TEAM

Name
Members /
1.
2.
3.
4.

QUESTIONS

What is the average daily demand over the first 2 years?
What is the average annual demand over the first 2 years?
What is the average daily lost demand over the first 2 years?
What is the average annual lost demand over the first 2 years?
What is the primary reason for lost demand?

When are transportation costsper drum minimized?

What is the minimum transportation cost per drum?

What is the physical annual holding cost of one drum?

What is the financial annual holding cost of one drum (what is the opportunity cost)?

What is the total holding cost of one drum?

per year /
per day

What is the maximum margin that can be obtained from selling one drum?

+ Retail price per drum
– Production cost per drum
– Minimum transportation cost per drum
– Minimum holding cost per drum
– Fulfillment cost per drum
= Maximum margin per drum(*)

(*) The maximum margin ignores batch production cost and part of the opportunity cost.

Use the maximum margin per drum to calculate the minimum number of drums that need to be sold to retrieve the investment cost of adding one unit of capacity to the factory ($50,000)?

Which of the following options are available to Jacobs Industries to reduce/eliminate lost demand?

Add production capacity
Subcontract production
Work overtime to increase production
Built up inventory during low demand period
Backorder production

Assuming that demand is non-random and stationary (i.e. constant) and that the production lead time is not proportional to the order quantity, what is the economic order quantity (EOQ)…

… if full Truckload is used (one full truckloadequals 200 units)

Annual demand in 200 units /
D =
Fixed order cost per batch of 200 units /
S =
Annual holding cost per 200 units /
H =
Economic order quantity (EOQ) per 200 units /
SQRT((2DS)/H) =

… if Mail is used (one mail equals 1 unit)

Annual demand in units /
D =
Fixed order cost per batch of units /
S =
Annual holding cost per unit /
H =
Economic order quantity (EOQ) /
SQRT((2DS)/H) =

Why should Jacobs Industries not blindly use these calculated EOQ values?

STRATEGY

Pre-game: Assume that you have to convince the CEO of Jacobs Industries about a course of action. Briefly describe yourinitial strategy.Do you plan to change the factory capacity, the shipping method, the order quantity, the reorder point? If so, what is the reason for your decision?

RESULTS

Post-game: Summary of results

Total cash at day 1460
Factory capacity at day 1460

Post-game: What actions did you takeduring the game (see History).Why did you take these actions (did they differ from your initial strategy)?

Post-game: If you were to play the game again, what would you have done differently to obtain a higher cash positionon day 1460?