Question:

Putting the Link in the Supply Chain

Rick Eldridge is the new vice president for operations at The

Golfer’s Link (TGL), a company specializing in the production of
quality, discount sets of golf clubs. Rick was hired primarily
because of his expertise in supply chain management (SCM). SCM
is the integrated planning and control of all resources in the logistics
process from the acquisition of raw materials to the delivery of
finished products to the end user. While SCM seeks to optimize all
activities in the supply chain, including transactions between firms,
Rick’s first priority is ensuring that all aspects of production and
distribution within TGL are operating optimally.

TGL produces three different lines of golf clubs for men, women,
and junior golfers at manufacturing plants in Daytona Beach, FL;
Memphis, TN; and Tempe, AZ. The plant in Tempe produces all
three lines of clubs, while the one in Daytona only produces Men’s
and Women’s lines, and the plant in Memphis only produces the
Women’s and Junior’s lines. Each line of clubs requires varying
amounts of three raw materials that are sometimes in short supply:
titanium, aluminum, and a distinctive rock maple wood that TGL
uses in all of its drivers. The manufacturing process for each line of
clubs at each plant is identical. Thus, the amount of each of these
materials required in each set of the different lines of clubs is
summarized in the following table:

Resources Required per Club Set (in lbs)

Men’s Women’s Junior’s

Titanium 2.9 2.7 2.5

Aluminum 4.5 4 5

Rock Maple 5.4 5 4.8

The estimated amount of each of these key resources available at
each plant during the coming month is given as:

Estimated Resource Availability (in lbs)

Daytona Memphis Tempe

Titanium 4500 8500 14500

Aluminum 6000 12000 19000

Rock Maple 9500 16000 18000

TGL’s reputation for quality and affordability ensures that the

company can sell all the clubs it can make. The Men’s, Women’s,
and Junior’s lines generate wholesale revenues of $225, $195, and
$165, respectively, regardless of where they are produced. Club sets
are shipped from the production plants to distribution centers in
Sacramento, CA; Denver, CO; and Pittsburgh, PA. Each month, the
different distribution centers order the number of club sets in each of
the three lines that they would like to receive. TGL’s contract with
this distributor requires the company to fill at least 90% (but no
more than 100%) of all distributor orders. Rick recently received the
following distributor orders for the coming month:

Number of Club Sets Ordered

Men’s Women’s Junior’s

Sacramento 700 900 900

Denver 550 1000 1500

 Pittsburgh 900 1200 1100

The cost of shipping a set of clubs to each distribution point from

each production facility is summarized in the following table. Note
again that Daytona does not produce Junior’s club sets, and
Memphis does not produce Men’s club sets.

Shipping Costs

Men’s Women’s Junior

To\From Daytona Tempe Daytona Memphis Tempe Memph

Sacramento $51 $10 $49 $33 $9 $31

Denver $28 $43 $27 $22 $42 $21

Pittsburgh $36 $56 $34 $13 $54 $12

Rick has asked you to determine an optimal production and shipping

plan for the coming month.

1. Create a spreadsheet model for this problem and

solve it. What is the optimal solution?

2. If Rick wanted to improve this solution, what

additional resources would be needed, and where would
they be needed? Explain.

3. What would TGL’s optimal profit be if the company

was not required to supply at least 90% of each
distributor’s order?

4. Suppose TGL’s agreement included the option of

paying a $10,000 penalty if the company cannot supply
at least 90% of each distributor’s order but instead
supply at least 80% of each distributor’s order.
 Comment on the pros and cons of TGL exercising this
option.

Answer :

(1)

The objective function is to maximize net profit which is to be

earned by selling men’s, women’s and junior’s golf
clubs at manufacturing plants in Daytona, Memphis and Tempe,
using titanium, aluminum and rock maple. The constraints in Excel
represent the quantity of titanium, aluminum and rock maple used
by production plant Daytona to produce golf clubs for 3 different
lines is as shown below:

Similarly, the constraints in Excel represents the quantity of

titanium, aluminum and rock maple used by production plant
Memphis and Tempe to produce golf clubs for 3 different lines is as
shown below:
Next, for the shiping plan, from Daytona, Memphis and Tempe to
Sacramento, Denver and Pittsburgh is as shown below:

.
The column “O†represent that 90% of the goods must be
supplied to the destinations as shown below:

Shipping plans for all three different lines are as shown below:
The procedure to solve the problem using Solver in Excel is written below:

1. Click the Data tab and click on Solver.

2. Select Max option and the solving method as GRG Nonlinear.

3. Enter the columns in By Changing Variable Cells as shown below:

4. Enter the Subject to the Constraints by clicking on Add button as shown below:

5. Add the other constraints in a similar way as in step 4.

6. Click on Solve.
7. Click on OK.

The optimal solution which is obtained is given in E34 which is the sum of E31 ,
E32 and E33 is as shown below:
Therefore, the net profit is

(2)

If Rick wants to improve this solution, then the shipping cost from Daytona , Tempe
and Memphis to Sacramento ,Denver and Pittsburgh should be reduced which will
result into optimising our profit and will give us better results.
(3)

If the company was not required to supply at least 90% of each distributor’s
order. The production plan of all three units will be as follows:

As the firm can ship upto 100% of the order, shipping plans of men and women golf
clubs are as follows:
Shipping plan for junior golf club is as shown below:
The procedure to solve the problem using Solver in Excel is written below:

1. Click the Data tab and click on Solver.

2. Select Max option and the solving method as GRG Nonlinear.

3. Enter the columns in By Changing Variable Cells as shown below:

4. Enter the Subject to the Constraints by clicking on Add button as shown below:
5. Add the other constraints in a similar way as in step 4.

6. Click on Solve.

7. Click on OK as shown below:

The optimal solution is shown below:

Thus, when 100% of distributor order is placed then the net profit increases.

(4)

Under this case, the firm will experiences losses. It can be seen that when the
supply is increased from 90% to 100%, the profit increases. Therefore, when the
supply is decreased, the profit will be decreased.