hw7a - the end of the month, you donate them to a local...

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ISyE 4803 - Homework 7 1. Answer the following: a. Discuss the advantages and disadvantages of revenue sharing. In what kind of environments would a revenue sharing agreement be beneficial for a supplier? b. Discuss how the risk of demand uncertainty is shared between the supplier and retailer under the following contracts: revenue sharing and transfer price (Assume that the retail price is exogenous and there is only one retailer.) 2. You are in charge of stocking a magazine at a local convenience store. You have compiled data on past sales, and you estimate that the demand will follow a uniform distribution with a range of 1000 to 2000. It costs you $1.50 to buy each magazine from the supplier and you sell them for $3.95 at your store. It costs the manufacturer $0.50 to produce and deliver each magazine to you. If any magazines are left over at
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Unformatted text preview: the end of the month, you donate them to a local physician’s association. If you run out of magazines, you estimate a loss of goodwill cost of $2.00 per stockout. a. Decentralized model, no coordination : Using the newsvendor model, show that the optimal order quantity is Q = 1748 magazines. Show that the manufacturer’s profit is $1748, your profit is $3114, and so the supply chain profit is $4862. Also show that your expected overstock level under this arrangement is 279.75 magazines. b. Centralized supply chain : Show that the optimal number of magazines you should order to maximize total supply chain profit is Q * = 1915. c. What might be ways to coordinate the supply chain? d. Develop a revenue sharing arrangement that coordinates the chain....
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This note was uploaded on 04/14/2009 for the course ISYE 4803 taught by Professor Staff during the Spring '08 term at Georgia Institute of Technology.

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