Assignment:
Laptop Computer Supply Chain Management
Two laptop OEMs (original equipment manufacturers), Bell and Ultra, dominate the market. The laptops are sold through two retailers, Best Value Electronics (BVE) and Pop Electronics. If a customer wants to buy a laptop while it is out of stock, he/she receives a 10% discount and pick up the laptop when the next shipment comes in. The OEMs outsource two components, CD ROM and battery. There are two CD ROM manufacturers, Alpha and Beta, and two battery manufacturers, Longey and Everlast. All companies use TransMono for transportation of goods. TransMono charges a fixed $5,000 service fee for each delivery, plus $1 for each CD ROM or battery and $2 for each laptop delivered.
Retailer
The retailer needs to do the following
Provide estimated monthly demand to the OEM based on forecast
Prepare an estimated income statement (based on estimated monthly demand)
Given actual demand, manage company operation (e.g., change the quantity of each order if the purchase contract allows) and calculate actual income and profit margin (profit margin = operating profit/net revenue)
The retail prices for Bell and Ultra are $1,000 and $1,700, respectively. The wholesale prices of Bell and Ultra are $700 and $1,000, respectively. The inventory holding costs are $12 and $15 per month for Bell and Ultra, respectively. Operating expense (fixed cost) is $1.5 million per month. Monthly sales figures for the past 5 years are shown in the following tables.
Table 1: Sales figures of Bell laptop at BVE
|
Year
Month
|
2010
|
2011
|
2012
|
2013
|
2014
|
|
1
|
904
|
902
|
1066
|
990
|
999
|
|
2
|
940
|
947
|
1003
|
1009
|
977
|
|
3
|
1074
|
865
|
1021
|
942
|
1004
|
|
4
|
959
|
975
|
971
|
1053
|
1013
|
|
5
|
1095
|
938
|
995
|
940
|
989
|
|
6
|
1230
|
1155
|
1212
|
1164
|
1152
|
|
7
|
1232
|
1172
|
1217
|
1211
|
1210
|
|
8
|
1008
|
950
|
983
|
948
|
973
|
|
9
|
987
|
1068
|
1022
|
1006
|
889
|
|
10
|
1041
|
1013
|
1029
|
980
|
914
|
|
11
|
1344
|
1400
|
1352
|
1403
|
1353
|
|
12
|
1419
|
1449
|
1425
|
1373
|
1305
|
Table 2: Sales figures of Ultra laptop at BVE
|
Year
Month
|
2010
|
2011
|
2012
|
2013
|
2014
|
|
1
|
3173
|
2869
|
3694
|
3191
|
3240
|
|
2
|
2929
|
3453
|
2150
|
2247
|
3076
|
|
3
|
3071
|
2925
|
2648
|
3015
|
3778
|
|
4
|
2967
|
3397
|
2819
|
2705
|
2216
|
|
5
|
2437
|
2703
|
3136
|
3817
|
2984
|
|
6
|
2566
|
2883
|
2465
|
2267
|
2518
|
|
7
|
2951
|
2699
|
2473
|
3223
|
3249
|
|
8
|
3367
|
2549
|
3284
|
2498
|
2155
|
|
9
|
2997
|
3223
|
2571
|
3269
|
3410
|
|
10
|
3252
|
2640
|
3132
|
2697
|
3516
|
|
11
|
2685
|
2981
|
3008
|
3222
|
2888
|
|
12
|
2938
|
2987
|
2902
|
2725
|
3254
|
Table 3: Sales figures of Bell laptop at Pop Eletronics
|
Year
Month
|
2010
|
2011
|
2012
|
2013
|
2014
|
|
1
|
4862
|
5224
|
4805
|
4953
|
5164
|
|
2
|
5231
|
4992
|
4702
|
5005
|
4915
|
|
3
|
5211
|
4484
|
4761
|
5522
|
4753
|
|
4
|
4780
|
4847
|
4781
|
5244
|
4864
|
|
5
|
4677
|
4789
|
5005
|
5073
|
5067
|
|
6
|
5520
|
5997
|
5963
|
6453
|
6264
|
|
7
|
5112
|
6486
|
5768
|
6310
|
5827
|
|
8
|
4842
|
5026
|
5327
|
5129
|
5688
|
|
9
|
5211
|
4594
|
4649
|
5409
|
5546
|
|
10
|
5147
|
4836
|
4813
|
5086
|
5101
|
|
11
|
6443
|
6846
|
7056
|
7046
|
7015
|
|
12
|
7049
|
6744
|
7177
|
6632
|
7049
|
Table 4: Sales figures of Ultra laptop at Pop Electronics
|
Year
Month
|
2010
|
2011
|
2012
|
2013
|
2014
|
|
1
|
941
|
1013
|
1040
|
1131
|
803
|
|
2
|
1132
|
1161
|
912
|
893
|
