Job description: WalWart is one of the biggest retail stores in the world. Our company sells everything, from bottled water to cell phones. One of the keys to our success is to keep the products in time in our retail stores. The selected applicant will have the following responsibilities:

 a) Make sure the products are on time and in the required amount to satisfy the demand; 

b) Communicate with the sales and marketing department to get demand forecasts; 

c) Communicate with the customer service department to reduce the number of complaints. 

Job salary: $84,713

 Days of work: Monday to Friday. We may call you during the weekend if there are emergent situations.

—–A conversation during the first day of work—–

 Our customers are normally very happy with our products and our customer service, but 2020 is a crazy year and we have been experiencing shortage of certain products: toilet paper and axes. We understand the necessity of bathroom supplies, but we don’t know what they want the axes for. Anyway, our current supplier of these products has mentioned it is producing at most as it can, but the increased demand of these products is more than its capacity. We currently have one supplier for the toilet paper and the axes (let’s call it Supplier A). As a side note, we don’t fully understand how Supplier A manages to produce toilet paper and axes in the same factory, but they do. We need to supply our stores on San Jose, Los Angeles, and San Diego during the following 3 ´ months. The forecasts for the combined demand of toilet paper and axes (in thousand units) are indicated the following table.

The supplier has two main warehouses, one in Tucson, AZ (with a production capacity of 90 thousand units), and another in Salt Lake City, UT (with a production capacity of 135 thousand units). The transportation cost is $0.01 per thousand units and per mile (you may want to search how far are these cities to calculate the cost using a map app or a website). It is evident that the capacity can satisfy the demand in the first month, but months 2 and 3 are a different story. At the end, we have three options: 

1. To ask the suppliers to produce more than we need and store the surplus for the following months (with an extra inventory cost of $3 per unit per month, independently if they are stored in San Jose, Los Angeles or San Diego). 

2. To hire another supplier (let’s call it Supplier B), which is located Albuquerque, NM, and has a capacity of 100 thousand units. Supplier B would charge us $300 per month as an initial payment for using it. 

3. Deal with angry customers because they cannot find their products.

Please do the following: 

a) Since this is a conversation, you need to contribute to it a little bit. Please indicate any assumptions (to fill holes in the story, such as data, objectives, etc.) that you would consider in the system to model and solve this problem (around 2 or 3 assumptions will suffice). 

b) Please indicate how you would face this situation by utilizing the techniques learned in class. I would prefer if you write it down as a paragraph, but you can use the following table as a basis.

c) Provide managerial indications to the problem you faced during the first day of your new job, i.e., indicate what would be the best option to satisfy the demand in the following three months. If you run out of time to answer this part, please indicate step by step the process of how you would end up with these indications.

*Note:

Formulate a mathematical model for this problem utilizing the 5-steps process which is 1.parameter,2.decision variables,3.constraints,4.objective function,5.Optimization model

 Solve this problem utilizing Excel solver and provide the appropriate recommendations.

Location Month 1 Month 2 Month 3 San Jose 50 70 80 Los Angeles 80 135 140 San Diego 30 60 30