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Review for Exam II
This exam will be administered
Tuesday, October 16, 2012, usual
time and place
Hws11-34
answer key
U.S. Distributors
Plants 7. Texas 8. Virginia 9. Ohio Supply Shipped
1. Germany 0 0 0 5.2 0
2. Belgium 0 0 0 6.3 0
3. Italy 2.1 0 0 4.5 2.1
Shipped 2.1 0 0
Factories U.S. Distributors
Plant 4. PR 5. Mexico 6. Panama Shipped Plant 7. Texas 8. VA 9. Ohio Shipped
1. Germany 0 5.2 0 5.2 4. PR 0 0 0 0
2. Belgium 0 0 6.3 6.3 5. Mexico 0 0 5.2 5.2
3. Italy 0 0 0 2.1 6. Panama 0 3.7 2.6 6.3
Demand 2.1 3.7 7.8 Demand 2.1 3.7 7.8
Shipped 0 5.2 6.3 Shipped 2.1 3.7 7.8
Transshipments:
4.PR 0
5. Mexico 0
6. Panama 0
Cost = 27120
HW #10-2
Homework Problem #10-2 answer key
Average Total
Raw Unit Cost
Materials Inventory ($) Value
oak 8000 6 48000
pine 4500 4 18000
brass
fixtures 1200 8 9600
stains 3000 2 6000
joiners 900 1 900
Total 82500
Work in
Process
frames 200 30 6000
drawers 400 10 4000
panels 600 50 30000
chests 120 110 13200
tables 90 90 8100
Total 61300
Finished
Goods
chests 300 500 150000
coffee tables 200 350 70000
Total 220000
Cost of goods sold 370000
= 0
HW 10-6
answer
Homework Problem #10-6 key
Supplier 1 Supplier 2
Cost of goods sold 8360000 14800000
Raw materials 275000 870000
Work-in-process 62000 550000
Finished goods 33000 180000
Inventory turns = 22.6 9.3
Weeks of supply = 2.3 5.6
Best
HW 14-22
Homework Problem #S14-22 answer key
Nutrient Contributions
Calories Fat Cholesterol Iron Calcium Protein Fiber
Breakfast Food Serving Unit Cost ($) g mg mg mg g g
Bran cereal = 0 cup 0.18 90 0 0 6 20 3 5
Dry cereal = 0 cup 0.22 110 2 0 4 48 4 2
Oatmeal = 1.025 cup 0.10 100 2 0 2 12 5 3
Oat bran = 0 cup 0.12 90 2 0 3 8 6 4
Egg = 0 egg 0.10 75 5 270 1 30 7 0
Bacon = 0 slice 0.09 35 3 8 0 0 2 0
Orange = 0 orange 0.40 65 0 0 1 52 1 1
Milk - 2% = 1.241 cup 0.16 100 4 12 0 250 9 0
Orange juice = 0 cup 0.50 120 0 0 0 3 1 0
Wheat toast = 2.975 slice 0.07 65 1 0 1 26 3 3
Nutritional Requirements 420 20 30 5 400 20 12
Nutritional Levels 420 10 14.90 5.02 400 25.22 12
Cost Per Meal = $ 0.509
Exam Format
45-50 multiple choice
3 problems
Closed-book
Closed-notes
Closed-neighbor
BRING---pencil, calculator, orange
scantron sheet
Exam details
Tuesday, October 16, 2012
Will start the exam at 2:00 p.m.
Exam Coverage
Chapter10, Chapter 11, Supplement to
Ch 11, Chapter 13, Supplement to
Ch13, and Chapter 15-second half
LPproblems in the supplement to Chapter
14, but not the content of Chapter 14—will
cover that later.
Typical problems—see
Practice Exam II
Inventory with Independent Demand
Problems involving calculation of
inventory turns and days of supply
Production Scheduling Problem
Transportation problem
LP formulation problem
Interpretation of LP SENSITIVITY
output
More typical discussion
problems
Transshipment problem
Linear programming formulation
Be able to draw schematics of
mainframe/glass architecture,
client/server architecture and N-tier
architecture
Chapter 15 – ERP
Inventoryfor Dependent Demand will
NOT be covered….
