Exam 13: Linking Product Availability to Profits

Scenario 13.1 - Nefarious The tenured professor routinely led student groups on factory tours in exotic locales,and one popular destination was an island south of Miami.The students enjoyed this happy little island and the professor liked it because he could supplement his income by bringing back a few boxes souvenirs he could sell to his friends.The souvenirs cost the professor $125 a box and he sells them for $290 a box.Souvenirs that dry out due to age can be sold for $80.Experience has shown that the demand for boxes of these souvenirs has a mean of 80 with a standard deviation of 20. -The professor's suitcase has room for 50 boxes of souvenirs.What is his expected profit?

A high level of product availability requires ________,which raises supply chain costs.

Which of these options would NOT increase profitability?

Postponement is valuable for a firm that sells a large variety of products with demand that is independent and comparable in size.

Scenario 13.1 - Nefarious The tenured professor routinely led student groups on factory tours in exotic locales,and one popular destination was an island south of Miami.The students enjoyed this happy little island and the professor liked it because he could supplement his income by bringing back a few boxes souvenirs he could sell to his friends.The souvenirs cost the professor $125 a box and he sells them for $290 a box.Souvenirs that dry out due to age can be sold for $80.Experience has shown that the demand for boxes of these souvenirs has a mean of 80 with a standard deviation of 20. -The professor's suitcase has room for 50 boxes of souvenirs.How many boxes does he expect to have left once his friends have bought what they want?

A managerial lever to increase profitability is to decrease the salvage value of each unit.

A manufacturer of lawn care equipment has introduced a new product.The anticipated demand is normally distributed with a mean of μ = 100 and a standard deviation of σ = 50.Each unit costs $75 to manufacture and the introductory price is to be $125 to achieve this level of sales.Any unsold units at the end of the season are unlikely to be very valuable and will be disposed of in a fire sale for $25 each.It costs $10 to hold a unit in inventory for the entire season.What is the cost of overstocking? What is the cost of understocking? What is the optimal cycle service level? How many units should be manufactured for sale?

A high level of product availability requires

The loss incurred by a firm for each unsold unit at the end of the selling season is

Faced with a 3000 taco capacity constraint,what is the optimal number of fish tacos to prepare?

Scenario 13.1 - Nefarious The tenured professor routinely led student groups on factory tours in exotic locales,and one popular destination was an island south of Miami.The students enjoyed this happy little island and the professor liked it because he could supplement his income by bringing back a few boxes souvenirs he could sell to his friends.The souvenirs cost the professor $125 a box and he sells them for $290 a box.Souvenirs that dry out due to age can be sold for $80.Experience has shown that the demand for boxes of these souvenirs has a mean of 80 with a standard deviation of 20. -Naturally,the professor will purchase the optimal number of boxes.(He's had a course or two in supply chain management and knows this model well. )What is his expected profit from purchasing the optimal number of boxes?

As the standard deviation of forecast error increases,

A high level of product availability requires less inventory,which will keep costs down for the supply chain.

The level of product availability

The margin lost from current as well as future sales if the customer does not return should be included in

Scenario 13.1 - Nefarious The tenured professor routinely led student groups on factory tours in exotic locales,and one popular destination was an island south of Miami.The students enjoyed this happy little island and the professor liked it because he could supplement his income by bringing back a few boxes souvenirs he could sell to his friends.The souvenirs cost the professor $125 a box and he sells them for $290 a box.Souvenirs that dry out due to age can be sold for $80.Experience has shown that the demand for boxes of these souvenirs has a mean of 80 with a standard deviation of 20. -The costs of overstocking and understocking have a direct impact on

In the previous problem,the manufacturer performs additional market research.Based on this research,they determine that they can increase the price to $150 and are able to reduce the standard deviation of the forecast to σ = 30.At the same time,they have made an arrangement with an outlet store that will purchase unsold equipment for $60 each.How will these changes affect the cost of overstocking,cost of understocking,optimal cycle service level and optimal order size?

Whether the optimal level of product availability is high or low depends on where a particular company believes they can

Explain the relationship between product availability and supply chain profitability.

In tailored sourcing,firms use a combination of two supply sources,