This is the probabilistic forecast refereed to in the swimsuit production case

in Chapter 3.

Probability
Demand S
Demand Probability Weighted Demand
8000 11% 880
10000 11% 1100 30%
12000 28% 3360 25%
14000 22% 3080 20%
16000 18% 2880
15%
18000 10% 1800
Average 13100 10%
5%
0%
8000 10000 12
Probability

Demand Scenarios

30%
25%
20%
15%
10%
5%
0%
8000 10000 12000 14000 16000 18000
Sales
These are the expected (or average) profit calculations for various different order levels
as described in the swimsuit production case in Chapter 3.

Profit
These are the cost parameters:
$400,00
Item Cost
Variable Production Cost $80.00 $200,00
Fixed Production Cost $100,000.00
Selling Price $125.00 $
Salvage Value $20.00

These are the average revenue calculations:

Demand Probability
5000 5500 6000 6500
8000 11% $125,000.00 $147,500.00 $170,000.00 $192,500.00
10000 11% $125,000.00 $147,500.00 $170,000.00 $192,500.00
12000 28% $125,000.00 $147,500.00 $170,000.00 $192,500.00
14000 22% $125,000.00 $147,500.00 $170,000.00 $192,500.00
16000 18% $125,000.00 $147,500.00 $170,000.00 $192,500.00
18000 10% $125,000.00 $147,500.00 $170,000.00 $192,500.00
Average Profit $125,000.00 $147,500.00 $170,000.00 $192,500.00
Maximum:
 Expected Profit
Profit

$400,000
$200,000
$0
5000 10000 15000
Order Quantity
Profit for a Given Production Level
7000 7500 8000 8500 9000 9500 10000 10500
$215,000.00 $237,500.00 $260,000.00 $230,000.00 $200,000.00 $170,000.00 $140,000.00 $110,000.00
$215,000.00 $237,500.00 $260,000.00 $282,500.00 $305,000.00 $327,500.00 $350,000.00 $320,000.00
$215,000.00 $237,500.00 $260,000.00 $282,500.00 $305,000.00 $327,500.00 $350,000.00 $372,500.00
$215,000.00 $237,500.00 $260,000.00 $282,500.00 $305,000.00 $327,500.00 $350,000.00 $372,500.00
$215,000.00 $237,500.00 $260,000.00 $282,500.00 $305,000.00 $327,500.00 $350,000.00 $372,500.00
$215,000.00 $237,500.00 $260,000.00 $282,500.00 $305,000.00 $327,500.00 $350,000.00 $372,500.00
$215,000.00 $237,500.00 $260,000.00 $276,725.00 $293,450.00 $310,175.00 $326,900.00 $337,850.00
 11000 11500 12000 12500 13000 13500 14000 14500
$80,000.00 $50,000.00 $20,000.00 -$10,000.00 -$40,000.00 -$70,000.00 -$100,000.00 -$130,000.00
$290,000.00 $260,000.00 $230,000.00 $200,000.00 $170,000.00 $140,000.00 $110,000.00 $80,000.00
$395,000.00 $417,500.00 $440,000.00 $410,000.00 $380,000.00 $350,000.00 $320,000.00 $290,000.00
$395,000.00 $417,500.00 $440,000.00 $462,500.00 $485,000.00 $507,500.00 $530,000.00 $500,000.00
$395,000.00 $417,500.00 $440,000.00 $462,500.00 $485,000.00 $507,500.00 $530,000.00 $552,500.00
$395,000.00 $417,500.00 $440,000.00 $462,500.00 $485,000.00 $507,500.00 $530,000.00 $552,500.00
$348,800.00 $359,750.00 $370,700.00 $366,950.00 $363,200.00 $359,450.00 $355,700.00 $340,400.00
$370,700
 15000 15500 16000 16500
-$160,000.00 -$190,000.00 -$220,000.00 -$250,000.00
$50,000.00 $20,000.00 -$10,000.00 -$40,000.00
$260,000.00 $230,000.00 $200,000.00 $170,000.00
$470,000.00 $440,000.00 $410,000.00 $380,000.00
$575,000.00 $597,500.00 $620,000.00 $590,000.00
$575,000.00 $597,500.00 $620,000.00 $642,500.00
$325,100.00 $309,800.00 $294,500.00 $269,750.00
This is the buy back contract swimsuit production example
from the inventory chapter:

These are the cost and contract parameters:

Item Price
Distributor sells for: $125.00
Manufacturer sells for: $80.00
Salvage: $20.00 NOTE: The distributor can either salvage goods, or
Manufacturer buy back: $60.00 the manufacturer will buy them back, and salvage them herself.
Fixed Production Cost: $100,000.00
Variable Production Cost: $35.00

This is the distributor's expected (or average) profit calculations:

Demand Probability
5000 6000 7000 8000
8000 11% $225,000.00 $270,000.00 $315,000.00 $360,000.00
10000 11% $225,000.00 $270,000.00 $315,000.00 $360,000.00
12000 28% $225,000.00 $270,000.00 $315,000.00 $360,000.00
14000 22% $225,000.00 $270,000.00 $315,000.00 $360,000.00
16000 18% $225,000.00 $270,000.00 $315,000.00 $360,000.00
18000 10% $225,000.00 $270,000.00 $315,000.00 $360,000.00
Average Profit $225,000.00 $270,000.00 $315,000.00 $360,000.00
Maximum:

This is the manufacturer's expected (or average) profit calculations:

