Objective Function of the Strategic Planning Model
Review the elements of the objective function of the strategic-planning model. Why does the model minimize cost rathçr than maximize profit? Are reduction, casting, and transportation costs really linear? How might any non linearities be modeled? How do the costs associated with the new smelter enter into the objective function? What could you do if there are trade-offs between fixed cost and variable-reduction cost in the new smelter (i.e., if there is one option involving a small fixed cost but high variable- reduction cost, which should be compared against an option consisting of a high fixed cost that generates a smaller variable-reduction cost)? Why does the model ignore the procurement and transportation cost of raw materials to the smelters? Why are customs duties included in the objective function? (Aren't customs duties unavoidable, anyhow?) Why aren't inventory costs other than in-transit inventory costs included in the model? Why doesn't the model impose costs for safety stocks, cycle stocks, stock-piling costs, seasonal stocks, work-in-process inventory, and so on? Why aren't the in-transit inventory costs and customs duties expressed directly in terms of the quantities Qsap?