Videosrus

SUPPLY CHAIN MANAGEMENT –Chopra Meindl Sixth Edition

Chapter 15: Sourcing Decisions in a Supply Chain

Exercise 1 and Exercise 2

EXERCISE 1

A publisher sells books to Barnes & Noble at $12 each. The marginal production cost for the publisher is $1 per book. Barnes & Noble prices the book to its customers at $24 and expects demand over the next two months to be normally distributed, with a mean of 20,000 and a standard deviation of 5,000. Barnes & Noble places a single order with the publisher for delivery at the beginning of the two-month period. Currently, Barnes & Noble discounts any unsold books at the end of two months down to $3, and any books that did not sell at full price sell at this price.

QUESTIONS TO ANSWER:

1. How many books should Barnes & Noble order?

What is its expected profit?

How many books does it expect to sell at a discount?

2. What is the profit that the publisher makes, given Barnes & Noble’s actions?

3. A plan under discussion is for the publisher to refund Barnes & Noble $5 per book that does not sell during the two-month period. As before, Barnes & Noble will discount them to $3 and sell any that remain. Under this plan,

How many books will Barnes & Noble order?

What is the expected profit for Barnes & Noble?

How many books are expected to be unsold?

What is the expected profit for the publisher?

What should the publisher do?

EXERCISE 2

A movie studio sells the latest movie on DVD to VideosRUs at $10 per DVD. The marginal production cost for the movie studio is $1 per DVD. VideosRUs prices each DVD at $19.99 to its customers. DVDs are kept on the regular rack for a one-month period, after which they are discounted down to $4.99. VideosRUs places a single order for DVDs. Its current forecast is that sales will be normally distributed, with a mean of 10,000 and a standard deviation of 5,000.

QUESTIONS TO ANSWER

1. How many DVDs should VideosRUs order?

What is its expected profit?

How many DVDs does it expect to sell at a discount?

2. What is the profit that the studio makes given VideosRUs’ actions?

3. A plan under discussion is for the studio to refund VideosRUs $4 per DVD that does not sell during the one-month period. As before, VideosRUs will discount them to $4.99 and sell any that remain. Under this plan,

How many DVDs should VideosRUs order?

What is the expected profit for VideosRUs?

How many DVDs are expected to be unsold at the end of the month?

What is the expected profit for the studio?

What should the studio do?

CHAPTER 16: Pricing and Revenue Management in a Supply Chain

EXERCISES 2 and 7

Exercise 2

The GoGo Bunny is a hot toy this Christmas, and the manufacturer has decided to ration supply to all retailers. A large retail chain owns two channels—a discount channel and a high-service channel. The retailer plans to sell the toy at a margin of $4 in the discount channel and a margin of $8 in the high-service channel. The manufacturer sends 100,000 GoGo Bunnies to the retailer. The retailer has forecast that the demand for the toy at the high-service channel is normally distributed, with a mean of 400,000 and a standard deviation of 150,000.

QUESTIONS TO ANSWER:

1. How many toys should the retailer send to the high-service channel?

Exercise 7

Return to the bicycle manufacturer NatBike in Exercise 6. Now assume that a customized bicycle costs $300 to manufacture, whereas a standardized bicycle costs $200 to manufacture, with all other data as in Exercise 6. EXERCISE 6 DATA BELOW QUESTIONS

QUESTIONS TO ANSWER:

1. What price should NatBike charge each segment if there is no capacity constraint?

2. What price should NatBike charge each segment if the total available capacity is 20,000 bicycles?

3. What is the total profit in each case?

Exercise 6 data:

NatBike, a bicycle manufacturer, has identified two customer segments; one that prefers a customized bicycle and is willing to pay a higher price and another that is willing to take a standardized bicycle but is more price sensitive. Assume that the cost of manufacturing either bicycle is $200. Demand from the customized segment has a demand curve of d1= 20,000 -10p1 and demand from the price-sensitive standard segment is d2 = 40,000 – 30p2.

Exercise 2

Weekly demand for jeans at a Gap store is normally distributed, with a mean of 100 and a standard deviation of 50. The supply plant takes three weeks to supply a Gap order. The store manager monitors its inventory continuously and reorders jeans when the available inventory drops below 350.

QUESTIONS TO ANSWER

1. How much safety stock does the store carry?

2. What CSL (cycle service level) does the store achieve?

3. If the store manager wants to target a CSL (cycle service level) of 95 percent, how much safety inventory of jeans should the store carry?

4. What should its ROP (reorder point) be?