Part 1.

The company sells higher-end custom-design socks in three-sock sets (rather than two). The company operates from a small packaging and distribution facility in Richmond, CA from which it ships product to customers. Given the company's location and focus, 97% of sales are in California, primarily in the major urban areas of the San Francisco bay area, Los Angeles, Sacramento (and last but not least) San Diego. The company sells exclusively via online sales, at an average price of $15/three-sock set, plus shipping costs charged to the customer.

The company currently orders its product from the Chinese sock manufacturer Zhejiang Datang Hosiery Group Co., Ltd in so-called "Sock City." Socks are shipped via truck to the port of Shanghai, from where they are shipped to the port at Los Angeles-Long Beach via ocean freight. Once offloaded in Los Angeles-Long Beach, the socks are shipped via truck to the Richmond facility. On average, shipment from the manufacturer to the Richmond facility takes 4 weeks. In addition to the transit time required for shipment, the lead time from when an order is placed with the manufacturer to when it is shipped from Zhejiang is 3 weeks. So, the total lead time is considered to be 7 weeks from when Throx places an order til it reaches the Richmond facility. Historically, the standard deviation of lead time has been 1 week.

Product Orders (Demand) Information

The company provides you with the following information for the past two fiscal years:

FY 2016 FY 2017 Demand Characteristic Annual demand, units 20,000 23,000 Average weekly demand, units 430 417 Variance of wee

v

Product Forecasting Information

Throx uses two main forecasting methods based on annual data to predict orders for the following year, a weighted moving average and exponential smoothing. They provide you with the following information about forecasts for FY 2015 and FY 2016:

WeightedMoving Exponential Demand Year Average Forecast Forecast 2016 20,000 17,000 17,200 2017 23,000 19,500 19,720

Weighted Moving Average uses Wt = 0.8 and Wt-1 =0.2.

Exponential Smoothing uses = 0.9.

Inventory Management Information

The initial inventory for all sock styles combined at the beginning of FY 2018 is 3,500 units. You also have information on current costs, which includes:

Order cost to Throx for an order placed with its current supplier, $/order = S = $350

Holding cost per set per per year = H = $5

The company currently pays $4 for each set of socks. = P

The company uses a continuous review replenishment policy, and has IT systems in place that allow constant monitoring of key information. Last year, the company used an ROP under this policy of 1,500 units for all sock styles and an order quantity Q of 5,000 units for all sock styles.

Potential Alternatives to Current Supply Chain Management

The company has asked you to evaluate a number of alternatives to their current SCM practices, including at a minimum their choice of supplier, transportation modes, warehouse capacity, order quantities and safety stock.

Alternative Suppliers

The company has contacted potential alternative suppliers in China, who have offered the following information relative to the current supplier:

Supplier Characteristic Unit Price, $/3-sock set Order cost, $/order Defect Rate AlternativeA Alternative B Current 2.00 $ 4.

Throx wants to use a single-sourcing strategy, so they want a recommendation about which supplier would be best. Throx has decided to use the following weights in analyzing the suppliers:

Supplier Characteristic Unit Price, $/3-sock set Order cost, $/order Defect Rate Weight 0.4 0.3 0.1 Financial condition of th

Alternative Transportation

An alternative to their current transportation approach available to Throx is shipment by UPS Express Air from Shanghai to Richmond, which averages 3.5 days. The comparison of costs is given as:

Maersk Ocean Freight UPS AirExpress Transporation Supplier Characteristics Units cost, $/sock set Damage Rate (arrent) (Alter

* No data are available about variation in transit times, so Throx assumes this is constant.

Similar to their decision about sourcing, Throx wants to use a single-sourcing strategy for transportation, so they want a recommendation about which mode would be best.

Alternative Warehouse Location

The company would also like to assess whether its current warehouse location is appropriate based on where customers are located. It provides you the following information about its key markets, and indicates that its orders in each market are roughly proportional to the total population.

Market Population LA-Long Beadh 110 14,000,000 40 San Francisco 8,900,000 37 122 San Diego 4,750,000 33 115 2,200,000 Sacrame

For each question below complete the required calculations utilizing the tools you learned in SCM 301 providing a summary or table of your calculations. In addition, provide a few summary bullet points explaining your observations/rationale for you conclusions or recommendations.

Calculate measures of forecast accuracy (MFE, MAD and MAPE) using the data from FY2016 and FY2017. Do these forecasts seem adequate for the purposes of decision making? Why or why not?

Develop a forecast for FY2018 using the two forecasting methods currently employed by the company. Comment on which of the forecasts is likely to be more appropriate to support decisions based on your assessment of forecast accuracy from Q1. Based upon this, identify which forecast method that you will use going forward with the project.

