5. In the Red Tomato example, assume that a $1 discount results in a 100% increase in consumption in any given month and 20% of demand for two subsequent months is moved forward. Using Excel Solver, decide whether Red Tomato should (i) not offer promotion, (ii) offer promotion in January, or (iii) offer promotion in April to maximize its profit. (10 points) Red Tomato Example Two-stage supply chain: Red Tomato (supplier) and Green Thumb (retailer) Data for Red Tomato and Green Thumb: Item Cost and Labor Requirement Month Demand Forecast Material cost $10/unit January 1,600 Inventory holding cost $2/unit/month February 3,000 March $5/unit/ month Marginal cost of 3,200 stockout/backlog April 3,800 Hiring and training costs $300/worker May 2,200 Layoff cost $500/worker June 2,200 Labor hours required 4/unit Regular time cost $4/hour Overtime cost $6/hour Cost of subcontracting $30/unit 34 Carlson School of Management Red Tomato Example Red Tomato ships assembled tools to Green Thumb Starting inventory in January is 1000. The goal of Supply Chain manager is to end June with at least 500 units of inventory and no stockout. All stockouts are backlogged and supplied from the following months' production Red Tomato has a starting workforce of 80 employees at it manufacturing facility in Mexico 20 working days per month Each employee works 8 hours per day (regular time); maximum of 10 hours of overtime per month Retail price of tools: $40 How should Red Tomato plan the production over the six-months to maximize its profit? Since all the demand has to be met, the revenues earned over six months will be fixed. Therefore, maximizing profit means minimizing cost. 35 5. In the Red Tomato example, assume that a $1 discount results in a 100% increase in consumption in any given month and 20% of demand for two subsequent months is moved forward. Using Excel Solver, decide whether Red Tomato should (i) not offer promotion, (ii) offer promotion in January, or (iii) offer promotion in April to maximize its profit. (10 points) Red Tomato Example Two-stage supply chain: Red Tomato (supplier) and Green Thumb (retailer) Data for Red Tomato and Green Thumb: Item Cost and Labor Requirement Month Demand Forecast Material cost $10/unit January 1,600 Inventory holding cost $2/unit/month February 3,000 March $5/unit/ month Marginal cost of 3,200 stockout/backlog April 3,800 Hiring and training costs $300/worker May 2,200 Layoff cost $500/worker June 2,200 Labor hours required 4/unit Regular time cost $4/hour Overtime cost $6/hour Cost of subcontracting $30/unit 34 Carlson School of Management Red Tomato Example Red Tomato ships assembled tools to Green Thumb Starting inventory in January is 1000. The goal of Supply Chain manager is to end June with at least 500 units of inventory and no stockout. All stockouts are backlogged and supplied from the following months' production Red Tomato has a starting workforce of 80 employees at it manufacturing facility in Mexico 20 working days per month Each employee works 8 hours per day (regular time); maximum of 10 hours of overtime per month Retail price of tools: $40 How should Red Tomato plan the production over the six-months to maximize its profit? Since all the demand has to be met, the revenues earned over six months will be fixed. Therefore, maximizing profit means minimizing cost. 35