1209
|
|
3
|
987
|
994
|
957
|
1133
|
1066
|
|
4
|
920
|
864
|
1006
|
864
|
707
|
|
5
|
675
|
821
|
1048
|
821
|
826
|
|
6
|
1049
|
1133
|
941
|
944
|
1249
|
|
7
|
981
|
828
|
972
|
1054
|
1055
|
|
8
|
1141
|
871
|
933
|
1034
|
1216
|
|
9
|
797
|
1149
|
998
|
1041
|
750
|
|
10
|
1148
|
944
|
1106
|
809
|
1129
|
|
11
|
1051
|
785
|
1073
|
1079
|
1129
|
|
12
|
864
|
960
|
891
|
1004
|
1161
|
OEM
The OEM needs to do the following;
Negotiate sales contract with retailer
Determine monthly production schedule (units to be produced, workforce size, overtime) based on sales contract
Determine order quantity and frequency from CD ROM and battery suppliers based on bids and contract negotiation
Prepare an estimated income statement
Given actual demand, manage company operation and calculate actual income and profit margin
The material costs (excluding CD ROM and battery) for producing an Bell laptop and an Ultra laptop are $400 and $600, respectively. The labor hour required for producing a laptop is 1 per unit. A maximum of 160 regular time hours and 40 overtime hours are available each month. Workers are paid a monthly salary of $1,500 each no matter how many regular time hours they works. For overtime work, each worker is paid $14 an hour. The costs of hiring and layoff a worker is $1,000 and $2,000, respectively. The inventory holding cost for a laptop is $10 per month. The inventory holding cost for a CD ROM or a battery is $4 per month. Operating expense is $300,000 per month.
Supplier
The Supplier needs to do the following;
Provide bids to OEM, including unit cost, discount, penalty, etc.
Negotiate and develop sales contract with OEM
Determine monthly production schedule based on sales contract
Prepare an estimated income statement
Given actual demand, manage company operation and calculate actual income and profit margin
The material cost for a CD ROM or a battery is $40. The labor hour required for producing a CD ROM or a battery is 1 per unit. A maximum of 160 regular time hours and 40 overtime hours are available each month. Regular time and overtime hourly labor costs are $9 per worker and $12 per worker, respectively. The costs of hiring and layoff a worker is $500 and $1000, respectively. Each supplier has a manufacturing facility that can accommodate a maximum of 40 workers. Workers are paid based on the actual hours they worked each month. The inventory holding cost for a CD ROM or a battery is $3 per month. Operating expense at supplier is $100,000 per month.
Assumptions
Initial workforces at OEMs and suppliers are 0
Initial inventory is as follows: 0 at retailers, 8,000 at suppliers, 8,000 at Bell, and 5,000 at Ultra. Products are shipped from sellers to buyers at the beginning of the month (from existing inventory)
Inventory has a linear consumption rate, average inventory = (begin-of-month inventory + end-of-month inventory)/2
The holding costs for inventory other than laptops, CD ROMs, and batteries are included in operating expenses
There are 30 days in each month; daily demand within a particular month is constant (daily demand = monthly demand/30); fractional demand is pushed to the next period of the month (e.g., if monthly demand is 800, then the demand during the first 10 days would be 266, the next 10 days would be 267, and the last 10 days would be 267)
The cost of transporting raw materials to CD ROM and battery suppliers is absorbed by raw material suppliers