Supply Chain Management Author: Sunil Chopra ISBN

Supply Chain Management Author: Sunil Chopra ISBN: 978013380057 CHAPTER 15 & 16 EXERCISES Name Course Date CHAPTER 15 & 16 EXERCISES Chapter 15 - Sourcing Decisions in a Supply Chain1. After reviewing the last three lines of Table 15-3 in your text, as the buy-back price for each disc increases from $0 to $6 while the wholesale price is held constant at $7, what happens to profits for the music store (the retailer) and the supplier (the manufacturer)? What about overall supply chain profitability? What is the lesson to be learned from this exercise? When the buy-back price for each disc is $0, $4 and $6 the expected profits to the music store (retailer) increases from $ 1,957 to $2,282 and $2,619 respectively. Similarly, the profits for the supplier (manufacturer) increase from $5,056 to $5,521 and $5,732, but there is a higher increase in the rate of profitability for the retailer. The expected supply chain profit increases as it is the sum of expected profit for the music store and the supplier. The exercise shows that profit is affected by both the wholesale price and buyback price where increasing the buyback price improves the profitability levels. Additionally, the buyback allows the supplier to share risks where unsold stock is bought. The information presented in Table 15-3 assumes that there are no costs associated with returning the “buy-back” products to the supplier. As the transportation costs to return the goods being bought back increases, what happens to the profitability of the supply chain? Transportation is one of the drivers of suppl...