Reference no: EM13104739

Your plant manager has decided to streamline production so as to reduce WIP (Work-in-process) inventory. However she does not want this reduced WIP to cause 'starvation' of workstations. She proposes flow of WIP from one workstation to another instead of collecting WIP in a centralized inventory storage area. She therefore asks you to design transfer containers for each set of workstations between which material flows. The design of the container serving raw material to a station should specify the container size (or capacity) and a warning level or "red level" which warns the workstation operator to call for more raw material. At a particular workstation you encounter the following problem parameters.
Production rate at the workstation (or rate at which
raw material is consumed at the workstation): Normally distributed with a mean of 1000 units per hour and a standard deviation
of 100 units per hour

Cost of delivering material to the workstation: $10 per order
Cost of holding the raw material: $0.125 per unit per hour.
Response time of forklift (time between placing
and receiving an order) 10 minutes.
4.1) Design the container (buffer capacity and red level) for the above workstation completely ignoring the fact that the production rate at the workstation is stochastic.

4.2) Your plant manager is dissatisfied with neglecting the stochastic element in the problem and tells you that she wants your design to ensure that stockouts will occur in no more than 5% of the refilling cycles. Redesign the container.