Chapter 6 answers to problems

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1、Chapter6:DesigningGlobalSupplyChainNetworksExerciseSolutions1.Answer:Usingadecisiontreetoanalyzethisdecisionrevealsadominantanswer.NotonlydoesoutsourcingtoMolectronresultinahigherexpectedincrementalprofit,butalsoineverypossibleoutcome,theMolectronoptionresultsinahigherprofit.Therefore,accordin

2、gtothefinancialanalysis,nomatterwhattherisktoleranceofthemanagementatMoon,theyshouldchoosetooutsourceratherthantoincreasetheirownfacility.Thereareotherfactorsthatcouldplayintothisdecision,however,whicharehardertoquantify.Twoareparticularlyimportant:theperformanceofMolectronandthestrategicdecis

3、ionregardingwhereMoonshouldfocusitsefforts.It’spossiblethatMolectron’squalityanddeliveryperformancewouldbeworsethanifMoonmadethemachinesthemselves.Ifthisisthecase,itcouldcounterthefinancialadvantageMolectronpresents.Secondly,buildingtheadditionalplantmayincreaseMoon’smanufacturingcompetenceand

4、thismaybeakeytotheirsuccessdowntheroad.Conversely,thenewplantcoulddistractMoonfromotheraspectsoftheirbusinessmakingoutsourcingmoreattractive.Allthesefactorsshouldbeconsideredwhenmakingthedecision.SolutionusingDecisionTree:Input:Currentdemand:D0=10,000Probabilityofdemandgoesupinnextyear:Pup=80%

5、Probabilityofdemandremainsthesame:Psame=20%Demandincreasingrate:ud=150%Increasedcapacity:M=10,000Annualfixedcostofnewcapacity:Cfix=$10,000,000Laborcostperserverofnewcapacity:Clabor=$500Rawmaterialcostperserver:Craw=$8,000LaborcostperserverbyMolectron:CMolectron=$2,000Priceperserver:P=$15,000Pr

6、obabilityofMolectron’spricegoesupinthesecondyear:50%ProbabilityofMolectron’spriceremainsthesameinthesecondyear:50%Molectron’scostincreasingrate:uc=120%Output:Todrawthedecisiontreeandanalyzethisproblem,weneedtocalculateforeachscenariothetotaldemandandcostperserverforboth1stand2ndyears.1styr.dem

7、andifitgoesup:Du=D0*150%=15,0001styr.demandifitremainsthesame:Dd=10,00017Therearefourscenariosof2nddemand:Duu,Dud,Ddd,Ddu.Thesubscriptsmeanthedemandchanges.Forexample,Duumeansdemandhasbeengoingupfortwoyears,andDudmeansthedemandwentupa