1. Debbie is the purchasing manager of the Campus Bookstore at Queen's University. Every year in March she needs to plan on the number of 'Graduation Rings' the Bookstore should stock. The "Graduation Rings' are specialty rings made by Tiffany and have the year of graduation engraved on them. Each ring costs $150/- and is sold for $300/-. By July if the "Graduation Rings" were not sold a jeweller would buy them at a price of $50/- per ring. Rings which did not sell in one year cannot be stocked and sold the next year. Based on past history Debbie knew that the demand for the "Graduation Rings" could range from 2 to 7. She calculated the probability for the various values of demand to be as follows:
|
Demand in units
|
2
|
3
|
4
|
5
|
6
|
7
|
|
Probability
|
0.1
|
0.1
|
0.2
|
0.3
|
0.2
|
0.1
|
Based on this information, what is the optimal number of "Graduation Rings"
Debbie should buy for the Campus Bookstore at Queen's University? What is Bookstore's expected profit,
2. It costs Tiffany $70 to make the rings. Tiffany's is willing to provide the 'Graduation Rings" to the Campus Bookstore at $70, provided the Campus Bookstore is willing to share the revenue. Tiffany suggests that the Campus Bookstore can retain 60% of the revenue and should pass on 40% of the revenue to Tiffany. Should the Campus Bookstore at Queen's University take up this offer? Are both the Campus Bookstore and Tiffany's better off in this scheme? Can you identify a range of manufacturer revenue share that ensures both parties are better off than before? Show the calculations.
3. Cummins Engines makes large diesel engines for industrial applications. These are mission critical engines as failure of these engines leads to significant losses for their customers. Cummins has an installed base of over 100,000 engines in the US and Canada. Cummins has outsourced on-site service and uses over 1,000 partners to provide this service in a five hour time window. Typically Cummins customers called the service partners directly if they have a problem and the partners solve the problem for their customers. Assume you have taken over the Service operations for Cummins and commission a customer service satisfaction survey. The results of the survey indicate that Cummins service levels are very poor and customers are migrating away from Cummins Diesel Engines on account of the poor service levels. You need to improve customer service levels. Would you bring the customer service inhouse so that Cummins does the entire service operations? If so would you be able to do it in a cost effective manner.
4. Seven Eleven Japan makes multiple deliveries to their stores each day. This is obviously inefficient as you could consolidate all deliveries into one trip and save on transportation costs! Why does Seven Eleven Japan follow this inefficient process? And don't they incur higher costs on account of this strategy?
5. You decide to start a small seated cafe, named Kings Lunch which operates in Queens university and does business only during the short lunch hour from noon to 1 PM. In your business plan you approximate the daily demand forecast using a normal distribution with mean 53 and standard deviation 8. You estimate customers will spend $20 on an average, generating a gross profit of $6. On the other hand when more customers come to Kings lunch than who can be seated then customers will have to be turned away resulting in lost sales. Queens University is willing to lease each seat for 250 days in the year at $1000 per seat (i.e. $4 per day). What is the optimal number of seats you should lease?
6. Queens University now mandates that you should serve atleast 80% of customers. This implies that you can turn away customers at most 20% of the time! What should the optimal number of seats you should now lease?
7. Hermee is a company that makes premium fashion scarves. The company makes these scarves in a facility in Asia. Manufacture of the scarves involves long lead times to procure the raw material and to do the extensive handwork on the scarves. Hermee has planned for six product lines to be sold this season, and the forecasts have been indicated by five forecasters operating independently. These forecasters are drawn from different functional areas but are assumed to have a good understanding of the market for these products. The forecasts are provided in the table below. Due to the long lead times involved Hermee needs to plan for production of three products now, and they could produce the other three products in the second production run after two months (assume the capacity constraint only applies to the number of product lines that Hermee can produce and not to the number of actual items). After six weeks Hermee is expecting to receive updated demand information from the New York fashion show. Prior history has shown that the variance in the forecasts given by individual forecasters is a good indication of the variance of the actual demand. Given only the following information, which three products should Hermee produce now, and which three could be produced in two months? Why?
|
|
|
Individual Forecasts
|
|
Product Line
|
Unit
|
John
|
Jacob
|
Jason
|
Jones
|
Jeffery
|
|
Cost
|
|
Mohair
|
300
|
1800
|
1400
|
2000
|
2800
|
2075
|
|
Cashmere
|
200
|
900
|
1800
|
1900
|
1800
|
1800
|
|
Angora
|
160
|
800
|
3000
|
1000
|
3000
|
1200
|
|
Diva
|
190
|
1200
|
600
|
2000
|
2800
|
3600
|
|
Senorita
|
196
|
5000
|
3800
|
3800
|
5600
|
3600
|
|
Mystic
|
95
|
4600
|
4300
|
3900
|
4000
|
4300
|
8. A change in management at a critical supplier leads to an additional sourcing constraint for Hermee. This constraint implies that Hermee needs to make a minimum of 1800 units of each product type. Will the minimum order quantity requirement change Hermee's decision on which products to produce in the first production run? If yes, what are the three products Hermee will need to produce in the first production run and why? If no, why will there be no need to change the three products that need to be produced in the first production run?Ignore the minimum order constraint of 1800.
9. The forecasters John and Jacob do not agree with the schedule developed. They argue one should not take the inputs of all forecasters. They say that John and Jacob are from sales and have a better understanding of the customer, and hence greater weight should be given to their forecasts. Do you agree with their arguments? Why or Why not?
10. Boeing used a new payment approach in its outsourcing for the Dreamliner project. They asked the suppliers to invest in the development of the products and modules. Additionally Boeing offered to pay the suppliers only when the Dreamliner plane was delivered to customers! What are the benefits and the problems with this approach.
a. Demand at Retailer > Demand at WholeSaler > Demand at Distributor > Demand at Manufacturer > Demand at Supplier
b. Standard Deviation of Orders from Retailer < Standard Deviation of Orders from WholeSaler < Standard Deviation of Orders from Distributor < Standard Deviation of Orders from Manufacturer < Standard Deviation of Orders from Supplier
c. Orders from Retailer < Orders from WholeSaler < Orders from Distributor < Orders from Manufacturer < Orders from Supplier
d. Variance in Orders from Retailer >Variance in Orders from WholeSaler >Variance in Orders from Distributor >Variance in Orders from Manufacturer >Variance in Orders from Supplier