Adobe Systems
Inbound logistics and operations – MUNI – ABEC
1
Inbound logistics and operations
Two big topics

Adobe Systems
Inbound logistics and operations – MUNI – ABEC
2
Task 1 - Supply operations
̶According to market research, the company will be able to sell 540,000 units of Product A next
year, up 10 % from this year. Its production capacity allows it to secure this volume and it
therefore plans to produce the amount of expected demand. According to the standard, 20 kg of raw
material S is used per product.
̶The actual stock on 1 July, i.e. the balance sheet date, is 1 200 tonnes. The expected consumption
by the end of the year is 5 100 tonnes, the expected value of material deliveries in III. and IV.
quarter is total 4 800 tonnes, total consumption for the year is 9 818 tonnes. The safety stock
standard is 45 days. Material consumption is proportionally dependent on production volume.

Adobe Systems
Inbound logistics and operations – MUNI – ABEC
3
Task 1 - Supply operations
̶Calculate the expected consumption of raw material S, set up a balance equation and determine the
supply needs of this raw material in the next year. How many deliveries will you order if the fixed
cost of the order is 200 000,- CZK, the interest rate is 15 %, the storage cost rate is 5 %. The
supplier offers to provide the ordered quantity of raw material in one, two or four deliveries per
year.
̶Use the balance equation formulae in your calculations:
̶
̶Is + D = C + Fs
̶
̶Where Is is the initial stock of raw material S
̶        D - delivery of raw material S
̶        C - consumption of raw material S
̶        Fs - final raw material stock S

Adobe Systems
4
Task 2 Narrow point - TOC
̶The dog feed company is not able to satisfy all orders (10 000 bags per month in total) and
produces 5 000 bags. It is therefore analysing the current production process and looking for
bottlenecks.
̶The company has four production facilities - a warehouse, a drying room, a mixing room and a
filling room.

Adobe Systems
5
Task 2 Narrow point - TOC
̶The warehouse has a capacity of 5 000 bags of 50 kg each. Once a month, the grain is weighed in
and processed.
̶The drying plant operates in one shift (8 hours per day, 22 days per month), with 15 % of the
working time for lunch and other breaks. 70 bags of grain can be dried per hour.
̶The mixing plant mixes 45 kg of grain with other ingredients per minute. The mixing plant is open
7 hours a day, 21 days a month.-
̶The filling plant is capable of filling 2 bags per minute. It operates continuously 8 hours a day,
22 days a month. Where is the bottleneck that prevents the company from satisfying all orders? How
can it be removed?

Adobe Systems
6
Task 3 – portfolio
̶Ferometal PLC supplies four products to the market with the following prices per unit (P), total
cost per unit (TCu or AC) and sales quantities (Q).
̶After a drastic price fall, the selling price of products A and B no longer covers costs.
Ferometal s.r.o.'s fixed costs for the period were estimated at CZK 120 million.
̶In calculating the cost per unit, the fixed costs were spread evenly over the total sales quantity
of 4 million units.
̶Which of these products should be phased out?
Product
Q
P
TCu(AC)
A
1 mil
100,-
120,-
B
1 mil.
200,-
250,-
C
1 mil.
80,-
50,-
D
1 mil.
240,-
170,-

Adobe Systems
Inbound logistics and operations – MUNI – ABEC
7
Task 3 b) – portfolio – portfolio dependencies
̶If you stop production of A, then there will be rise of substitute C by 250 000 pieces.
̶If you stop production of B, then there will be decline of complement D by 250 000 pieces.

Adobe Systems
Inbound logistics and operations – MUNI – ABEC
8
Task 3 b) – portfolio – portfolio dependencies
̶Fixed costs 120 milion.
̶Stop A === C + 250 000
̶Stop C === D – 300 000
̶
Product
Q
P
TCu(AC)
A
1 mil
100,-
120,-
B
1 mil.
200,-
250,-
C
1 mil.
80,-
50,-
D
1 mil.
240,-
170,-

Adobe Systems
9
Task 4
̶The publishing house Knowladge Inc. intends to publish a professional book for which it expects to
sell 8,000 copies per year in the coming years. The fixed costs of publication (production) amount
to CZK 360 000 per issue. The capital tied up in the printed but not yet sold books must bear
interest at 10 % p.a. Sales will be continuous, i.e. without fluctuations in time. How high should
the circulation (optimum production rate) be so that the interest and production costs per book are
as low as possible, since the proportional costs (paper, binding, printing ink, etc.) are:
̶100 CZK/piece
̶400 CZK/piece
̶In which of the two cases will the issue be lower?

Adobe Systems
10
̶Thank you…