In the assignment, Stark industries concluded that they won’t manufacture anything more than 80 RBR50s, with each RBR50 requiring 10 HS422 Servos. This enables us to say with certainty that the actual demand will not be greater than 80 RBR50s, however it could be anything up to this value. That is, I would require up to 800 Servos, with number of Servos increasing in multiples of ten.
Thus, I created a column with 0 to 800 in multiples of ten: 0, 10, 20, …, 800. For each of these possible demand values I simply calculated the cost associated with each of the three suppliers using the formula of fixed cost + demand*variable costs. This resulted in four columns (first column being the demand values and the next three columns the total costs for the three suppliers).
As can be seen from the above table, the best supplier really matters on how much demand Stark Industry want. If they require 10, then evidently the best supplier would be supplier 2. Supplier 3 will be the better choice if Stark Industries require ranges 20 to 40. Supplier 1 would be suitable if they seek a range of 50 to 80 HS422 Hitec Servo units. The only problem with this is that it could be off by 10% which could conclude in the company choosing the more expensive supplier which, in return, will result a loss for Stark Industries. A key objective in my analysis, was briefly mentioned previously, was to know between which demand values is Supplier 1 the cheapest and this was from range 50 up to range 800. It would simply suffice to say that anything greater than the range of 50 concluded in supplier 1 being the cheapest. Supplier 2 was cheapest at the range of 10 and supplier 3 was cheapest at ranges 20-40.
Other interesting things to note would be that supplier 1 and 3 were very close in terms from ranges 10 to 290 but afterwards supplier 3 began to distance itself by becoming more expensive as the demand range expands. Since supplier 2 represents the best deal for demands between 0 and 260 and supplier 3 being best for ranges 270 to 400, and if the forecasted demand being possibly as high as 280, then in this case the best supplier option would supplier 3 as this would be the most cost-effective choice although a loss would be incurred. In this assignment I explored the issues of incurring losses as this makes choosing a supplier difficult. The possible 10% error with respect to the forecasted demands is the sort of issues that occur when referring to choosing a suitable supplier depending on the given demands.
Simply under or over forecasting these points is incredibly vital to understand in terms of losses.In conclusion, although the forecast could be off by 10% or more, if the Stark Industries chooses the range of 50-80 then it is suitable to say that supplier 1 is the choice for their organisation.