Supply Chain Management Midterm Questions I will upload the two files you need for solving the midterm. the first one ( midterm questions and instruction)
Supply Chain Management Midterm Questions I will upload the two files you need for solving the midterm. the first one ( midterm questions and instruction) use it to solve the problems. please do the problems in excel file, each problem in a separate spreadsheet. I will also upload the book in you need to understand the materials. the chapters included are : inventory management and risk pooling , supply contracts, and smart pricing) which are chapters 2, 4, and 13. if you need any question let me know Instructions: Please show all of your work on this exam, partial credit will be given for
demonstrating the correct process for the problem, no credit will be given for correct
answers not supported by your work. In addition to showing work, please underline (or
highlight) the final answer for quantitative questions if it is not clear what your final solution
is, you will not receive credit.
This exam is completely individual you may not work with other students in any way.
There are 3 problems, for a total of 100 points.
Make sure to put your completed exam into the associated D2L Dropbox Please submit one
Excel file (with a new Sheet for each problem), and one additional file with any hand-written
work.
Today you will be planning the supply chain for a
new shoe by Nike the Thorsen Max 405! It is
shown below. It is beautiful, isnt it???
1. Complete parts a, b, and c.
Nike Air Jordan is coming out with a new sneaker, the Thorsen Max 405. Nike has a single
manufacturing facility for the Thorsen Max 405 shoe in California. The shoe is totally ethically
sourced. They distribute the shoe through five warehouses located in Georgia, Massachusetts,
Illinois, Texas, and California. The current distribution system partitions the US into five
markets, with each warehouse serving a single regional market. Customers (mostly retail stores)
receive shoes directly from the regional warehouses in their market. So, in the current
distribution system, each customer is assigned to a single market and receives shoe deliveries
from that regional warehouse.
The warehouses receive shoes from the Nike manufacturing facility. It takes two weeks to ship
an order from the manufacturing facility to a warehouse. There is currently a 90% service level.
Nike is considering replacing the five regional warehouses with a single warehouse to improve
service levels and reduce costs. The single warehouse should be one of the existing warehouses.
The following table shows demand for the past 10 weeks at each warehouse.
1
2
3
Georgia
26
35
41
Mass
33
45
37
Illinois
27
42
35
Texas
32
43
54
California 44
34
22
Table 1: 10 weeks of demand
4
40
38
40
40
55
5
46
55
51
46
48
6
48
30
64
74
72
7
55
18
70
40
62
8
18
58
65
35
28
9
62
47
55
45
27
10
44
37
43
38
70
a) (10 points) As a supply chain analyst, you decide to analyze the customer demand in the five
markets. Your analysis reveals that the demand in the five regions are very different; that is, it is
common that if weekly demand in one region is above average, it is more likely that the weekly
demand in the other regions is below average. How does this observation affect the attractiveness
of the new proposed system (i.e., the single warehouse approach)?
b) (20 points) You have been assigned the task of calculating the cost of the existing
decentralized system. Assume that each warehouse uses a (Q,R) ordering policy. The data is as
follows: An order costs $5,000 (per order), and the inventory holding cost is $2.00/unit/week.
Specifically, your job is to
compute Q and R for each warehouse. (hints: You can calculate AVG from Table 1; you
can also calculate STD from Table 1; use a z-table or Excel to look up the z-value for a
90% service level)
calculate average inventory for each warehouse. (hint: once you know Q and R, you can
calculate average inventory)
Determine total weekly cost for each warehouse (composed of weekly inventory holding
cost, weekly setup cost, and weekly transportation costs)
The following table gives the transportation costs per unit of product for in-bound (i.e., from
Nike manufacturer to the warehouse) and outbound (i.e., from the warehouse to the customers in
their market).
Cost 1
In
Georgia
$12
Mass
$11.5
Illinois
$11
Texas
$9
California $7
Out
$13
$13
$13
$13
$13
c) (20 points) Conduct an analysis of the centralized system, for the case where each market is
used as the centralized system. You will have to aggregate demand each week, then determine
new values for Q and R and average inventory and the costs. Then answer, which strategy is
best, in terms of cost: centralized or decentralized? Which regional warehouse should be used as
the central warehouse?
The following table gives the transportation cost per unit of product from each regional
warehouse to other market areas.
Warehouse
Georgia
Mass
Illinois
Texas
California
Georgia
$13
$14
$14
$15
$17
Mass
$14
$13
$8
$15
$17
Illinois
$14
$8
$13
$15
$16
Texas
$15
$15
$15
$13
$8
California
$17
$17
$16
$8
$13
2. Complete parts a and b.
Nike has identified two customer segments for the Thorsen Max 405 shoes. One segment is
willing to place an order for shoes online a few months in advance, and the other segment that
buys the shoes in the retail store is willing to pay a higher price. The customers who are less
price sensitive have a demand curve of D1=10000 20P1. The customers willing to place an
order a few months in advance have a demand curve D2=10000 40P2.
a) (10 points) What price should Nike charge each segment if its goal is to maximize profits?
Calculate the price, and show the price/demand curves for this problem.
b) (10 points) If Nike were to charge a single price over both segments, what price should they
charge? (In other words, this means Nike will charge P=P1=P2, and they are trying to maximize
the profits of the combined demand for the two segments).
3. Complete parts a and b.
Nike manufactures the Thorsen Max 405 shoes at a cost of $20/pair. The distributor will sell to
customers for $200/pair during summer 2020, unsold sneakers at the end of the season are sold
for $10/pair. A MSU Jabs College marketing team determined the following demand scenarios
were possible:
Demand (pairs of sneakers)
3,000
3,100
3,200
3,300
3,400
3,500
3,600
3,700
Probability
3%
8%
15%
30%
17%
12%
10%
5%
The sequence of events is as follows. First, the distributor orders before it knows the demand
from the customers. Then, Nike produces the amount ordered by the distributor. Finally,
customer demand is observed.
a) (15 points) Nike sells to the distributor at $100/unit. First, how much will the distributor
order? Second, find the expected profit for Nike and the distributor, respectively. Third, plot
order quantity (number of units) versus profit (in dollars). (Conduct the analyses in Excel.)
b) (10 points) Nike wants you to develop an option contract so that both Nike and the distributor
enjoy a higher expected profit than found in part (i), if possible. (This contract requires two new
costs: The reservation price, and the exercise price.) In particular, Nike is interested in
comparing two alternative sets of contract terms:
Reservation price = $25/unit, Exercise price = $75/unit
Reservation price = $50/unit, Exercise price = $50/unit
Create an Excel file to calculate the expected profit for Nike and the distributor, respectively, for
those two scenarios, and the distributor order quantity for the two contracts. Conduct the
analyses in Excel. What is your recommendation should Nike pursue either of these
contracts?
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