During your internship, you have been asked to join a demand/supply alignment meeting at your company. Your primary responsibility is to conduct the requested analysis and provide results and insights from the analysis.

The statistical forecasting team has shared the following forecasts for the next two months.

Month	Estimated Demand
1	1200
2	2400

The product is perishable the inventory produced to meet the demand for a month cannot be carried over to the next month. This makes it critical to plan production quantities well. The manufacturing plant has a capacity of 1500 units per month. The production cost is $10 per unit and the price is $60 per unit.

Subcontracting

If the plant does not have enough capacity for a month, the company can either curtail production to capacity or subcontract with a contract manufacturer who charges $15 per unit for 300 or fewer units and $12 per unit for larger orders. If the company chooses to sub-contract, it will contract the production of all planned units that cannot be produced in-house. The company treats subcontracting as a Yes/No decision that applies to both months. That is, if the company chooses to subcontract in one month, it will do so for both months.

For this assignment assume that the company first chooses a stocking or production quantity and then decides whether to subcontract part of this production or not.

Price promotion

The marketing team has suggested that the company should offer a price promotion and reduce the selling price to $50 in the first month to induce customers to forward buy the product and make the monthly demand similar each month. Their models estimate that a price reduction of $10 will increase the demand for the month during which the promotion is offered by 500 units. This increase will be due to customers who will choose to buy one month earlier than they had originally planned. Using price promotions is a Yes/No decision and it only applies to the first month in this context.

Question:

Analyze the alternatives available to the company and recommend the one that you think will be the best for the company.

Start with the analysis of the baseline case (in-house production only and no price promotions). Then, incorporate the options available for planning sales and operations for the next two months, namely, subcontracting and price promotions.

Then, suggest some ways you can further improve profits over the best alternative you have identified. Your analysis and submission should include-

1. A quantitative profit analysis of each alternative.
   1. Baseline [10 points]
   2. Sub-contracting only [10 points]
   3. Price promotion only [10 points]
   4. Price promotion and subcontracting [10 points]

Please include the monthly in-house and sub-contracted production quantities as well as the total profit for each of the above alternatives.

2. A specific recommendation and the rationale for it. [5 points]
3. Suggestions for further improving the expected profit. [5 points]

Please use an excel file for your analysis and include a screenshot of the excel file in your submission.