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ANS: When a customer purchases a can of soda at a convenience store, his purchase
represents the end of a supply chain’s delivery of an item and the beginning of information
regarding his purchase flowing in the opposite direction. The supply chain stages include
customers, retailers, wholesalers/distributors, manufacturers, and component/raw material
suppliers. A customer’s purchase moves product towards the customer and dollars and
information towards the retailer. The retailer places an order from the
wholesaler/distributor to replenish stock, thereby moving information back up the supply
chain while moving product down the supply chain. As the order is filled, the retailer will
move dollars back up the supply chain. The wholesaler/distributor transmits information
and dollars to the manufacturer who produces product and ships it down the supply chain
to the wholesaler. Finally (or initially, depending on your perspective) the manufacturer
moves orders (information) and dollars towards suppliers in exchange for material flow into
their production processes.
2)WHY SHOULD A FIRM SUCH AS DELL TAKE INTO ACCOUNT TOTAL SUPPLY CHAIN
PROFITABILITY WHEN MAKING DECISIONS?
ANS: Dell realizes that their ultimate success lies with the success of their supply chain
and its ability to generate supply chain surplus. If Dell was to view supply chain operations
as a zero sum game, they would lose their competitive edge as their suppliers’ businesses
struggled. Dell’s profit gained at the expense of their supply chain partners would be short
lived. Just as a physical chain is only as strong as its weakest link, the supply chain can be
successful only if all members cooperate and focus on a global optimum rather than many
local optima.
3)WHAT ARE SOME STRATEGIC PLAN,PLANNING AND OPERATIONAL DECISIONS THAT MUST
BE MADE BY AN APPAREL RETAILER SUCH AS GAP?
ANS: As The Gap plans supply chain strategy it must first consider the marketing
function’s pricing plans in order to structure a supply chain consonant with these plans.
Strategic considerations such as the capacity of each supplier and assembly operations,
sourcing decisions and how logistics are to be handled are all part of the design. The supply
chain must also settle on communication channels and frequencies. Supply chain planning
takes the strategic decisions as a given and seeks to exploit efficiencies in the chain to
maximize supply chain surplus. The entire chain should collaborate in forecasting and
planning production as to achieve a global optimum. The forecasts should take into account
planned promotions and known seasonal fluctuations in demand.
CHAPTER 2
ANS: The Nordstrom web site states the following. Over the years, the Nordstrom family of
employees built a thriving business on the principles of quality, value, selection, and service.
Today, Nordstrom is one of the nation’s leading fashion retailers, offering a wide variety of
high-quality apparel, shoes, and accessories for men, women, and children at stores across
the country. We remain committed to the simple idea our company was founded on,
earning our customers’ trust one at a time.
Nordstrom fills customer needs for high quality fashion merchandise and outstanding levels
of customer service. Price is no object for the typical Nordstrom shopper.
ANS: Supply chain responsiveness takes many forms, including the ability to respond to a
wide range of quantities, meet short lead times, handle a large variety of products, build
innovative products, meet a high service level, and handle supply uncertainty.
The Nordstrom supply chain must be highly responsive in the areas of handling highly
innovative fashion products, customer response, and service level; they are effective in
supplying well-heeled customers with merchandise and their return policy is legendary in
the Pacific Northwest.
CHAPTER 5
SOLUTION OF QUESTION 1.
1.A) The objective of this model is to decide optimal locations of home offices, and number of trips
from each home office, so as to minimize the overall network cost. The overall network cost is a
combination of fixed costs of setting up home offices and the total trip costs.
There are two constraint sets in the model. The first constraint set requires that a specified number
of trips be completed to each state j and the second constraint set prevents trips from a home office
i unless it is open. Also, note that there is no capacity restriction at each of the home offices. While
a feasible solution can be achieved by locating a single home office for all trips to all states, it is easy
to see that this might not save on trip costs, since trip rates vary between home offices and states.
We need to identify better ways to plan trips from different home offices to different states so that
the trip costs are at a minimum. Thus, we need an optimization model to handle this.
Optimization model:
n n m
Min i 1
fi yi cij xij
i 1 j 1
Subject to
n
x
i 1
ij D j for j 1,...,m (5.1)
m
x
j1
ij K i yi for i 1,...,n (5.2)
# of Consultants 8 5 10 5
The number of consultants is calculated based on the constraint of 25 trips per consultant. As trips
to Kansas cost the same from Tulsa or Denver there are many other solutions possible by
distributing the trips to Kansas between these two offices.
1.B) If at most 10 consultants are allowed at each home office, then we need to add one more
constraint i.e. the total number of trips from an office may not exceed 250. Or in terms of the
optimization model, Ki, for all i, should have a value of 250. We can revise constraint (5.2) with this Ki
value and resolve the model. The new model will answer (b).
However in this specific case, it is clear that only the Denver office violates this new condition. As
trips to Kansas can be offloaded from Denver to Tulsa without any incremental cost, that is a good
solution and still optimal.
Hence we just allocate 5 of the Denver-Kansas trips to Tulsa. This reduces the number of consultants
at Denver to 10 while maintaining 5 consultants at Tulsa.
1.C) Just like the situation in (b), though in general we need a new constraint to model the new
requirement, it is not necessary in this specific case. We note that in the optimal solution of (b), each
state is uniquely served by an office except for Kansas where the load is divided between Denver
and Tulsa. The cost to serve Kansas is the same from either office. Hence we can meet the new
constraint by making Tulsa fully responsible for Kansas. This brings the trips out of Tulsa to 125 and
those out of Denver to 235. Again the number of consultants remains at 5 and 10 in Tulsa and
Denver, respectively.