1. What strategy do you think the drivers used to decide what orders to place?

Comment on
the choice of the strategy.

The drivers will choose “Decentralized strategy” with deferred payment agreement. This will
be beneficial for the drivers in the following ways:
a) Drivers have full freedom for choosing the quantity to be ordered.
b) Drivers do not need to make capital investment in purchasing inventory.
c) They can utilize their knowledge of the kind of products that are selling well in the
markets they operate

2. On average what is the sum of profit made by the drivers and the cargo over each two
-month replenishment period?
The average of profit made the drivers and cargo over each two-month is $223.589 Total Profit- and
the total cumulative profit is $37563. Please Refer excel sheet for detailed calculation.

3. Suppose we are still using the first strategy (i.e. decentralized decisions), but the drivers now
correctly optimized the quantity to order in each period. What would be the sum of the
profit made by the Cargo and its drivers over each two-month replenishment period?
Profit made by the drivers in centralized decision system = $12,313
Profit made by Cargo in centralized decision system = $26,066
Sum of profit made by driver & Cargo cumulatively = $38,379

4. Suppose we are now using second strategy (i.e., centralized decisions) so that Cargo makes
decisions for each driver in each period to optimize the total revenue earned by the drivers.
What would be the sum of the profit made by the Cargo and its drivers over each of the
two-replenishment period?
Profit made by the drivers in centralized decision system = $39,995

5. Based on your answers above, write a paragraph summarizing the pros and cons of the
centralized and decentralized strategy?

Centralized

The efficiency of centralized system is higher

Overall profit in centralized system is more than decentralized system ($39,955 vs $38379)
Pros

Higher Accuracy of data forecasting

Offloading replenishment decision from drivers, would relieve drivers from additional
burden of demand forecasting
Con Drivers would be dissatisfied if the freedom of deciding on inventory is taken away from
s them
 Drivers would be forced to invest capital in buying inventory

De-centralized
Pros Drivers can decide on the quantity to be ordered. Hence more satisfaction on the part
of retailers.

Low efficiency in supply chain network

Cons
Less profit as compared to centralized supply chain

Less accurate demand forecasting

6. The tab “Part 1 (forecast model) in the same spreadsheet contains the sales provided by
Herbacetamol’s manufacturer, and catalogues past Herbacetamol’s sales over a single year
with hourly granularity. Look at these data and answer the following questions:
a) Investigate the data contained in this tab. Is there a time of year that Herbacetamol is
more popular? A day of the day? Is there a trend in sales over time? Do these factors
depend on one another? Can you come up with explanations for the patterns you
observe in these data?
b) How would you build a demand model based on these data that Cargo could use to
predict future Herbacetamol sales?

Avg Sales , Weekday

25

20

15 Total

10

0
1 2 3 4 5 6 7

a) Herbacetamol monthly sales trend is as shown in the curve below:

Conclusion:
1. Herbacetamol generally tends to sell well on the 7 th day i.e. on Saturday
2. From the pivot table in data sheet (Part 1 detailed), we can conclude that Sales in Jan-
March quarter is higher than other quarters across the years followed by Oct- Dec quarter.
b) TO BE DONE