EBBD EMAIL – for Internal Use Only
From: Danny Wilco <[email protected]>
Subject: Re: Quarterly Ordering Decisions
Here is what we would like you to do. We want you to use the Import Beer product line as a test case for developing an optimization program. Use the Excel file that we have developed with the forecast information for the import beer product line. Other information that you will need has been provided by Accounting: inventory holding costs, product costs and price markups.
This information with the Sales Forecast and costs and prices has been provided in the Excel file. [EBBD-ImportsData]
We want you to develop a method that will determine the optimal ordering quantities so that we maximize the gross profits and also take into account inventory holding costs.
After you have developed this method, write a short report to management explaining what you did and how this method can be used going forward on a quarter by quarter basis and for the other product lines.
Also attach any calculations or analysis that you did in an Excel file.
Let me know if you have any questions.
~DW, VP LogOps.
If you have done all of the exercises successfully you should be able to easily complete the EBBD assignment from Wilco. Be sure to watch the videos.
Download the EBBD-ImportsData Excel (click on link above) file and look at how it compares to the practice examples in the EBBD Exercises spreadsheet.
Setup the decision cells, the inventory cells and inventory constraints. Then add the calculations for income and costs. Make sure you get the timing right for which inventory is sold in which quarter. You could develop intermediate cells that calculate the costs, just to help you keep track of this. Be sure to use the quarterly inventory holding cost rate. Then calculate the gross profit cell.
Then, open up Solver and add the aspects to it. Make sure that you add a constraint that keeps your inventory values positive.
Once you have the correct solution, save your Excel file and write the report.
Upload the Report and the Excel file with the solution to Case 3 Dropbox.
The report should thoroughly address these aspects in depth and breadth:
Linear Programming (L.P.). (n.d.). Absolute Astronomy. Retrieved from http://www.absoluteastronomy.com/topics/Linear_programming
Linear Programming, Introduction (n.d.). Purplemath. Retrieved from http://www.purplemath.com/modules/linprog.htm
YouTube LP example: DJJ Enterprise (3 PARTS)
Linear Programming Formulation in Excel (n.d.). YouTube. Retrieved from http://youtu.be/TNLqtmkK4EA
LP Formulas in Excel (n.d.). YouTube. Retrieved from http://youtu.be/wQhNEMvh3MM
Using Solver to Optimize LP. (n.d.). YouTube. Retrieved from http://youtu.be/9tHqa8EV3rc
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