• The process for doing the case was given to

you in the outline, but they are not

"questions" like what you would see in a
problem set. They are meant to guide how
you tackle the writeup. You should be
approaching this like a business case
(because it is), and there are no "questions"
you need to answer. Like any business case,
your writeup should be geared towards your
target audience, and it will be marked as
such.
• The Excel will have little weight relative to the
writeup. Any marks based on the Excel will
be based on how readable it is (e.g. just by
looking at your Excel, can the reader tell
which cells are your prices and quantities?).
The writeup should be mostly standalone,
and the reader should be able to at least get
an idea of your model without looking at the
Excel. There shouldn’t be any significant
explanations/paragraphs within your Excel.
• The "status quo" in the case is the prices and
quantities that are given in the tables. Since
many of you are having issues with the ratio
constraint, note that the status quo should
meet the ratio constraint. If you are having
issues meeting this constraint, double check
what the case says about how to measure
the number of containers, or you might also
find it useful to view some of the discussions
on Ed.
'°IHR COMPANY°’:
Based in Vancouver, The Czech Container Jb’fppiay Copay (“CCSC’) owns and operates the HMS Nerf Ft. a Maemk
Triple-E Class Ultra Large Container Vessel (pictured below):

In line with standard industry practice, the CCSC ferries cargo in 20’ rind 40' containers:

o A 20’ Contamzr• Known as a Twenty-foot Equivalency Unit ('EU") with a maximum load of 24 tons/container.
o A 40’ Confoiifcr• Equal to two TEbJs (by volume) with a maximum load of 30 tons/container .

' In case analysis, it’s a guod idea In “cross-check” case £gurcs. Fur example, yuu should confirm thai a 40’ cunminnr is in fan twice ss vuluminuus ss s 20’ container.
“CURRENT OPERATIONAL AND REVENUE M6NnGEMENT MODF ”'
Twice a year — once during the “low” season and again during the “high” season — the HMS A'ortlxrn F Azore embarks on a
voyage from Vancouver (task cargo), with “stopovers” at the following 10 “pnrt-of-calls” to pick up cargo for Jan/ AJzrry to
Dubai, follovnng which, the vessel returnins to Vancouver (zn»z cargo):

For example, during the “High Season” in FY2022-2023, the HMS Norms F » rr sailed from Vancouver (without carpo)
G travelled to the I •' port of call, Japan, and 1r›aded 320 TF.L s destined for Dubai G travelled to the 2•° pnrt ‹if call, China,
and lr›aded 68 TfiUs destined for Dubai G . . . G travelled to the l0'^ purt uf call, Thailand, and loaded 9 TfiUs destined f‹ir
Dubai G travelled to the final destination Dubni to defiver 1,799 TEUs of cargo (the combined TEkls picked up from the 10
port-of-calls) D sailed back to Vancouver (without cargo):

The amr›unt of cargo (“demand”) {TEUs] loaded at a port-of-call depends on CCS€i’s “price” (S/TEU) and the “season”. For
example, the following table contains €iCSC*s FY2022-2t123 “price” and “seasonal demands” for the 10 port-of-cails:

Port of Call Price (8/THU) High Season Totel Demand (TRUS) Low Seaaon Total Demand (TEUS)
Japan 894fi 32tl 28fi
€ihina 8878 G8 61
HK 8766 737 t›60
Indonesia g840 68 61
India g790 340 304
Korea g710 35 31
Malaysia g643 138 123
Singapore 8649 43 38
Taiwan g702 41 37
Thailand ¥663 9 8
Total TEUa delivered to Dtibai: t,799 t,609

2
Notice that for any given port-of-call, CCSC charges a uniform “price” across both seasons (i.e. CCSC is not managing
revenues through dynamic pricing). This is where you come in — you have been hired as z consultant to advise CCSC on (if
feasible) boosting revenues throu.gh dynamic pricing subject to newly imposed “yield management” constraints specified next°.

fGoinp forward) Dvnamic Price Mecha£ti8mB & Operational P1u8 Yield Management Snecs:
CCSC’s managements wants you to explore the feasibilip' of boosting revenues through dynamic pricing (charging separate
prices in the how vs. High Seasons) subject to the following “newly imposed” operntionnl and Jneld management
“constraints":

• [See the following table] For each-port-of-call, a pre-specified percentage of its tota) cargo destined for Dubai must be in
20’ containers (and the rest in 40’ containers) ant) the weight of 20’ and 40’ containers exactly as specified below-

24

HK 42 19 22
Jndi›nesia 4t1 21 2S
India 4H 22 22
Korea 4f› 21 25
ñ taiavsia 54 2fl 22
Sin;t«p‹›rc 39 19 25
Taiwan 41 10 l9
Thailand 2i1 23 26
“yapan Example”: 3U/« uf the t‹›tai cargu demand (TliFJs) picked up in Japan Al br transpuried in 211’ eirntaineis and the remark 7 /o uf tiltdl
cargi› demand (TliUs) wih be trans{x›rted in 4fl’ ‹xintainers where each 20’ ci›nminer must weigh 20 tions and esch 4tl’ cnnminer musi weigh 24 ions.
Reminder: one 40’ cr›ntainer = twn 2tY ccinminers bv volume.

