Problem Set #3: Inventory Aggregation
Consider the information and data presented in the textbook case study *Should Packing Be Postponed to the DC
[Distribution Center]?"
For this assignment, do the following:
Compare the two alternatives under consideration for final labeling and packaging:
1. At the production faculty in Malaysia before being shipped to the DC (the current approach) and
2. At the DC in St. Louis (i.e., postponing labeling and packaging until just before shipment).
The comparison should consider the savings in annual holding cost with aggregation compared to the increased production costs of aggregation. When determining if aggregation is warranted, note that how inventory is managed does not need to be consistent across the three products (computers, printers, scanners). That is, aggregation may be worthwhile for only one or two of the three products, and this approach can be implemented.
When analyzing the two alternatives, assume that the demand across the four customers are independent and that the target product fill rate is 99%. Because afire destroyed all historical forecasting performance data, whether or not it is fair to assume that demand is independent across periods of the lead time is unknown.
Therefore, run the analysis two times, using the following assumptions: (a) that demand variation is independent across periods, and (a) that demand variation is perfectly correlated across periods.

Problem Set #4: Optimization
You have been hired by a vendor who is preparing for an upcoming Expo 2018. The vendor hopes to capitalize on the event's theme of "Future Energy" by selling an innovative solar-powered product. Three products are under consideration (so as not to disclose their products ahead of time, the vendor refers to the three products are Products A, B, and C). The products vary in their sophistication (Product A is the most complex and Product C is the least complex), and each product is made by a different manufacturer (each with a different lead time).
Once the Expo ends, products not sold will be sold to a discounter at a heavily reduced price. Financially, differences exist in salvage value, selling price (i.e., revenue perunit), and production cost. The vendor will sell just one of the products (A, B, or C). Because the products all require careful handling, an annual holding cost rate of 30% is assumed. The table below summarizes the important information regarding the products under consideration.

                                                 PRODUCT A    PRODUCT B   PRODUCT C
SELLING PRICE/UNIT                  $500                  $700                $550
PRODUCTION COST/UNIT          $400                  $375                $300
LEAD TIME (WEEKS)                     35                      20                     10
SALVAGE PRICE/UNIT                $200                  $105                  $55
DEMAND FORECAST (UNITS)    1200                1400                  1600
FORECAST CV                              30%                   25%                   20%

Given the information presented, create a spreadsheet for the vendor that determines what product (A, B, or C) should be sold at the Expo based on expected profits, and how many units the vendor should order from the manufacturer. Clearly organize and label the spreadsheet so that the vendor can see inputs and results (i.e., the vendor may wish to modify inputs later as more information becomes available).

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