News Vendor Problem
Redmond Plant Shop (RPS) sells a particular type of carnivorous plant called Venus Flytraps, with the majority of the sales made in the spring months. RPS makes a one-time purchase of the Venus Flytraps prior to each spring season and sells each Venus Flytraps for $15. Any Venus Flytraps unsold at the end of the spring season is marked down to $3 and sold at a special summer sale (assume all marked-down Venus Flytraps are sold).There is a transportation cost of $4for each Venus Flytraps, since they are bought from a grower in North Carolina and shipped across country for sale in Redmond, WA. In addition to the transportation cost, the grower charges RPS $8 per unit if RPS purchases less than 700 units, but the grower offers a discounted price at $7per unit (for all units ordered) if RPS purchases 700 units or more. The demand during spring months is estimated by a market research company to be normally distributed with mean 1000 and standard deviation 400(you don’t need to round the demand). If RPS sells out of the Venus Flytraps (i.e., if the actual demand is more than RPS has purchased prior to the season), it will place an expedited order to the grower to meet the excess demand. The grower does not offer the discount for the expedited order(i.e., the grower charges $8 per unit for the expedited order), and the expediting transportation cost is$6per unit.
Run the simulation to obtain optimal order quantity.
determine the total profit and optimal order quantity to maximize profit
Redmond Plant Shop (RPS) sells a particular type of carnivorous plant called Venus Flytraps, with the majority of the sales made in the spring months. RPS makes a one-time purchase of the Venus Flytraps prior to each spring season and sells each Venus Flytraps for $15. Any Venus Flytraps unsold at the end of the spring season is marked down to $3 and sold at a special summer sale (assume all marked-down Venus Flytraps are sold).There is a transportation cost of $4for each Venus Flytraps, since they are bought from a grower in North Carolina and shipped across country for sale in Redmond, WA. In addition to the transportation cost, the grower charges RPS $8 per unit if RPS purchases less than 700 units, but the grower offers a discounted price at $7per unit (for all units ordered) if RPS purchases 700 units or more. The demand during spring months is estimated by a market research company to be normally distributed with mean 1000 and standard deviation 400(you don’t need to round the demand). If RPS sells out of the Venus Flytraps (i.e., if the actual demand is more than RPS has purchased prior to the season), it will place an expedited order to the grower to meet the excess demand. The grower does not offer the discount for the expedited order(i.e., the grower charges $8 per unit for the expedited order), and the expediting transportation cost is$6per unit.
Run the simulation to obtain optimal order quantity.
determine the total profit and optimal order quantity to maximize profit
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