Exam coverage of this chapter starts on
page 700
What were five motivations for
transitioning from mainframes
Absence of data integration
36 month backlogs at centralized MIS
shops
Idle CPU cycles on desktops
Mainframes were expensive bottlenecks
Support for Internet and thin clients
Quicker, cheaper development times
through REUSE
What is the information
architecture modern ERP
systems are currently based
on?
Mainframe/glass house
Client/server
distributed
N-tier
None of these
Every application software
package consists of
1. Presentation management
component
2. Business logic management
component
3. Data management component
4. All of the above
5. 1 and 2 only
ERP
Issoftware that organizes and
manages a company’s business
processes by sharing info across
functional areas
Large caps have been there and
done that—transitioned to ERP
Mid and small caps are getting there
The road to implementation has been
rough
More ERP
Based on an N-tier distributed
architecture
Not on mainframe glasshouse
•Advantages of N-tier
architecture
Provides for data integration
Better usage of MIPS on both PCs
and servers
Solves the 36-month backlog of the
centralized MIS shop
Enables a better career path for the
MIS professional
N-Tier distributed
architecture
Is decentralized or centralized, or
some combination of these
(which?)
Utilizes thick clients or thin
clients (which?)
ERP Modules
Sales & Project
distribution management
Production & Accounting and
Materials controlling/finance
Management
Supply chain
Quality
management management
Human resource Customer
management relationship
management
ERP Terms
Best-of-breed
Collaborativeproduct commerce
Customer relationship management
Supply chain management
XML
Re-engineered Computer
Architectures
Startedwith mainframe/glasshouse
Migrated to client/server
Evolved to N-tier distributed
Why did such re-engineering
occur?
There was no data integration
MIPs on mainframes were hugely
expensive and very much in demand
MIPs on PCs were idle 95% of the time
and extremely cheap
Backlogs for MIS shops were at 36
months
Developing new applications were slow
and expensive
Distributed architectures
solved these problems
Dataresides behind a single database
engine
Components of any Software
Application
Components in brief
Mainframe Architecture (circa
1993)
Mainframe Computer
Problems with Mainframe
Architecture
Absence of data integration, resulting in little
enterprise visibility
The applications are maintainable only by the
centralized MIS shop, which is overloaded,
resulting in 36 month lead times to get
revisions effected
Every application had to be built from scratch,
line-by-line, resulting in large cost and long
lead times to create new applications
More problems with Mainframe
Architecture
No reuse was possible
These mainframe apps were accessed
on networked PC’s via IBM 3278
terminal emulation software that was
completely incompatible with the
windows GUI applications—meaning no
cut and paste
Mainframes were computational
bottlenecks
Desktop PCs sat idle 99% of the time
First solution: Client/server
architecture
Clients (PM, BL)
Server (DM)
Database
These were known as thick
clients
Because they contained both the
presentation management (PM) and the
business logic (BL) components of the
application
Notice how the application is distributed
across the network, residing in two
computing boxes—the client or desktop
and the server
First solution: Client/server
architecture
Thick Clients (PM, BL)
Server (DM)
Database
Advantages of Client/server
architecture
AllData are all accessible behind the
Server which runs the data
management portion of the
application—usually an Oracle
Database engine
Now the marketing guy can see where
his customer’s job is, and whether the
customer is current with his payments,
among other ‘things’
Advantages of client/sever
architecture
The IT professional could sit shoulder-to-
shoulder with the end-user and develop
applications as well as make changes to
existing software rapidly, without a 36 month
backlog
For new applications, there were huge reuse
opportunities—in particular, the IT
professional does not have to create a DM
component—the Oracle engine can be
reused
Problems with Client/server
It wasn’t Internet compatible
It required an IT professional to install
software on the end-user’s personal
computer (the client)
It required an IT professional to work
closely with the non-IT professional
There were no career paths for IT
professional hired in marketing, finance,
accounting, manufacturing, etc.
