1. IE 214: Operations Management
KAMAL
Lecture 7
IE 214: Operations Management
Supply Chain Management

3. EXERCISE 11.6
(a) Net profit of 4%, spends 40% of its revenue on purchases. It will take $3.13 in sales to equal $1 saved through purchasing.
(b) Net profit of 6%, spends 80% of its revenue on purchases. It will take $7.69 in sales to equal $1 saved through purchasing.

5. EXERCISE 11.2 Company Donna Inc. Kay Corp. 1 2 4 3 12 * 0.2 = 2.4
18 * 0.2 = 3.6
Service
8 * 0.2 = 1.6
9 * 0.2 = 1.8
Products
8 * 0.4 = 3.2
Sales
5 * 0.2 = 1
6 * 0.2 = 1.2
Total Higher rating
EXERCISE 11.2

7. EXERCISE 11.8
(a) Daily holding cost = (Annual holding cost  Cost)/ Days in year = (.3  $100,000)/365 = $82.20.
Difference in cost per day between shipping options = ($4,800 – $3,800)/10 days = $100.
Since the daily holding cost ($82.20) is less than the daily cost of faster shipping with option b ($100), use the slower shipping, option a.
(b) Implications of added in-transit time to the customer: delivery of this product or of a major product of which this is a component may have repercussions well beyond the cost savings and a very unhappy customer.

9. a) b) c)