Homework SolutionOperationsAndLogistics ManagementMGMT E-5065Krupp Refrigeration, Inc.Just-in-Time SystemsApplied Management Science for Decision Making, 2e 2014 Pearson Learning Solutions Philip A. Vaccaro , PhD

Krupp Refrigeration, Inc. Krupp Refrigeration, Inc. is trying to reduce inventory and wants you to install a kanban system for compressors on one of its assembly lines.

REQUIREMENT :

1. Determine the size of the production batch (lot size) or Q*. 2. Determine the number of kanban trays (containers) that are needed. Problem 1

Krupp Refrigeration , Inc.

Setup cost = $10.00

Annual carry cost per compressor = $100.00

Daily production = 200 compressors

Annual Usage ( demand ) = 25,000( 50 weeks x 5 days each x daily usage (demand) of 100 compressors )

Lead time = 3 days

Safety Stock = days production of compressors

Compartments per tray = 100

The Data

Krupp Refrigeration , Inc.First, we must determine the optimal batch or lot size. Qp* = 2DSH [ 1 - d/p ]2(25,000)(10)100 [ 1 - 100/200 ] ==500,00050=10,000= 100 compressors

Krupp Refrigeration , Inc.Then, we must determine the number of trays or kanbans.Demand during lead time = 300 ( 3 days x daily usage of 100 )

Safety stock = 100 ( days production x 200 ) Number of trays =Demand during lead time + Safety stock

Number of compartments=300 + 100

100= 400

100= 4 trays

Krupp Refrigeration, Inc.Krupp determined that the cost, on an hourly basis,of setting up equipment is $30.00

REQUIREMENT :

Is the given setup cost of $10.00 valid?If so, what is the ideal setup time?

Krupp later determines that the cost, on an hourlybasis, of setting up equipment has now changed to $40.00

REQUIREMENT :

What should the ideal setup cost and setup time now be?Problem 2

Krupp Refrigeration , Inc.The ideal setup cost is first determined :S =( Q ) ( H ) ( 1 - d/p )22DS =( 100 ) ( 100.00 ) ( 1 - 100/200 )22 ( 25,000 )S =( 10,000 ) ( 100.00 ) ( .5 )50,000S =500,00050,000= $10.00

Krupp Refrigeration , Inc.Then, the ideal setup time can be determined.Setup time =Ideal Setup CostHourly Wage Setup time =$10.00

$30.00= .333 hour or 20 minutes

Krupp Refrigeration , Inc.Then, the ideal setup time can be determined.Setup time =Ideal Setup CostHourly Wage Setup time =$10.00

$40.00= .250 hour or 15 minutes

Krupp Refrigeration , Inc.Calculations Summary Produce 100 compressors at one time. Produce two times daily. The number of authorized trays should be four. The ideal setup cost should be $10.00 The ideal setup time should be 20 minutes.

Homework SolutionOperationsAndLogistics ManagementMGMT E-5065Krupp Refrigeration, Inc.Just-in-Time Systems