Question: Complete Exercise 6.2. (The Unipart problem reproduced below.) You can submit your work as an Excel file and type your responses there. (10 Points) Unipart,
Complete Exercise 6.2. (The Unipart problem reproduced below.) You can submit your work as an Excel file and type your responses there. (10 Points) Unipart, a manufacturer of auto parts, is considering two B2B marketplaces to purchase its MRO supplies. Both marketplaces offer a full line of supplies at very similar prices for products and shipping. Both provide similar service levels and lead times. However, their fee structures are quite different. The first marketplace, Parts4U.com, sells all of its products with a 5% commission tacked on top of the price of the product (not including shipping). AllMRO.coms pricing is based on a subscription fee of $10 million that must be paid up front for a two year period and a commission of 1% on each transactions product price. Unipart spends about $150 million on MRO supplies each year, although this varies with utilization. Next year will likely be a strong year, in which high utilization will keep MRO spending at $150 million. However, there is a 25% chance that spending will drop by 10%. The second year there is a 50% chance that the spending level will stay where it was in the first year and a 50% chance that it will drop by another 10%. Unipart uses a discount rate of 20%. Assume all costs are incurred at the beginning of each year (so Year 1 costs are incurred now and Year 2 costs are incurred in a year). From which B2B marketplace should Unipart buy its parts?
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
