Question

Jupiter Electronics produces and sells electronic accessories and is able to control the demand
for the product by varying the selling price.
The approximate relationship between price and demand is-

p = $32 +(2, 100/D)− 4, 500/D^2
, for D > 1
Where, p is the price per unit in dollars and D is the demand per month.

[5]

Currently Jupiter is trying to reduce its supply chain risk by making more responsible make-
or-buy decisions through improved cost estimation. At the same time, it is also seeking to

maximize its profit.
A high-valued component for making its best-selling product can be purchased for $33 per
unit and has expected usage of 7840 units per year. Alternatively, Jupiter can make the
component in-house and have it readily available at a cost of $11.5 per unit, using a machine
purchased by $213,000. It is predicted that the machine has a depreciable amount of $13,000
at the end of year 6. Labor and other maintenance costs are estimated to be $53,560 per year
over the study period of 8.5 years. Jupiter uses SYD method in order to calculate the
depreciable costs for all the equipment it has. The fixed cost is $43,661 per month and the
variable cost is $54 per unit. [i=17%].
i) Choose the best alternative to reduce the supply chain risk.
ii) Show that the selected alternative maximizes its profit.

Answer 1

1) improved cost estimation is the best alternative to reduce the supply chain risk .Supply chain network design involves reducing costs and increasing reliability to minimize product handling . Revising supply chain network design will require special software , analysis and experience necessary to resolve issues in the network by designing an effective plan.

2) improved cost estimation strategies in supply chain management focus on finding the most efficient and affordable ways to procure and store products , transportation and customer satisfaction.it involves selecting cheapest material and carrier.so in this way cost reduction can increase or maximises the profits without increase in sales