1. A toy manufacturer makes stuffed kittens and puppies which have relatively lifelike motions. There are three different mechanisms which can be installed in these "pets." These toys will sell for the same price regardless of the mechanism installed, but each mechanism has its own variable cost and setup cost. Profit, therefore, is dependent upon the choice of mechanism and upon the level of demand. The manufacturer has in hand a forecast of demand that suggests a 0.2 probability of light demand, a 0.45 probability of moderate demand, and a probability of 0.35 of heavy demand. Payoffs for each mechanism-demand combination appear in the table below.
|
Demand
|
Wind-up action
|
Pneumatic action
|
Electronic action
|
|
Light
|
$250,000
|
$90,000
|
-$100,000
|
|
Moderate
|
400,000
|
440,000
|
400,000
|
|
Heavy
|
650,000
|
740,000
|
780,000
|
Construct the appropriate decision tree to analyze this problem. Use standard symbols for the tree. Analyze the tree to select the optimal decision for the manufacturer.
2. A manager must decide on the mix of products to produce for the coming week. Product A requires three minutes per unit for molding, two minutes per unit for painting, and one minute for packing. Product B requires two minutes per unit for molding, four minutes for painting, and three minutes per unit for packing. There will be 600 minutes available for molding, 600 minutes for painting, and 420 minutes for packing. Both products have contributions of $1.50 per unit.
a. Algebraically state the objective and constraints of this problem.
b. Plot the constraints on the grid below and identify the feasible region.
c. What is the optimal product mix for this problem?
3. A manufacturing company preparing to build a new plant is considering three potential locations for it. The fixed and variable costs for the three alternative locations are presented below.
a. Complete a numeric locational cost-volume analysis.
b. Indicate over what range each of the alternatives A, B, C is the low-cost choice.
c. Is any alternative never preferred? Explain.
|
Costs
|
A
|
B
|
C
|
|
Fixed ($)
|
2,500,000
|
2,000,000
|
3,500,000
|
|
Variable ($ per unit)
|
21
|
25
|
15
|
4. Ikon Office Solutions is the world's largest independent office technology company, with revenues approaching $5 billion and operations in the U.S., Canada, Mexico, the United Kingdom, France, Germany, and Denmark. Ikon is pursing a growth strategy to move from what was more than 80 individually operating copier dealers to an integrated solutions company. Its goal is to provide total office technology solutions, ranging from copiers, digital printers, and document management services to systems integration, training, and other network technology services. The company has rapidly expanded its service capability with an aggressive acquisition effort that has included technology services and document management companies.
Given these objectives, the company seemed to need ERP software. A few years ago, it began a pilot project in the Northern California district to assess the possibility of using SAP's enterprise software applications companywide. Chief Information Officer David Gadra, who joined Ikon about a month after the pilot system was turned on, however, decided not to roll it out. Ikon will take a $25 million write-off on the cost of the pilot.
"There were a number of factors that made us decide this project was more challenging than beneficial for us," says Gadra. "When we added everything up-human factors, functionality gaps, and costs incurred-we decided our environment is ill defined for SAP." Instead, Ikon is bringing all 13 of its regional operations onto a homegrown application system.
"I don't blame the consultants or SAP," he says. "We made errors on our side in estimating the amount of business change we'd have to make as part of this implementation."
The vast majority of the $25 million loss represents consultant fees; less than 10% went to pay for the software itself. At any given point in the project, Ikon was paying 40 to 50 outside consultants $300 an hour.
Ikon budgeted $12 million to get the system running. That cost came in at over $14 million, including $8 million paid to IBM for consulting.
A major reason the company decided to drop SAP was its conclusion that the software didn't sufficiently address the needs of a service company like Ikon, as opposed to those of manufacturers. For example, SAP didn't have an adequate feature for tracking service calls. Ikon also had great difficulty assembling an internal team of SAP experts. Ikon's costs were high because the firm relied heavily on consultants.
"I am extremely disappointed by Ikon's announcement," says SAP America president Jeremy Coote, describing Ikon's earlier pilot as on time and "extremely successful." Coote calls Ikon's decision to scrap the project "an example of what happens when you don't sell at the corporate level" as well as the divisional level. A newer version of SAP is to include a service management module.
Based on the case above, answer the following-
a. What are the information needs at Ikon and what alternatives does Ikon have to meet these needs?
b. What are the advantages and disadvantages of ERP software in meeting these needs?
c. What risks did the company take in selecting SAP software for evaluation?
d. Why did Ikon cancel the SAP project?