This question will have you calculating 2 EOQ and ROP values and interpreting the results. For both EOQ and ROP, give your final answer in full sock sets (ROUND UP to the next whole number). The specific questions to answer are based in parts a-c. Tips to solve the EOQ and ROP are given below in bullet points.

Calculate EOQ and ROP for FY2017 based on the FY2017 forecast value that you recommended in Question #1.

Calculate the EOQ and ROP based upon actual demand for FY2017

Using the responses from parts a & b, indicate what the implications are for inventory management costs in FY2017. In other words, 1. Compare the total costs for both EOQ values and analyze what it shows you. 2. What if any are the implications of the ROP based on the forecast vs the ROP based on actual demand.

See additional tips below:

Use a service level of 95% (z=1.65) when calculating the ROP

Calculate average weekly demand (dSi0TrNzKp7X1YiFCtoHe2kdxhNZYrNZcGTZ7Azo+ ) by dividing the forecast by 50 weeks

For the variance in weekly demand, use the data provided in the table on page 2 of the case with the FY2017 forecast for all approaches.

Remember that there is a difference between variance and standard deviation and how you apply these values in the ROP formula

Annual Inventory management costs will include the following: Annual Holding Costs, Annual Ordering Costs, and Purchase Cost.

Currently, the company is purchasing parts not using EOQ and ROP values determined by the tools we are using. These values are given in the case.

Using their current order quantity, calculate the current inventory management costs based upon actual demand in FY2017 aka use this as D.

Compare this cost to the costs to that would have been achieved if the company had used its forecast for FY2017 to calculate EOQ and ROP values (what you calculated in Question 3a). TIP: When calculating costs based upon the forecasted EOQ, use the actual demand as D in your total cost equation. This will ensure you find the true savings or increase that the company would have seen by using the EOQ value.

Provide the company with the following recommendations for FY2018 to improve SCM performance, based on analysis of available data and appropriate methods from SCM 301. Be sure to justify your recommendation. Use your forecast method / values from Question 2 as input into your decisions.

Indicate which of the three suppliers should be used for FY2018. Develop a supplier scorecard using the following scale: 3=best, 2=second best, 1=worst and the weights provided in the case to support your selection.

Calculate EOQ and ROP values for FY2018 based on your forecast from Question 2 and recommended supplier from Question 5a. (TIP: The selected supplier may change your S and P values.) Give your final answer in full sock sets (ROUND UP to the next whole number). What are the expected costs for inventory management based on your decisions? How does this compare to company's current policy--your answers from 4a?

Indicate which transportation mode should be used for FY2018. You must complete analysis of the transportation costs. You may develop a scorecard to support your answer, but it is not required. When supporting your recommendation, be sure to discuss other implications (such as inventory levels, safety stock, cost set to support your decision.

Indicate an appropriate location for a new facility if one is to be built using the weighted center of gravity approach. Round your final coordinates (X, Y) to two decimal places. Discuss other relevant factors that would influence the choice of a specific location once the (X,Y) coordinates have been identified.

Discuss potential issues with the implementation of your recommendations. What changes or resources would be necessary to implement them, and what might create challenges?

Part 2.

1. In microeconomics the term utility references the:

i. relative scarcity of a good or service

ii. usefulness of a good or service

iii. satisfaction derived from consumption of a good or service

iv. slope of a consumers demand curve for a good or service

i

ii

iii

iv

ii and iii

iii and iv

Question 22 pts

The consumer choice models describes how an individual allocate his/her income over goods and services in order to maximize utility. One component of the consumer choice model is the individuals utility function. From the utility function alone, which of the following can be determined?

i. the utility maximizing bundle of goods and services a consumer will choose to purchase

ii. the utility derived from all bundles of goods and services

iii. the bundles of goods and services that yield the same level of utility

i

ii

iii

i and ii

ii and iii

i, ii, and iii

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Question 32 pts

Punk-rocker Pete is feeling insecure about his long-term relationship with economist Elaine. At the conclusion of a recent date, he tells Elaine, "I feel that I derive much more utility from this relationship than you." Elaine tells him that his claim is ridiculous because:

Elaine knows she has spent more income on Pete than Pete has spent on her over the course of their relationship

Elaine knows Pete has spent more income on her than she has spent on him over the course of their relationship

Elaine knows that utility is subjective and therefore it is not meaningful to make inter-personal utility comparisons

Pete knows he has spent more income on Elaine than Elaine has spent on him over the course of their relationship

Pete knows Elaine has spent more income on him than he has spent on her over the course of their relationship

both Elaine and Pete know they have spent the same amount of income on each other over the course of their relationship

