hw8a - Transportation is done by truck, capacity is 150...

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ISyE 4803 - Homework 8 1. Read Chapter 8 in the text. 2. In class we looked at an example where a plant supplies a store that satisfies customer demand. The data for the problem is as follows: For the plant: average production is 10 units/day, value at plant is $500/unit, holding rate is 25% per year, 0 safety stock, space cost is $20/unit/yr For the store: average demand is 10 units/day, value at store is $512/unit, holding rate is 25% per year, 100 units safety stock, store space cost is $25/unit/yr
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Unformatted text preview: Transportation is done by truck, capacity is 150 units/trip, $700 per trip, transit time is 3 days. The store is responsible for the in-transit inventory. Find the transfer price (i.e., value at the store) which will make the decentralized system (i.e., where the store determines its best order quantity independently of the plant) behave as the centralized system (where order quantity is found which minimizes all costs. Comment on the solution and compare to transfer payment....
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