledge of the experts and their self made formulas
also go into this type of cost estimation. The main advantage of this
type of process is that it works fine and perhaps is very accurate for
ships which have been built previously but it would not work with the
same degree of accuracy if the shipyard receives an order which is
totally different from the type and size of ships it has been
constructing. The thing is, a shipyard relying totally on this case has
the tendency to get stereotyped and if suddenly those particular types
of ships go “out of fashion”, they would certainly be in troubled waters.
If this is the case, certainly another solution could be that the
shipyard only accepts standard orders and does not cater to “custom
made” ships. This would certainly reduce the number of clients
wanting to get their ships from such a yard, but on the other hand this
also would make the shipyard specialize in building the ships which
they offer.
One may ask, “If they would be using the same design, size and
type of ship, inevitably, they will still be dealing with the present
economic condition of the materials?”, “what about it?”. Well, in this
case they won’t be having any trouble including electrical and
nonelectrical machineries in their estimates, that is, on what will be left
and a lesser but not much of a real problem would be the metals and
metal products. This is true in the sense that if they will be spending
for the said machineries and equipments and that they will have to
worry with its fluctuations in prices, it would be better to make use of
their current machineries and equipments and rather just spend on its
repair and maintenance. Repair and maintenance shouldn’t cost as
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Questions
Proposed Solution
In order to meet the monthly usage, Owen electrics buys 600 tons
of steel because it is the second most important commodity after
copper of the company. It shows that in July 1, in order to to be
protected against strike which is anticipated when the steel contracts
expire on July 1, 1959. However, it will result him to have a cost of
$157.50 per month (105*$1.50) or a total of 472 for three months.
And an additional of $210 to move the steel from the warehouse to the
Owen electric. But, the suggested plan reduces the cost of material
from $91,020 to $ 89947 having a saving of $ 1073 that can be used to
sustain that storage and delivery cost amounting to $ 682 (472+$210)
Applying the Bayesian analysis, even the estimates of $96,000
loss for 8 weeks strikes, the probability will only 10 % ( P(8)₌0.10),
thus, the expected loss would still be $ 9600 (96000 * 0.10)
If there were no strikes, there is a probability ( P(5)₌0.50),
( P(3)₌0.40), ( P(0)₌0.10),and if there is strike ( P(0)₌0), ( P(7)₌0.30),
( P(5)₌0.40), and ( P(3)₌0.30), therefore, there is a 5 % increase even
there is a strike or no strike. However, the probability of strikes is
come in 4 broad possibilities; ( P(no strike)₌0.20), ( P(3)₌0.40),
( P(6)₌0.30), ( P(8)₌0.10). due to the strike, the steel industry will
almost certainly stock with much higher prices.
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to offer lower prices. However, that this approach may not work too
well on items that are price fixed. Stark also suggests that Queenstown
might be able to reduce inventories by trying to schedule its needs for
maintenance items in advance.
Question
Proposed answer:
A.E.D. Division
Questions
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Proposed Solution
Question
Proposed Solution
Question
Proposed Solution
Blue Motors Corporation can solve the issue if they can change
their quantity order of the components that instead of 15 units per
day, perhaps they can make it 450 units per month during peak
demand and 200 units during slack season including safety stocks.
Frequent order is not much to do the job neither care about their
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Questions
Proposed Solution
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Questions
Proposed Solution
The difference is not that much from 0.10 dollars to 0.095 dollars
if they order 20000 pieces when they only need 10000 pieces to 13000
pieces. True that unit prices usually are lower and the larger the order
quantity, the fewer the number of orders that must be process and the
fewer the shipments that need be handled and this reduces costs. But
in the case of Owen Electric if they going to buy 20000 pieces, it will be
too much, they will have too much stocks, so that, instead of reducing
the inventory or keep it low the result is, they will have more items to
be stored which they are not actually needed and if stocks are held
long enough, the accumulated carrying charges will exceed its value.
When many items are stored, inevitable that some of them will not be
used, will shrink, or disappear or will spoil, and the only way to prevent
is simply by not investing it in inventory. In the case of Owen Electric,
obviously the excess in 20000 pieces from the 10000 pieces needed if
they are going to accept the suppliers offer will not be use and become
obsolete.
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