• Since 20’ containers are “denser” than 40’ containers, to thwart the ship from “becoming unbalanced and tipping river”” as well as to
expedite the loading/unloading pmcess, management stipulates that when the HMS North Farr reaches its final destination
Dubai:
Total Ntimber of 20’ containers on the ship in Dubai
1.2 K 2
Total Number ot40’ containers on the ship in Dubai

• In order to accommodate “last minute orden from premium customers”, €iCS€i's “yield-management-managers” insist on hai4ng a
“buffer” (no different from airlines and htitcls setting asiile seats and rooms for “premium” customers) such that when the HMS
iWurtAm f.>poian reaches its final ciestinatirin Dubai:

Total TEUs on the ship in Dubai ñ 2,000 TEUs

Total weight of the ship (tons) in Dñ ubai (Seasonal Peak Load Factor) x 24,000 tons
rHigh Season: 97°t›
Seasonal Peak Load Factor (
Low Season: 92%

h hmd

1. Use the FY2022-2023 info to calculate, for each port-of-call as we1) us the “gmnd totnl”: TEUs, Revenue, Ratio of
20’:40’ containers, Total weight, etc. You mny want to comment on whether some “pn›posed” constraints ate violated
at the port/total level.

° Assume the H8iS Northern Exp‹›surc has negligihlc “variable expenses” {so thai ter all practical purples “maximizing profits” is canmmuuni uf “ nvaximixing irs-cnucs”.

3
2. For dynamic pricing, you are goin to "simulate-estimate", the "demand-curve" nt each port-of-call as follows:
a. Use the Excel command to generate a number between 0 and I G multiply this number by -1 G
"label" it "Price Elasticity" 6.
b. Assume that in FY2022-2023, each port-of-call’s "price" and "demand" resulted in every port-of-call having
the price elasticity equal to J. For example, given Japan’s price and output in season X, its price elasticity was
E, identical to the pcice elasticity of the other nine port-of-cally
c. Assume each port-of-call has a linear demand curve. For example, the i'^ port-of-call demand curve is:

Here Pt Price $/TEU and qt Total Demand (TEUs) for the l’h port-of-call. From ECO t0t, recall that
the point price elasticity is:

Now, since every port of call has the same value of fi, and you know each port’s FY2022-2023 P, q figures G
you can figure out ench portmf-ct's linear demand curve pammeters nt rind bt.

Watch some (ally) ECO204 Excel Solver YouTuhe videos (see online math chapter). "Observe" how Solver requires «
formula for the "objective" (in this case the grand total revenues across all 10 port-of-calls); in turn that requires you
to pick — in this case — either price or quantity as the "decision variable". Whzt did you do in ECO10J* Ever notice
how in that course you always "solved" for the "optimal quantity" (never the price) to maximize "profits/revenues" or
minimize “cost per unit”? Why didn’t you “select" price as the decision variable in ECOt0J ?
4. In Excel, create a table with the demand curve parameters for each port-of-call and make up a "trial" output value
(TEU)G feed into the port-of-call demand curve to generate the corresponding price ($/TEU) and revenue G
perform any additional calculations such aa, for example, thnt 30% of Japanese total TEUs must be in 20’ containers;
the overall ratio of 20’:40' containen must be between 1.2 and 2; etc. G Bring up Solver G Your "objective" is to
maximize total revenues from all 10 port-of-calls G your "decision variables" are the ten port-of-call "demands"
(TEUs) G enter all constraints G "Solve" and request the "sensitivity report".

Of your convenience, here is the complete problem stnted in maths:

i0 i0 to
maxp Total Revenue from all ten port-of-calls = fl; = P¡qi (n; — biq;)q;

Subject tn:

Total Number of 20’ containers on the ship in Dubai

1.2 2
" Total Number of 40' containers on the ship in Dubai

Total TEUs on the shlp in Diibal fi (Seasonal Peak Load Factor) x 2,000 TEUs

Total weight of the shlp (tons) ln Dubal fi (Seasonal Peak Load Factor) x 24,000 tons
rHigh Season: 9796
Seasonal Peak Load Factor
Low Season: 92%

5. In your report and Excel model, be sure to compare your solution with the "stntus quo" and don’t forget to interpret
and "utilize" the Lagrange multipliers in the sensitivity report.