a. Create a spreadsheet model for this problem and solve it. What is the optimal solution? b. If Rick wanted to improve this solution, what additional resources would be needed and where would they be needed? Explain. c. What would TGL’s optimal profit be if they were not required to supply at least 90% of each distributor’s order? d. Suppose TGL’s agreement included the option of paying a $10,000 penalty if they cannot supply at least 90% of each the distributor’s order but instead supply at least 80% of each distributor’s order. Comment on the pros and cons of TGL exercising this option.
Rick Eldridge is the new Vice President for operations at the The Golfer’s Link (TGL), a company specializing in the production of quality, discount sets of golf clubs. Rick was hired primarily because of his expertise in supply chain management (SCM). SCM is the integrated planning and control of all resources in the logistics process from the acquisition of raw materials to the delivery of finished products to the end user. Because SCM seeks to optimize all activities in the supply chain including transactions between firms, Rick’s first priority is ensuring that all aspects of production and distribution within TGF are operating optimally. TGL produces three different lines of golf clubs for men, women, and junior golfers at manufacturing plants in Daytona Beach, FL, Memphis, TN, and Tempe, AZ. The plant in Tempe produces all three lines of clubs. The one in Daytona produces only the men’s and women’s lines, and the plant in Memphis produces only the women’s and juniors’ lines. Each line of clubs requires varying amounts of three raw materials that are sometimes in short supply: titanium, aluminum, and a distinctive rock maple wood that TGL uses in all of its drivers. The manufacturing process for each line of clubs at each plant is identical. Thus, the amount of each of these materials required in each set of the different lines of clubs is summarized below:
The estimated amount of each of these key resources available at each plant during the coming month is given as:
TGL’s reputation for quality and affordability ensures that it can sell all the clubs it can make. The men’s, women’s, and juniors’ lines generate wholesale revenues of $225, $195, and $165, respectively, regardless of where they are produced. Club sets are shipped from the production plants to distribution centers in Sacramento, CA, Denver, CO, and Pittsburgh, PA. Each month, the different distribution centers order the number of club sets in each of the three lines that they would like to receive. TGL’s contract with this distributor requires filling at least 90% (but no more than 100%) of all distributor orders. Rick recently received the following distributor orders for the coming month:
The cost of shipping a set of clubs to each distribution point from each production facility is summarized in the following table. Note again that Daytona does not produce juniors’ club sets and Memphis does not produce men’s club sets.
Rick has asked you to determine an optimal production and shipping plan for the comingmonth.