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Question 42 pts

Marginal utility is the:

total utility from consuming a bundle of goods divided by the quantity of units consumed

change in total utility from consuming each additional unit of a good

change in total utility realized by consuming each additional unit of a good divided by the price of the good

sensitivity of consumer purchases of a good to changes in its price

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Question 52 pts

Which of the following is statements is correct?

there is no relationship between marginal utility and total utility

if marginal utility is diminishing but positive as consumption increases, then total utility will increase

total utility is equal to the change in marginal utility from consuming each additional unit of a good

if marginal utility is diminishing as consumption increases, total utility will also be diminishing

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Question 62 pts

The law of diminishing marginal utility states that:

the demand for a good will rise as price is lowered, holding all other factors constant

the quantity of a good demanded will rise as price is lowered, holding all other factors constant

as more and more units of a good are consumed, utility will decline beyond a point

in order to maximize utility, consumers will allocate their income such that marginal utility per dollar is equal across the goods purchased

none of the above options are correct

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Question 72 pts

Pete likes pie. If he consumes 1 piece of pie, he obtains 8 units of utility, if he consumes 2 pieces he obtains 12 units of utility, and if he consumes 3 pieces he obtains 15 units of utility. It follows that:

total utility is increasing at an increasing rate and marginal utility is increasing

total utility is increasing at an increasing rate and marginal utility is decreasing

total utility is increasing at an increasing rate and marginal utility is constant

total utility is increasing at a decreasing rate and marginal utility is increasing

total utility is increasing at a decreasing rate and marginal utility is decreasing

total utility is increasing at a decreasing rate and marginal utility is constant

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Question 82 pts

Suppose an individuals preferences are described by the Cobb-Douglass utility function U = X0.5Y0.5and consider the following three combinations (or bundles) of X and Y: Bundle A (3,4); Bundle B (6,1); Bundle C (2,5). Given the individuals preferences, the bundles ranked from least-preferred to most-preferred are:

Bundle A, Bundle B, Bundle C

Bundle A, Bundle C, Bundle B

Bundle B, Bundle A, Bundle C

Bundle B, Bundle C, Bundle A

Bundle C, Bundle A, Bundle B

Bundle C, Bundle B, Bundle A

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Question 92 pts

Suppose a consumers utility function is U = X0.5Y0.5. It follows that the indifference function associated with the bundle X = 8 and Y = 8 or (8, 8) is:

Y = 2/X

Y = 4/X

Y = 8/X

Y = 16/X

Y = 32/X

Y = 64/X

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Question 102 pts

If an indifference curve relating X and Y slopes downward, then it may be concluded that:

i. both X and Y are bads

ii. both X and Y are goods

iii. X is a good and Y is a bad or X is a bad and Y is a good

i

ii

iii

i or ii

ii or iii

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Question 112 pts

Consider an individual whose preferences are described by the utility function is U = X0.5Y0.5. If she consumes 2 units of X and 6 units of Y, then some level of utility will be experienced. If the individual instead consumes 4 units of X, how much of good Y must she consume in order to attain the level of utility associated with 2 units of X and 6 units of Y?

Y = 1

Y = 2

Y = 3

Y = 4

Y = 5

Y = 6

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Question 122 pts

Any bundle of goods located outside (versus inside) of a consumers budget constraint:

i. will yield more utility than any bundle located inside the budget constraint

ii. will yield more utility than any bundle located on the budget constraint

iii. implies the consumer is not spending all of his or her income

iv. is unobtainable, given the consumer's income

i

ii

iii

iv

i and iii

i and iv

ii and iii

ii and iv

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Question 132 pts

If a consumers income is $300, the price of good X is PX = $6, and the price of good Y is PY = $3, then the algebraic expression for the consumers budget constraint is:

Y = 50 - 0.5X

Y = 100 - 0.5X

Y = 300 - 0.5X

Y = 50 - 2X

Y = 100 - 2X

Y = 300 - 2X

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Question 142 pts

Suppose a consumer has an income of $15 that is spent on two goods: X and Y. The price of good X is $3.00 and the price of good Y is $1.00. Which of the following combinations (or bundles) of X and Y lie on the individuals budget constraint?

4X and 4Y

5X and 4Y

3X and 6Y

3X and 8Y

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Question 152 pts

If the consumer is a utility maximizer in allocating income over goods and services, then income will be allocated such that:

the marginal utilities of the goods and services purchased are equal

marginal utility per dollar is equal over the goods and services purchased

the prices of the goods of the goods and services purchased are equal

an equal proportion of income is spent on each of the goods and services purchased.