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.)

Related Discussions:- Two Questions

Cost leadership in fast-food chains, Within the food service industry, find...

Within the food service industry, find examples of firms that have sustained competitive advantage by competing on the basis of (1) Cost leadership, (2) Response, and (3) different

Explain employee''s emails and online usage, From the video, take a positio...

From the video, take a position whether an organization has the right to monitor employee's emails and online usage

Define how information systems affect business careers, How does business o...

How does business obtain the ability to assimilate, synthesize, and apply the concepts of management information systems; specifically how information systems transform business; h

What is basic naive method, 1. The monthly sales for Telco Batteries, Inc.,...

1. The monthly sales for Telco Batteries, Inc., were as follows: Month Sales Jan 20 Feb 21 Mar 15 Apr 14 May 13 Jun 16 Jul 17 Aug 18 Sep 20 Oct 20

Lpp, A paper mill produces two grades of paper viz., X and Y. Because of ra...

A paper mill produces two grades of paper viz., X and Y. Because of raw material restrictions, it cannot produce more than 400 tons of grade X paper and 300 tons of grade Y paper i

Explain impacted financially should a consumer lawsuit, Numerous laws that ...

Numerous laws that are enacted to protect consumers have been passed and business leaders have evolved to reflect this focus on consumer safety. Select one of the laws in Appendix

Find the probability that both service clerks are busy, Discounts Wholesale...

Discounts Wholesale Club has two service desks, one at each entrance of the store. Customers arrive at each service desk at an average of one every six minutes. The service time at

Explain development impacted shangri la hotel strategy, Assess how employee...

Assess how employee training and development impacted Shangri La Hotel strategy to delight customer each and every time.

Describe how channel partners rely on each other, Marketing channels are ju...

Marketing channels are just as important to an organization as pricing and product decisions. •Identify and describe three primary types of channel partners. •Provide an example of

Explain intent or motive behind sexual harassment activities, Should be int...

Should be intent or motive behind Lewiston's conduct be considered when deciding sexual harassment activities? Explain

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd