Demand for vitamins is 10,000 bottles per month. Drugs Online (DO) incurs a fixed order placement, transportation, and receiving cost of $100 each time it places an order for vitamins with the manufacturer.
- DO incurs a holding cost of 20 percent. The manufacturer charges $3 for each bottle of vitamins purchased. Evaluate the optimal lot size for DO.
- Each time DO places an order, the manufacturer must process, pack, and ship the order. The manufacturer has a line packing bottles at a steady rate that matches demand. The manufacturer incurs a fixed-order filling cost of $250, production cost of $2 per bottle, and a holding cost of 20 percent. What is the annual fulfillment and holding cost incurred by the manufacturer as a result of DO's ordering policy?
1. What is the optimal order quantity for the retailer (with no discount) - already done in the slides.
Just do it again yourself showing all the calculations.
2. What is the optimal order quantity for the manufacturer
3. What is the optimal order quantity for the combined supply chain (with no discounts) - already done in the slides. Just do it again yourself showing all the calculations.
4. Draw a diagram similar to slide 11-46 to show the impact of the quantity discount outlined in slide 11-52 on the cost to retailer?
5. Draw a diagram (similar to slide 11-46) to show the impact of the quantity discount on profit (i.e. revenue - cost) for manufacturer?