uboptimal supply chain performance occurs because $...$

$$ Each firm makes decisions based on their own margin, not the supply chain$$s margin.

$$ This is called double marginalization.

A typical example of double marginalization is when, within one conglomerate of many companies where each

company is a profit center, maximizing the profit of one company can hurt the profit of another. Say, for example, that

one company within the conglomerate sells screens to the company which makes VR headsets. If the price for the

screens is set too high $($to maximize the profit center for the screen company$),$ then the VR headset company could face

price competition and see its profits fall.

$3.$ Given the following supply chain made up of a manufacturer and a supplier:

Demand is normally distributed with mean $=500$ and standard deviation $=100.$

$3$a$.$ What is the optimal order quantity for the supplier in this supply chain?

Hint: for the supplier

Cu $=$ w $-$ c $=14001000=400$

Co $=$ c $-$ v $=1000600=400$

Select one:

a$.400$

b$.500$

c$.530$

d$.590$

$3$b$.$ What is the optimal order quantity for the buyer in this supply chain?

Hint: for the buyer

Cu $=$ p $-$ w $=16001400=200$

Co $=$ w $-$ v $=1400-600=800$

Select one:

a$.400$

b$.416$

c$.584$

d$.600$

The optimal order quantity for the entire supply chain can be calculated as:

Cu $=$ p $-$ c $=16001000=600$

$4/4$

Co $=$ c $-$ v $=1000600=400$

Critical Ratio $=0\mathrm{.}6000$

z $($round up rule$)=0\mathrm{.}26$

Q$*=500+0\mathrm{.}26*100=526$

Here we see that considering the supply chain as a whole, instead of two separate entities, results in a higher critical

ratio and a higher optimal order quantity. This is the best we can do$!$

$3$c$.$ Which statement is correct?

Select one:

a$.$ The supplier would like the buyer to order less.

b$.$ The supplier would like the buyer to order more.

c$.$ The situation is optimized.

$3$d$.$ How can this situation be optimized?

Select one:

a$.$ The buyer offers the supplier a buy$-$back price b$,$ offering to buy$-$back any unsold goods for this buy$-$back

price.

b$.$ The supplier offers the buyer a buy$-$back price b$,$ offering to buy$-$back any unsold goods for this buy$-$back

price.

$3$e$.$ What is the optimal buy back price for this supply chain given $($assume shipping costs are zero$)$ rounded to the

nearest dollar?

b $=$ Shipping costs $+$ Price

$($Price $$ Wholesale Price$)\backslash$times $($Price $$ SalvageValue@retailer$)/($Price $$ Cost$)$

Select one:

a$.1200$

b$.1267$

c$.1430$