Chapter 14 - Chapter 14: Sourcing Decisions in a Supply...

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Unformatted text preview: Chapter 14: Sourcing Decisions in a Supply Chain 1. With no buyback: = + = + = 9 12 12 * C C C CSL o u u 0.571 Optimal lot-size = ) , , ( * * CSL O NORMINV = = NORMINV(0.571,20000,5000) = 20,900 Given that: Borders sale price (p) = $24 Borders salvage value (s = b) = $3 Borders cost (c) = $12: Expected profits for Borders = ( p s ) NORMDIST(( O )/ , 0, 1, 1) ( p s ) NORMDIST((O )/ , 0, 1, 0) O (c s) NORMDIST(O, , , 1) + O (p c) [1 NORMDIST(O, , , 1)] = $198,784 Expected overstock = ( O ) NORMDIST ( (O )/ , 0, 1, 1) + NORMDIST ( (O )/ , 0, 1, 0) = 2,477 Expected understock = ( O )[1 NORMDIST ( (O )/ , 0, 1, 1)] + NORMDIST ( (O )/ , 0, 1, 0) = 1,577 Given that: Publishers sale price (c) = $12 Publishers buyback price (b) = $0 Publishers cost (v) = $1 Publishers expected profit = O(c-v) (overstock)(b) = $229,901 Total supply chain profit = $198,784 + $229,901 = $428,685 With buyback: We reevaluate the profits for Borders (with c = b = 8) and the publisher (with b = 5) Borders' order size, O* 23372 Expected overstock 4118 Expected understock 746 Expected profit for Borders = $214,578 Expected profit for publisher = $236,506 Total supply chain profit = $451,084 EXCEL worksheet 14-1 illustrates these computations 2. With no buyback: = + = + = 01 . 5 99 . 9 99 . 9 * C C C CSL o u u 0.666 Optimal lot-size = ) , , ( * * CSL O NORMINV = = NORMINV(0.666,10000,5000) = 12,144 Given that: Blockbusters sale price (p) = $19.99 Blockbusters salvage value (s = b) = $4.99 Blockbusters cost (c) = $10: Expected profits for Blockbuster = ( p s ) NORMDIST(( O )/ , 0, 1, 1) ( p s ) NORMDIST((O )/ , 0, 1, 0) O (c s) NORMDIST(O, , , 1) + O (p c) [1 NORMDIST(O, , , 1)] = $72,609 Expected overstock = ( O ) NORMDIST ( (O )/ , 0, 1, 1) + NORMDIST ( (O...
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Chapter 14 - Chapter 14: Sourcing Decisions in a Supply...

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