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

Explain what is it and how does it help the consumer, Unconscionability is ...

Unconscionability is an import UCC concept. What is it and how does it help the consumer? Illustrate your answer with examples

Explain the term marketing and selling, Explain the term Marketing and Sell...

Explain the term Marketing and Selling. Marketing and Selling : The marketing theory is a management orientation which holds that the key task of the organization is to find o

Explain turnovers are undesirable and to be avoided, Do you believe all tur...

Do you believe all turnovers are undesirable and to be avoided?

Explain what does just in time manufacturing mean, What does Just in Time M...

What does Just in Time Manufacturing mean and how does it relate to manufacturing operations?

What is utility of optimised production technology, Q. What is utility of o...

Q. What is utility of optimised production technology to manufacturing operations? Optimised production technology (OPT) optimises the employ of ‘bottleneck resources' (restric

How did the corporation performs in the return on investment, How did the c...

How did the corporation perform the past year overall in terms of return on investment, market share, and profitability?

Explain what are the four main reasons for holding inventory, 1. What facto...

1. What factors enter into the choice of a value for the smoothing constant in exponential smoothing? 2. Name at least 3 competitive advantages of concurrent engineering? 3.

Compute the value of the policy variable, You are asked to analyze the kanb...

You are asked to analyze the kanban system of LeWin, a French manufacturer of gaming devices. One of the workstations feeding the assembly line produces part M670N. The daily deman

Explain what is the critical path, The following represents a project that ...

The following represents a project that should be scheduled using CPM: Time (DAYS) Activity Immediate Predecessors a m b A - 1 3 5 B - 1 2 3 C A 1 2 3 D A 2 3 4 E B 3 4 11 F

Explain appropriate technique to develop a forecast, Air travel on Mountain...

Air travel on Mountain Airlines for the past 18 weeks was: Week Passengers Week Passengers 1 406 10 440 2 410 11 446 3 420 12 451 4 415 13 455 5 412 14 464 6 420 15 466 7 424 16 47

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