2. Seattle Electronics Inc. (SEI), a retailer of electronic goods and products s

ID: 364579 • Letter: 2

Question

2. Seattle Electronics Inc. (SEI), a retailer of electronic goods and products sells three models of

computers, the Litepro (L), the Medpro (M) and the Heavypro (H) which are all replenished

through the same supplier. Annual demands for the three products are 12,000 for Litepro, 1,000

for Medpro and 25 for Heavypro. Each unit of Litepro costs $500, Medpro $750 and finally

Heavypro $1,000. The shipping cost of $4,000 is incurred each time an order is delivered. For

each model ordered and delivered, an additional fixed cost of $1,000 is incurred for receiving

and storage. SEI uses an annual holding cost rate of 20%. SEI is considering different strategies

regarding the replenishment of these three models.

(7 Points)

a) Independent Ordering: Find the optimal order quantity and the average annual total cost

associated with for all three items if each model is ordered and delivered independently which

means a separate truck delivers each model.

(8 Points)

b) Joint Ordering: Find the optimal order quantities and the average annual total cost if all three

models are ordered jointly (this means all models are ordered at the same time and thus, every

order placed contains quantities of each of the three models).

(8 Points)

c) Mixed Strategy: In the mixed strategy, 2 of the items are ordered jointly and one is ordered

independently. For instance Litepro and Medpro can be ordered jointly and Heavypro

independently. There will be 3 different combinations of this strategy that needs to be

considered. For all these possible strategies, find the optimal order quantities and then the

average total annual costs.

(2 Points)

d) Based on your analysis above, identify the strategy that yields the minimum total annual cost

Answer. Occupational group: Set of people having common occupation is an occupational group.

Focus group is a group of people assembled to participate in a discussion.

Plant is part of an organization.

In an industry there can be multiple groups such as in manufacturing industry, some are auto manufacturers, so are refreigerator manufacturers.

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