Homework 4 Solutions

Question 1: Uncertainty has significant impact on the supply chain. Certain decisions regarding supply chain design cannot be changed easily. Once made, they must remain in place for several years. Therefore, it is essential to make these decisions as accurately as possible. n other !ords, it is essential to consider all the possible scenarios that might arise in future operations. f uncertainty is not taken into account, there might be scenarios in the future !hen the supply chain performance suffers. Question ": #ome of the ma$or sources of uncertainty: fluctuations in demand, prices, e%change rates, costs and the behavior of the competitors. Question &: The basic principle of 'C( analysis is that there is an additional value in any revenue or e%pense, beyond its nominal value, that relates to the particular timing at !hich the collection of this revenue or the payment of this e%pense takes place. This value results from the fact that any amount of cash available over a certain period can be invested at the running interest rate, and therefore, generate additional value. )ore specifically, the present value of some revenue or e%pense of * dollars that !ill occur + years from no!, is e,ual to *-.1/ 0+, !here is the available interest rate for the considered +1year time interval. Under this observation, t!o or more streams of cash flo!s can be compared on the basis of their net present value .+230, i.e., all costs and-or revenues in each cash flo! stream !ill be converted to a present value, and the +23 for the entire stream !ill be the sum of the 234s of all revenues minus the sum of 234s of all costs. The cash flo! stream !ith the highest +23 is the preferred one. Question 5: #ome of these financial uncertainties are: costs .labor, transportation from plant to markets, ta%es and tariffs0, e%change rates, and the state and availability of infrastructure. Question 6: #ome other factors that must be taken into consideration !hile deciding !here to source a product are the political, economic and social stability of the considered countries regions, and issues that can arise from the cultural differences at these countries. 7%ercises 1 and " (or e%ercises 1 and " look at the e%cel spreadsheets in the accompanying 7%cel file. To understand the structure of the computations presented in this file look at the formulae that generate the values for the different cells. 8ou can obtain these formulae by clicking upon the corresponding cells. 7%ercise 9: :ell !ould need the follo!ing information:

Time hori;on over !hich the considered system !ill be operational Quantifiable measure.s0 of ho! much the system !ill be used, i.e., a profile for the re,uired computing capacity over the considered time hori;on. )onthly payments charged by #C1*#2 for various capacity levels Upfront license fee for #C#oft!are and any terms on the provided capacity )aintenance costs in case #C#oft!are is selected *pplicable discount rates for the considered hori;on

n addition, :ell must consider the ,uality of service and the stability and trust!orthiness of the t!o companies .this industry sector is particularly notorious for its volatility, i.e., the speed !ith !hich companies created and dissolved.0 (urthermore, the security of putting potentially critical information for the company on another company4s server is an issue that must be considered thoroughly by the company.