Perdue supplies frozen chicken wing to the local grocery chain Shop Rite. The va

Question

Perdue supplies frozen chicken wing to the local grocery chain Shop Rite. The variable cost for Perdue is $200/box. Perdue sells it to Shop Rite at the price of $400/box. The retail price at Shop Rite is $700/box. Two weeks before the expiration date, any unsold chicken wing will be sold to a discount channel at the price of $100/box. In the current sales season, the chickenwing demand of Shop Rite can be 300, 350, 400, 450, 500 boxes, each with probability of 20%. You only need to consider the sales of the current season. There is only one chance to order for each season, therefore, this is a one shot decision. How many boxes of chicken wings should Shop Rite Order? In average, how many boxes will be sold through the discount channel? What is the expected profit for Shop Rite? If the supply chain is fully coordinated, what is the supply chain profit? Keeping the $400/box wholesale price, Perdue want to propose a (lowest cost) buyback contract to coordinate the supply chain. What should be the buyback price? Please round to integer dollar value. Please discuss the potential implementation issue of the buyback contract. Please design an options contract that is equivalent to the buyback contract in (5). Shop Rite makes a proposal to Perdue suggesting Perdue to reduce the whole sale price to $300/box. In exchange, Shop Rite is willing to share 10% of their revenue. Should Perdue accept this offer, i.e., does Perdue make more money? What is the equivalent revenue sharing contract of the buyback contract in (5)? What is the problem with this contract? How to solve the problem?

Explanation / Answer

Here Whithin 2 hours its difficult to solve the all 9 question .As per rule we have to solve min 4 sub question.I have solved total 6 questions.

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Given Information :

VC =$ 200 / box

Selling price =$ 400 / box

Retail price = $ 700 / box

Unsold box sold at = $ 100 / box

Here we need to create the pay off table .

S.. are the states

N...are the demands

Profit equation for shop rite order

Profit = Profit *No of goods Sold - Actual cost * No of goods unsold

= (700-400) * No of goods Sold - (400-100) *No of goods unsold

= 300 * No of goods Sold - 300 *No of goods unsold

We use this equation in pay off table.

1 ) For maximizing the profit, shop rite hould order 400 boxes

2) Avg Boxes sale trhough discount channel = 400 boxes

3)Expected profit for shop rite = $ 102000

4)If the supply chain is fully coordianted =

Then full profit is

500 * 300 = $ 150000

5) If buy back price is there for 400 demand

then

Buy Bac price is 100.

Means actual loss is 300

6)

a) Bargaining power of customer

b) Low demand

c) Item will losse value

Pa Off Table Demand N1=300 N2=350 N3=400 N4=450 N5=500 Strategies S1 = 300 90000 90000 90000 90000 90000 S2=350 75000 105000 105000 105000 105000 S3=400 60000 90000 120000 120000 120000 S4=450 45000 75000 105000 135000 135000 S5=500 30000 60000 90000 120000 150000

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