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You oversee production planning at a toy company. Unfortunately, the production process is unreliable. That is, if you schedule to produce Q units the amount of sellable output will range between 0 and the scheduled Q units based on a uniform distribution.
Customers order a set amount five weeks in advance. For each week you can schedule one production attempt.
Your goal is to maximize your profit from each order by deciding upon an adequate production quantity in each week of the production cycle while taking into account the following cost and revenue components:
For each successfully produced unit up to the initial order volume you will receive a compensation of {{Revenue}} per Unit
Each unit you produce in excess of the ordered quantity must be salvaged inflicting costs of {{Cost_O}} per unit.
If you produce ahead of the delivery date, the finished products will have to be stored inflicting costs of {{Cost_H}} per unit and week. That is for each successfully produced unit up to the initial order volume you will be charged a holding cost depending on the week of production:
| Weeks to delivery date | 1 | 2 | 3 | 4 |
|---|---|---|---|---|
| Holding cost per unit | {{H_1}} | {{H_2}} | {{H_3}} | {{H_4}} |
There will be 5 orders in total and you will work on each order one at a time.
Each week before you take your production decision you will be presented with the following information:
After you submit your lot size decision production takes place and you receive the following information:
After the five-week production cycle you will get a summary consisting of the following information:
At the end of the game you will be told how many points you scored and what your final payoff will be.
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