Question:
You would like to develop a pull production system in your shop floor. For one process “P001” producing small springs for a pen, the daily demand is 150 units. Whenever you order the raw material for this spring manufacturing, you need to wait 6 days. One day, your boss asked how many bins of size 100 (a bin can store up to 100 springs) your department needs to carry in this process P001. Based on historical analysis, your department keeps 10% safety stock to prevent any inventory shortage during the order lead time (6 days). If needed, assume that 1 year = 365 days. Hint: think of the order lead time and lead time demand (15) How many beans does your department need to carry? Ordering cost for bins is $200 regardless of the number of bins ordered, and the inventory carrying cost for a bin (regardless of the number of springs in the bin) is $200 per day. What is the number of bins to minimize the total cost in terms of the EOQ? What do you need to do to make your answer in (a) economical based on EOQ in (b)? This is a numerical question. You should be specific using the ordering cost, inventory cost or demand etc.
