Question

3. A two-workstation cell uses a kanban system to produce 200,000 parts per year. Expected leadtime to replenish a container is 0.75 hours (i.e. 45 minutes). Parts cost $100 and have an inventory opportunity cost of 15%. There are three material handling options available:

            Manual - annual fixed cost of $25,000, cost per trip = $0.10, Max load size = 5;

            Push Cart - annual fixed cost of $25,000 + $5,000 initial investment (must be amortized over 5 years), cost per trip = $0.15, Max load size = 50; and

            Forklift - annual fixed cost of $25,000 + $60,000 initial investment (must be amortized over 8 years), cost per trip = $0.50, Max load size = 1000.

    Note: The company uses a MARR of 20% for all investments.

a) (25%) Specify the following system design parameters: container size, material handling type, # kanban that will be feasible and minimize material handling cost.

b) (5%) How would the system be different if it was controlled by CONWIP versus Kanban? Provide a conceptual example.

Answer 1

Particulars	Manual	Push Cart	Forklift
Annual Fixed Cost (A)	25,000	25,000	25,000
Initial Investment	-	5,000	60,000
No. Of Years (Life)		5	8
Annual Depreciation (B)	-	1,000	7,500
Total Production	2,00,000	2,00,000	2,00,000
Load Size	5	50	1,000
No. oF trips	40,000	4,000	200
Cost Per Trip	0.10	0.15	0.50
Total Cost of Trips ©	4,000	600	100
Total Cost	29,000	26,600	32,600

Cost of Push Card Option is least. Hence, it is feasible with the minimal cost.