Modern solution of today: N-
TIER DISTRIBUTED
ARCHITECTURE
This is a distributed architecture like
client/server, but now the application is
distributed across three or more
computing boxes on the network
N-Tier distributed Architecture
Database
Data Server (DM)
Application Application
Server 1 Server 2
Thin Clients (1/2PM)
Take a closer look at the
Application Server runs the business
logic component and half ot the
Application Servers
presentation management component—the
portion the serves out the web pages
Comments on N-Tier Distributed
Architecture
Clients are called ‘thin’ because the only
thing running on them is the Internet
Browser
The IT professional doesn’t have to
install anything on the client
More re-use is possible—specifically
that browser
Advantages of N-Tier Distributed
Architecture
Like Client/server, it accommodates
enterprise visibility because the data are
integrated
Applications can be built rapidly because
there is abundant reuse
The DM module is reused
Half of the PM component is reused
There are reuse opportunities within the rest of the
PM component and the BL component as well
More advantages of N-Tier
IT professionals don’t have to be
remotely loaned out to marketing,
management, accounting and finance
They can now be centrally located and
managed where career paths will exist
for them
Application Servers do Two
things
They serve out web pages upon request
They do all of the business logic
processing.
ERP Modules
Finance/Accounting
SalesMarketing
Production/Materials Management
Human Resources
Supply Chain Management
Customer Relation Management
These modules would be placed
in a
Thin client
Data server
Application server
Mainframe
WHICH??
ERP Implementation
Analyze business processes
Choose modules to implement
Align level of sophistication
Finalize delivery and access
Link with External Partners
Customer Relationship
Management
CRM software plans and executes
business processes that involve
customer interaction, such as
marketing, sales, fulfillment, and service
(not manufacturing)
CRM is focused on customers, not
products
Collaborative Product Commerce
Software concerned with new product
design and development, as well as
product lifecycle management
Connectivity
A common data management
component
API’s (Application Programming
Interfaces)
EAI (Enterprise Application Integration)
XML (Extensible Markup Language)
Dr. Viator (accounting) teaches a course in
this language
Chapter 10--Supply Chain
Management
Plants/warehouses/distribution/
information infrastructure
Most of America’s product gets moved
by _____ (air, water, rail, truck,
pipeline).
What is COVISINT??
What benefits accrue from SCM?
What’s new and exciting in
SCM??
InformationTechnology (specifically
enterprise visibility)
Has changed everything
SCM Software modules within ERP
systems
I2 Technologies
Has reduced uncertainty
Which has reduced _____________
Which is a form of _______________
Inventory turns
Calculated on an annual basis
The more, the better
Inputs:
Costof goods sold
Average aggregate value of inventory
Average aggregate value of
inventory
Calculated by taking the product of the
unit cost with the number of units and
then summing these products for all
inventory categories
Days of supply
Avgagg value of Inv*365/Ann cost of
goods sold
Or simply… 365/inventory turns
Manufacturing Inventory Types
Raw materials inventory
Work-in-process inventory
Finished goods inventory
Supply Chain Management
Terms
Bullwhip effect Landed cost
Collaborative planning, Logistics
forecasting and Order fulfillment
replenishment RFID
Continuous Sourcing
replenishment
Vendor-management
Core competencies inventory
Cross-docking Warehouse
E-business management system
E-marketplaces
E-procurement
EDI
Inventory turns
Chapter 13 – Inventory
Management
Inventory for Independent demand
{ Not manufacturing inventory, usually—
more like retail inventory}
Carrying costs
Rent
Lighting/heating
Security
Interest (on borrowed capital tied up in
inventory)
Taxes
Shrink/obsolescence/theft
Can also be expressed as a % of product cost
A rule of thumb is 30%
Ordering costs—costs related
to
Transportation
Shipping
Receiving
Inspection
Shortage costs
This is an opportunity cost
Is ignored in the simple models you will
be using, by assuming that there are no
shortages
Back-order costs
Willassume impatient customers who
must have the product they wish to buy
NOW.
