Cogent Technology Retail Store (profit/tablet) Supply Vendor Location Store 1 Store 2 Store 3 Store 4 Store 5 Store 6 Alum Rock $ 9 $ 8 $11 $12 $7 $ 8 26 Berkeley 10 10 8 6 7 40 Concord 6 6 7 4 20 Daly City 4 6 8 10 40 East Foothills 12 10 8 6 7 45 Demand 25 15 30 18 27 35
Cogent Technology has computer stores on the West Coast. Their stores are set up like warehouse clubs focusing on high volume. Cogent Technology has a hub set up for their distribution. For instance, to serve the Silicon Valley area, a Cogent Technology warehouse is set up in San Jose to serve nearby stores. Cogent Technology warehouse managers generally purchase their items in bulk to get volume discounts from their vendors. Cogent Technology warehouse has an agreement with the vendors that they can return unsold inventory if it does not sell in six months. Cogent Technology has a policy of fulfilling all customer orders. In some cases when the store managers foresee a stockout situation, they are authorized to buy from other vendors rather than wait for the warehouse to deliver their items. In some cases, the prices bought directly by the store managers are cheaper than what the warehouses buy in bulk.
A good example of a sellable item is tablets. Cogent Technology warehouses purchase their stock from vendors based in Alum Rock, Berkeley, Concord, Daly City, and East Foothills and then ships it to its six stores in Silicon Valley. The vendors know that Cogent Technology retail stores are authorized to buy directly from other vendors so they decide to limit the number of tablets the warehouse can purchase. The table below shows the profit that Cogent Technology makes per tablet, based on which location the item is purchased and at which warehouse it is sold. The table also includes the available tablets per week at the retail locations and the display space available at each retail store per week.
1) Determine the most optimal model for Cogent Technology to maximize their profits. You may use a computer application to solve this problem.
2) If a Cogent Technology warehouse can buy all its tablets from a local store that will result in a profit of $7 per tablet at store 5; $8 per tablet at stores 2 and 6; and $9 per tablet at stores 1, 3, and 4, should Cogent Technology purchase all, some or none of its tablets from this vendor? Explain your answer quantitatively and qualitatively.
3) Recommend a strategy for Cogent Technology.
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