Webster Manufacturing Inc. is implementing a Just-in-Time (JIT) system and wants to know how many Kanbans to use for the initial setup of its JIT system. The daily demand is 400 units and each Kanban (i.e., container) holds 15 units. The combined processing and waiting time per container is 0.7 days. If the initial alpha value for safety stock is 0.6 and the processing and waiting time is reduced by 30 percent due to job and process improvements, by how many units is the maximum authorized inventory reduced from the original Webster problem #23 and #24?
A) Less than 100 units
B) More than 100 but less than or equal to 200 units
C) More than 200 but less than or equal to 300 units
D) More than 300 but less than or equal to 400 units

Question

Quizplus · Accepted Answer

The original maximum authorized inventory (MAI) is calculated using the formula: MAI = Demand * (Processing time + Waiting time) * (1 + Alpha) / Container size. Initially, MAI = 400 * 0.7 * (1 + 0.6) / 15 = 44.8 Kanbans, rounded up to 45 Kanbans, equivalent to 675 units (45 * 15). After a 30% reduction in time, the new time is 0.7 * (1 - 0.3) = 0.49 days. The new MAI = 400 * 0.49 * (1 + 0.6) / 15 = 31.36 Kanbans, rounded up to 32 Kanbans, equivalent to 480 units (32 * 15). The reduction in inventory = 675 - 480 = 195 units, which is more than 100 but less than or equal to 200 units.