So back-ordering is not considered in
the simple models we looked at
Continuous Inventory Systems
Constant order amount, called the EOQ
EOQ = Economic Order Quantity
Fixed annual deterministic demand
Minimizes
Holding (carrying) costs
Ordering costs
Uses re-order point to determine when
to order
Time between orders is not fixed
EOQ models also have
No shortages/back-ordering
Constant lead time
Instantaneous or finite replenishment
Can take into consideration price
discounting
When doing so, three costs are minimized
jointly: Ordering costs, holding costs and
purchase costs taken over a year’s time
If the quantity ordered is less
than the EOQ, then
Ordering costs will be greater than
holding (carrying) costs
ABC Classification—what is
the point??
To concentrate, focus on the those items in
inventory that constitute the highest dollar
value to the firm
Class A items constitute 5-15% of the items and
70 to 80% of the total dollar value to the firm
Class B items constitute 30% of the inventory
items but only 15% of the dollar value
Class C items constitute 50 to 60% of the items
but only 5 to 10% of the dollar value
ABC Classification..
Class A items are tightly controlled
Class B items less so
Class C items even less
Dollar values are computed by multiplying the
unit cost by the annual demand for the item
This technique is used in all auto parts
inventory control systems and has been for
15 years
Periodic inventory systems
are….
Fixed Time period systems
NOT
EOQ Models
The time between orders is fixed, the
re-order point is fixed, but the order
amount is not
Which gives you lowest
holding cost?
Instantaneous replenishment
Finite (non-instantaneous)
replenishment
Quantity discounts
OF THE ABOVE GIVES YOU
WHICH
LOWEST TOTAL ORDERING COST?
How do we calculate a re-
order point?
Lead time in days times the daily
demand plus the safety stock
Safety stock equals the service level
(usually 3 for z) times the standard
deviation of daily demand times the sq.
rt. of lead time.
(You will be given the formulas)
How do we calculate…
Time between orders?
Production days in a year / # of orders
Run length
EOQ or order quantity / daily Production
rate
Safety Stocks and Service
Levels
Safetystock = Z value * std. dev. of
daily demand * sqrt(lead time)
For95% service level, use Z value of
1.65
For 99% service level, use Z value of 3
Inventory Terms
Independent
ABC system demand
Carrying costs Inventory
Continuous inventory In-process inventory
system Non-instantaneous
Dependent demand receipt
EOQ Order cycle
Quantity discount
Fixed-order quantity
system Stockout
Service level
Fixed time period
system Efficiency
Capacity
Simulation
Two types—
Continuous deterministic
VENSIM is an example
Discrete stochastic
PROMODEL is an example
Eachof these two types differ by
method of time advance
Time advance in continuous
deterministic simulation
Time is advanced in small, equidistant
increments
The simulation engine is really
integrating differential equations
Time advance in discrete
stochastic simulation
Time is advanced from event to event
The simulation engine maintains a stack of
discrete events chronologically ordered in
time, called an events calendar
The next event to occur is popped off the
stack and processed.
The result of processing the event is that
more events are generated and subsequently
get saved on the events calendar
MONTE CARLO—
computer-generation of random
The
numbers using an
Which simulation gestalt uses
activities, events, entities and
their attributes?
Continuous deterministic?
Discrete stochastic?
The Excel function RAND()
generates…
Normally-distributed random variates
Gamma-distributed random variates
Uniformly-distributed random numbers
Exponentially-distributed random
variates
To get a non-uniform random
variate, we often start with
A normal random variate
A lognormal random variate
A uniform random number
A triangular random variate
To get a non-uniform random
variate, we often use…
The central limit theorem
The law of large numbers
The inverse function theorem
All of the above
In discrete/stochastic simulation,
we are interested in
Entity idleness
Entity travel time
Entity time in the system
Resource utilization
All of the above
In discrete/stochastic
simulation, which of the
following components has
time duration?
Events
Activities
Entities
Resources
All of the above
Discrete/stochastic simulation is
appropriate for which of the
following three decision
environments
Making (DM) under Certainty
Decision
DM under risk and uncertainty
DM under change and complexity
Math programming models, like
the transportation and
transshipment models we looked
at, are appropriate for which
decision making environment
Making (DM) under Certainty
Decision
DM under risk and uncertainty
DM under change and complexity
