Suppliers in this supply chain are to be selected using the data provided in Section 2 of the

spreadsheet. In this case, all suppliers offer a fixed order quantity. Multiple orders may be

made from a single supplier, but the quantities per order are fixed. In addition, Supplier 1

has imposed a condition of exclusivity. This means that, if selected, the retailer can only

utilise Supplier 1 to provide the replenishment orders. Supplier 2 and 3 do not have this

constraint. However, Supplier 2 has an option where an additional incentive can be

provided, which will increase the ordering cost and the reliability of replenishment orders.

Not choosing the incentive option will decrease ordering costs and reliability. Supplier 3

has no restrictions on exclusivity or offers any incentive scheme.

1. Draw the structure of the decision tree for the supplier selection decision. (worth 5

marks)

2. Given the probabilities that each supplier will make a single order delivery in full,

calculate the following for each branch of the decision tree.

a. Expected quantity delivered per order (worth 2.5 marks)

b. Total cost and cost per unit of generic product. (worth 2.5 marks)

3. Consider your responses in Section 1 alongside your responses made in Section 2,

Questions 1 and 2a and 2b. What configuration of supplier(s) would best fit the

supply chain, at what order quantity? Why?