Problem 1:
The annual demand (D) for a new CVJ video camera can be described by D = 2000 2P where P is the retailer's selling price per camera. Each camera costs the manufacturer $100 who sells it to a retailer at $150 per camera.
a) How much should the retailer set the camera price at in order to maximize his own profit? Show your calculations.
b) If the manufacturer and retailer coordinate their pricing, what would be the retail price that will maximize the supply chain's profitability? Show your calculations.
Problem 2:
If you look at the history of orders and shipments between a retailer and a producer, and you notice a large increase in shipments from the producer followed by a sharp drop in retailer's orders:
a) What is the most logical explanation to what may have happened assuming that both companies kept doing business afterwards as usual?
b) What impact does this have on the supply chain's bullwhip effect?
Problem 3:
The Second Cup coffee shop consumes 70 pounds of coffee per month. The shipping cost is $50 per shipment, and the holding cost is 20%. The coffee bean provider offers The Second Cup all-unit discount according to the following structure:
Order Quantity (in pounds) Price/pound
0 - 120 $3.25
120 - 500 $2.75
500 and more $2.10
a) Calculate the optimal batch size for The Second Cup coffee shop.
b) Calculate the total annual cost for The Second Cup at this optimal batch size
Problem 4
If the optimal lot size for a single product is 100 units and the company wants to reduce it to half the size. What should the setup cost be reduced by for this new lot size to be optimal, given that everything else remains the same?
Problem 5
If a company runs a promotion in the off-peak season, answer the following with a short explanation:
a) What is the impact on the bullwhip effect if forward buying is significant?
b) What is the impact on supply chain cost if significant fraction of the increase in demand results from forward buying?
c) What is the impact on the supply chain's cost and revenue if significant fraction of the increase in demand results from taking business away from competitors?
d) Would you in general recommend off-peak promotion when the product has high margin or when it has low margin?
Problem 6
In general, as demand increases, does it become more cost effective to transport using Less-thanTruckload (LTL) or truckloads (TL)? Why?
Problem 7
Consider the following production plan assuming the demand must be met and the number of workers by the end of December 2008 is 17 people:
Month Beginning Demand Required Number of Number of Number of Actual
Inventory Production Workers Workers Current Production
Hired laid- off Workers
Jan 2009 200 500 300 ?? ?? 20 660
Feb 2009 360 600 ?? ?? ?? 15 660
March 2009 ?? 650 ?? ?? ?? 15 660
Answer the following questions and show your calculations:
a) How many units arc produced by each worker in January?
b) How many units must be produced in February if no stockouts are allowed?
c) How many units must be produced in March if no stockouts are allowed?
d) What is the beginning inventory in March for this plan?
e) What is the number of workers hired in each the three months?
f) What is the number of workers laid off in each of the three months?
g) What is the total inventory cost incurred for this plan if it costs $12 per year to hold one unit in inventory?
Problem 8:
The following graphs were constructed for two supply chains A and B. Customer's demand was almost flat. Answer the following based on the graphs provided:
a) Briefly explain the Bullwhip phenomenon in terms of the graphs provided for both supply chains
b) Which supply chain has less of a Bullwhip effect? Explain your answer
c) According to these graphs, which supply chain performed better in terms of the total cost of inventory and backlogs/stockouts? Briefly explain how you came up with your conclusion
