Attempt all the questions.
Section-A
Question1)a) Explain the expected costs of Stockouts.
b) What do you mean by the term Uncertainty and Implied Uncertainty in demand.
Question2) Key part of procurement process is the selection of vendors. What criteria are commonly used in this selection process? Which criteria must be given highest priority? Why?
Question3) Movement and storage are two basic functions of warehousing. Explain the emphasis placed on these two basic functions in cross-docking, distribution, and basic raw material warehouses. What is the rationale for the similar or different emphasis?
Question4) One purpose of material handling is to increase efficient capacity that is to improve space utilization. How does material handling help to achieve this objective?
SECTION-B
Case Study
Firm was purchasing several different materials for processing of their product. On making a preliminary ABC analysis, they shortlisted three items that belonged to A category. Out of these one of the items was analysed in great detail and following was the information they obtained. Average demand for the product was 18000 pieces per month with the standard deviation of 2800 per month. Cost for ordering which was mainly by way of transportation cost was Rs. 5000 per order. Price of the product varied with vendor with whom they will contract. Vendor A quoted Rs. 50 per unit and he promised to deliver same within 3 weeks. Second vendor quoted Rs. 55 per unit and he promised to deliver same in 2 weeks time. Both vendors insisted on immediate payment as credit was difficult to come by. The company will pay for the same from their working capital but would incur 12% interest for the same. The firm was interested in understanding the following:
Question5) Case Questions:
a) What would be the economic order quantity for the two vendors?
b) If the firm maintained Continuous review policy, what will be the safety stock for each of the vendors if 95% customer service level was desired to be maintained?
c) Which vendor must the company prefer in order to procure the items? Suppose quality standards etc. are same with both the vendors.