HW4
Background
Consider a supply chain comprising farms (suppliers), a packer (you) and supermarkets (retailers).
The packer orders cattle from the farm. At the packer’s processing plant, cows are slaughtered and processed into products ready for sales. The packer receives and fulfils orders from the supermarket.
The packer has a warehouse to store finished products.
Normally, the packer’s order to the farm takes one week to be delivered, but it may be subject to delay.
Unsatisfied orders by the packer are lost.
Assume that the farm(s) always have sufficient capacity.
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Initial Setting
Wallet (cash): $100,000
Inventory: 9000 kg
Processing capacity: 10,000 kg
Storage capacity: 10,000 kg
Event sequence in a round (week)
Pay the fixed cost of $10,000 per period
Receiving order from the retailer
The demand and price are exogenously decided
Satisfy the order with inventory at hand and receive payment
Assume you always satisfy the order whenever possible and unsatisfied demand is lost.
Receive order delivery from the farm
the received order was placed one week ago or even before
Production: process the input to output
If the processed input exceeds your capacity, extra processing cost is incurred
Place new order(s) with the farm(s) and make the payment.
There are two farms to order from.
The purchasing price is exogenously quoted by the farms and not subject to negotiation.
The packer may decide to invest into risk mitigation measures
E.g., upgrade the production facility, storage facility, or improve the hygiene conditions, essentially to reduce the risk.
Inventory cost is assessed and deducted.
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Packer’s problem
The packer decisions:
Order quantity
Whether to invest to upgrade its facility.
The Packer’s processing capacity can be expanded at the cost of $5 per unit, which will be effective in 5 weeks
The packer’s storage capacity can be expanded at the cost of $5 per unit.
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Packer’s Goal
The goal is to maximize the ending profit (measured by the ending cash at hand)
Revenue: selling to supermarket
Purchasing cost paid to the farmer
Processing cost: $1 per kg (assume 1kg input yields 1 kg output for simplicity); if exceeding capacity, then $1.5 per kg per week.
Inventory holding cost: $0.5 per kg per week; if exceeding capacity, then $1 per kg per week.
Fixed cost per period: $10,000
Play the game
You will play the game for 35 rounds.
The objective is to maximise your total profit. For simplicity, it is measured by the net amount of cash at the end of 35 weeks.
For round 1 to 3, let’s all do this
Order 4,500 each from Texas and California
Nothing else
The game is over any time your cash position becomes negative.
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Play the Beef Packer Game (https://packer.computational-logistics.com/) for 35 rounds. Then answer the following questions：
What’s your ending profit at the end of round 35? Provide a screenshot.
What kinds of risks did you encounter?
How do you think you can do better? Try the game one more time and record the ending profit.
What lessons did you learn?
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