To assist Mohawk in its examination of the policies, address the following:
Mohawk Industries builds transmissions for a large automobile manufacturer. One of its transmission assemblies requires part #HD234, purchased from a supplier within the same industrial park. Because of the close proximity of its supplier, the lead time for part #HD234 is negligible. The demand for part #HD234 varies according to the orders received from the automobile manufacturer. The requirements schedule for the next 10 periods in shown below:
Period 1 2 3 4 5 6 7 8 9 10 Total
Demand 15 35 50 40 150 225 175 70 20 9 780
This requirements schedule is considered fairly typical. Furthermore, the cost of placing an order with the nearby supplier is $100.00, the purchase cost is $50.00, and the holding cost fraction is 0.01 per period.
Mohawk is in the process of assessing different lot sizing policies. It is interested in several that have been suggested. Before it can decide among them, Mohawk wishes to test each heuristic on part #HD234. Those to be tested include:
A. EOQ as a Time Supply heuristic
B. Lot-for-Lot heuristic
C. Least Unit Cost heuristic
D. Part-Period Balancing heuristic
E. Silver-Meal heuristic
To assist Mohawk in its examination of the policies, address the following:
1. Compare the replenishment strategies and performance (total costs and inventory turnover) of each heuristic (A through E) by subjecting the requirements schedule
given for part #HD234 to each model.
2. Explain the cost components for each rule. Account for any differences in the costs calculated for the various lot sizing rules.
3. If any rule performed poorly, explain why.
4. Make a recommendation for Mohawk Industries on the best replenishment strategy.