Homework Solution

Just-in-Time Systems
Krupp Refrigeration, Inc.

Operations
And
Logistics Management
MGMT E-5065

Applied 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.

The
Data

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

Krupp Refrigeration , Inc.

First, we must determine the optimal batch or lot size.

Qp* =

2DS

H [ 1 - d/p ]

500,000
=
50

2(25,000)(10)
100 [ 1 - 100/200 ]

= 100 compressors

10,000

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 :

Problem 2

1. Is the given setup cost of $10.00 valid?

2. If so, what is the ideal setup time?
Krupp later determines that the cost, on an hourly
basis, of setting up equipment has now changed to
$40.00
REQUIREMENT :
1. What should the ideal setup cost and setup
time now be?

Krupp Refrigeration , Inc.

The ideal setup cost is first determined :

S=

2
( Q ) ( H ) ( 1 - d/p )
2D

S=

2
( 100 ) ( 100.00 ) ( 1 - 100/200 )
2 ( 25,000 )
S=

( 10,000 ) ( 100.00 ) ( .5 )
50,000
S=

500,000
50,000

= $10.00

Krupp Refrigeration , Inc.

Then, the ideal setup time can be determined.
Ideal Setup Cost
Setup time =

Setup time =

$10.00
$30.00

Hourly Wage

= .333 hour or 20 minutes

Krupp Refrigeration , Inc.

Then, the ideal setup time can be determined.
Ideal Setup Cost
Setup time =

Setup time =

$10.00
$40.00

Hourly Wage

= .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 Solution
Just-in-Time Systems
Krupp Refrigeration, Inc.

Operations
And
Logistics Management
MGMT E-5065