Seoul National University

Supply Chain Management

May 11 – May 22, 2015

Homework Assignment
Completed assignment is due at the start of Session 7 on Tuesday, May 19.
This assignment is to be completed in a group of 2 or 3 students. Submit a hard copy, not an electronic copy (typed answers are preferred). Show your work clearly and explain your reasoning in detail. You will not receive a credit if the instructor cannot understand what you have done because of insufficient explanation.

(Q1-Q2) Teddy Bower the Newsvendor
(To answer these two questions, use the Standard Normal Distribution Function Table; one of the purposes of these questions is to give you a hands-on experience in using the table, which you will need to do in the final …show more content…

9. (Air shipping scenario) The management is considering shipping by air for all Europe options. The air freight increases the shipping cost from $10 to $25 for each unit of printer.
On the other hand, the delivery lead time will be reduced from 5 weeks to one week. The objective remains the same as that of Q8: minimize inventory holding cost while achieving the in-stock probability of 95%. Based solely on the tradeoff between inventory cost and shipping cost, should the management pursue air shipping, i.e., does the reduction in inventory holding cost justify increased shipping cost? Explain. (To answer this question, perform an analysis similar to that of Q8 with the new lead time and compare the results under the two shipping scenarios.)
10. (Postponement scenario) As an alternative to air shipping, the management may continue to ship the printers by sea but pursue postponement. That is, instead of each of the six options shipped separately from Vancouver, the process can be modified such that generic, indistinguishable printers are sent from Vancouver to the European DC, where the options are added in the last step before sales occur. Assume that it takes negligible amount of time to add an option, and that no extra cost is incurred to implement postponement. Furthermore, assume that the unit cost of a generic printer