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A well-known coffee shop sells about 300 gallons of its most popular product each week. The estimated cost to store and maintain one gallon of
A well-known coffee shop sells about 300 gallons of its most popular product each week. The estimated cost to store and maintain one gallon of product is $0.50 per week. Each time the coffee shop places an order from its supplier, the following costs are incurred, independent of the size of the order: $200 delivery fee, $30 unloading and storage, and a $70 transaction fee. Once an order is placed, it arrives exactly 3 work days later. The coffee shop, supplier, and delivery service all operate 7 days per week. (a) Determine the optimal ( s,Q) policy. (12pts) (b) Compute the variable cost per week of the optimal policy. Express your answer in currency format. (3pts) (c) Suppose the coffee shop's current policy is to place an order every Friday to cover demand such that no shortages occur. Express the coffee shop's current ordering policy as an ( S,Q) policy. (4pts) (d) Compute the weekly cost savings (in currency format) of the optimal policy compared to the current policy (2pts)
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