Topics: Costs, Optimization, Sunk costs Pages: 3 (788 words) Published: April 6, 2013
For question 1, you should try to identify the total landed costs for Applichem’s current plan. Reasoning that Applichem’s managers are astute business people, assess the key strengths and weaknesses of the current plan from a supply chain perspective, and try to understand how they settled on this plan. What performance criteria do Applichem’s managers seem to value? Keeping in mind that forecasts are almost always wrong, have they made any apparent tradeoffs between between cost and performance? Ans 1)

Current Plan:

Optimal Model according to Solver:

The total landed cost for Applichem’s current plan is $837,007 which is less than the optimal cost which we got according to our model. But when we try to understand their current plan from the supply chain perspective, we can see that there are few strengths in their current plan: i. Firstly, the delivery would be quicker as according to their current plan all the plants are working at some minimum utilization and so some of the demand in Japan would be fulfilled by the plant at Osaka which isn’t the case with our optimal model (which recommends not producing anything at the Osaka plant). ii. It seems from their current plan that the managers at Applichem value the time of delivery more than the cost and so we can see that although it would be more economical not to produce in Osaka according to our model, but the time of transportation would be more because there would be more imports to Japan. So they have made a tradeoff between the delivery time and the total cost.

Ans 2)For question 2, ignore my comment about forecasts and see whether solver can improve on the current plan, at least with respect to total landed costs.

As far as the optimization of the total landed cost is concerned, we can see that Solver gives the minimum cost of $797,728 as the optimal solution. Following screenshot shows the decision variables, constraints and the objective function.

For question 3, begin...
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