Two Questions, 2. You have been assigned to make a long-term sourcing decision for a raw, Operation Management

Two Questions, Operation Management

Assignment Help:

2. You have been assigned to make a long-term sourcing decision for a raw material you will purchase. There is only one supplier of this raw material. You estimate that you need 60 units per day of this raw material, with a standard deviation of 20 units. The supplier charges $300 for each unit and $3,000 fixed cost for each delivery. Whenever you order from the supplier, it delivers in 60 days. You use a 20% interest rate for estimating holding costs. If you run out of raw materials, in which case your production line has to stop, this costs you $1,000 per day for each unit of raw material in shortage. Assume 365 working days per year.
a) What is the optimal (EOQ, ROP) policy you should use?
b) If you use the optimal policy, what is the annual fixed ordering cost, and what is the annual inventory holding cost?
3. The Silky Shirts Company based in Thailand makes silk women’s shirts for a retailer in the U.S. It costs Silky $30 to make each shirt, it sells them to the retailer for $50 and the shirts retail for $100. The retailer estimates he can sell an average of 800 shirts with a standard deviation of 400 at this price per season (normally distributed). The retailer sells all remaining shirts for $20 at the end of the season.
a) How many shirts should the retailer order to maximize his profits?
b) If Silky had its own stores, and could make and sell (at the same retail price as above) its own shirts in its own stores instead of needing the retailer as a middleman, how many shirts would it order assuming demand remained the same as above?

c) Assume that Silky offers the retailer a revenue sharing contract where the retailer shares half the revenue on all sold shirts with Silky, and in return Silky reduces its price from $50. To what level would Silky have to reduce its price to induce the retailer to order as many units as the integrated company would order in Part b) above? (The retailer still sells the shirts for $100 during the season and discounts them to $20 at the end of the season but now gives half of all the revenue obtained to Silky.)

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages

Two Questions, Operation Management

Related Discussions:- Two Questions

Explain a plan of viable business options for family fabrics, Case 1: You a...

Explain major considerations regarding logistics alliances, What are the ma...

Explain a global corporation, A global corporation sees the world as its la...

Explain how can product development costs be minimized by, How can product ...

Plant layout, Outline the considerations for choice of location and the cri...

Financial risk, the importance of the measurtement of market risk for finan...

What is the objective under jit and time-based competition, _____ is the ob...

Explain europe and japan to adopt the new product, What triggered the new p...

Describe job openings in advertising in a global scale, Compare local Ohio ...

Explain which an organization can be engaged be engaged, The categories of ...

Write Your Message!

Featured Services

Online Tutoring

Project Development

Exam Preparation

Course Help

Assignment Help

Popular Subjects

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT