2. Would you recommend using a specific shelf location and in-store coupon dispensers to
sell the energy bars? Justify. [5 marks]
3. Suggest additional data you would advise Health Food to collect in order to investigate
other factors affecting the sales of the energy bars. [5 marks]
Part 2: Selecting carriers for a telecommunication company to obtain volume discounts
During 2001, many European markets for mobile phones reached saturation. Because of this,
mobile phone operators started to shift their focus from growth and market share to cutting
costs. One way to do this is to reduce spending on international calls. These calls are routed
through network operating companies called carriers. The carriers charge per call-minute for
each destination, and they often use a discount on total business volume to price their services.
A mobile phone operator must decide how to allocate destinations to carriers.
V-Mobile, a mobile phone operator in Denmark, must make such a decision for a T-month
planning horizon when it has C carriers to choose from, D destinations for its customers’ calls,
and there are I price intervals for a typical carrier. (These intervals define a carrier’s discount
structure.) The information in the worksheet “Telecommunication” of the data file provided
one version of V-Mobile’s planning problem for a 2-month planning horizon, 3 carriers for
selection, 5 destinations of customers’ calls and 3 price intervals:
The price per call-minute for destination d from carrier c in price interval i in month t
The (forecasted) demand of call-minutes for destination d in month t
The lower and upper limits on volume (number of call-minutes) for carrier c in price
interval i
The lower and upper limits on capacity (number of call-minutes) for carrier c in month t
The penalty per call-minute (to discourage poor quality options) for carrier to destination d
in month t.
V-Mobile wants to find a least-cost way of routing its call-minutes through the various carriers.
Naturally, it hopes to take advantage of price discounts offered by the carriers. Develop an
optimization model that helps V-Mobile allocate its international calls in a cost-efficient
manner. One of the possible models is to consider the following decision variables:
The volume (call-minutes) routed through carrier c to destination d in price interval i in
month t
3
A binary variable for each combination of carrier c and price interval i with value equals 1
if the volume of call-minutes assigned to this carrier (over all destinations and months) falls
in price interval i, and equals 0 otherwise.
1. Formulate the problem by a mathematical model in the report. Explain. [15 marks]
2. Develop the optimization model of Part 2.1 on spreadsheet presented with the final results.
[15 marks]
3. Write a brief memo to summarize the results of Part 2.2. Provide other recommendations
to facilitate implementation of your results. [5 marks]
[Readability and presentation of report: 5 marks]
Appendix for Part 1: Memo from ISD to Health Food
To the marketing manager at Health Food:
As you know, in reviewing your test marketing of the energy bars, my colleagues and I at ISD
suggested how your sales could be enhanced. From our experience in marketing similar
products, we told you that the shelf locations of a product and the presence of in-store coupon
dispensers can enhance supermarket sales.
We are happy to report the positive correlation of these factors and sales of the energy bars.
You can see the effects, if you look through the data. I think the most striking thing is the only
store (Store 1) with over 4000 unit sales and only 200 in promotional dollars was a store with
coupon dispensers!
We can talk at a later time about extending our marketing agreement. In the meantime,
congratulations on a successful test marketing venture.
Sincerely,
In-store Design
END
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