Demand Probability
5000 6000 7000 8000
8000 11% $125,000.00 $170,000.00 $215,000.00 $260,000.00
10000 11% $125,000.00 $170,000.00 $215,000.00 $260,000.00
12000 28% $125,000.00 $170,000.00 $215,000.00 $260,000.00
14000 22% $125,000.00 $170,000.00 $215,000.00 $260,000.00
16000 18% $125,000.00 $170,000.00 $215,000.00 $260,000.00
18000 10% $125,000.00 $170,000.00 $215,000.00 $260,000.00
Average Profit $125,000.00 $170,000.00 $215,000.00 $260,000.00
Maximum:

This is the expected (or average) total profit:

Total Average Profit: $350,000.00 $440,000.00 $530,000.00 $620,000.00

Distributor $225,000.00 $270,000.00 $315,000.00 $360,000.00

Manufacturer $125,000.00 $170,000.00 $215,000.00 $260,000.00
Total Profit $350,000.00 $440,000.00 $530,000.00 $620,000.00
 Profit vs Order Quantity

Profit ($)
$1,200,000.00

$1,000,000.00 Dist
P
$800,000.00
Mfg
$600,000.00 P
Tota
$400,000.00
P.
d salvage them herself. $200,000.00

$0.00
5,000 8,000 11,000 14,000 17,000
Quantity

Profit for a Given Distributor Order Level

9000 10000 11000 12000 13000 14000 15000 16000
$340,000.00 $320,000.00 $300,000.00 $280,000.00 $260,000.00 $240,000.00 $220,000.00 $200,000.00
$405,000.00 $450,000.00 $430,000.00 $410,000.00 $390,000.00 $370,000.00 $350,000.00 $330,000.00
$405,000.00 $450,000.00 $495,000.00 $540,000.00 $520,000.00 $500,000.00 $480,000.00 $460,000.00
$405,000.00 $450,000.00 $495,000.00 $540,000.00 $585,000.00 $630,000.00 $610,000.00 $590,000.00
$405,000.00 $450,000.00 $495,000.00 $540,000.00 $585,000.00 $630,000.00 $675,000.00 $720,000.00
$405,000.00 $450,000.00 $495,000.00 $540,000.00 $585,000.00 $630,000.00 $675,000.00 $720,000.00
$397,850.00 $435,700.00 $466,400.00 $497,100.00 $509,600.00 $522,100.00 $520,300.00 $518,500.00
$522,100

Profit for a Given Distributor Order Level

9000 10000 11000 12000 13000 14000 15000 16000
$265,000.00 $270,000.00 $275,000.00 $280,000.00 $285,000.00 $290,000.00 $295,000.00 $300,000.00
$305,000.00 $350,000.00 $355,000.00 $360,000.00 $365,000.00 $370,000.00 $375,000.00 $380,000.00
$305,000.00 $350,000.00 $395,000.00 $440,000.00 $445,000.00 $450,000.00 $455,000.00 $460,000.00
$305,000.00 $350,000.00 $395,000.00 $440,000.00 $485,000.00 $530,000.00 $535,000.00 $540,000.00
$305,000.00 $350,000.00 $395,000.00 $440,000.00 $485,000.00 $530,000.00 $575,000.00 $620,000.00
$305,000.00 $350,000.00 $395,000.00 $440,000.00 $485,000.00 $530,000.00 $575,000.00 $620,000.00
$300,600.00 $341,200.00 $377,400.00 $413,600.00 $438,600.00 $463,600.00 $479,800.00 $496,000.00

$698,450.00 $776,900.00 $843,800.00 $910,700.00 $948,200.00 $985,700.00 $1,000,100.00 $1,014,500.00

$1,014,500

$397,850.00 $435,700.00 $466,400.00 $497,100.00 $509,600.00 $522,100.00 $520,300.00 $518,500.00

$300,600.00 $341,200.00 $377,400.00 $413,600.00 $438,600.00 $463,600.00 $479,800.00 $496,000.00
$698,450.00 $776,900.00 $843,800.00 $910,700.00 $948,200.00 $985,700.00 $1,000,100.00 $1,014,500.00
 Dist.
P
Mfg.
P
Total
P.

17,000

17000 18000
$180,000.00 $160,000.00
$310,000.00 $290,000.00
$440,000.00 $420,000.00
$570,000.00 $550,000.00
$700,000.00 $680,000.00
$765,000.00 $810,000.00
$505,000.00 $491,500.00

17000 18000
$305,000.00 $310,000.00
$385,000.00 $390,000.00
$465,000.00 $470,000.00
$545,000.00 $550,000.00
$625,000.00 $630,000.00
$665,000.00 $710,000.00
$505,000.00 $514,000.00
$514,000

$1,010,000.00 $1,005,500.00

$505,000.00 $491,500.00
$505,000.00 $514,000.00
$1,010,000.00 $1,005,500.00
This is the revenue sharing contract swimsuit production example
from the inventory chapter:

These are the cost and contract parameters:

Item Price
Distributor sells for: $125.00
Manufacturer sells for: $60.00
Salvage: $20.00
Revenue Sharing: 20% NOTE: The distributor pays this percentage or revenue to
Fixed Production Cost: $100,000.00 the manufacturer.
Variable Production Cost: $35.00

This is the distributor's expected (or average) profit calculations:

Demand Probability
5000 6000 7000
8000 11% $200,000.00 $240,000.00 $280,000.00
10000 11% $200,000.00 $240,000.00 $280,000.00
12000 28% $200,000.00 $240,000.00 $280,000.00
14000 22% $200,000.00 $240,000.00 $280,000.00
16000 18% $200,000.00 $240,000.00 $280,000.00
18000 10% $200,000.00 $240,000.00 $280,000.00
Average Profit $200,000.00 $240,000.00 $280,000.00
Maximum:

This is the manufacturer's expected (or average) profit calculations:

Demand Probability
5000 6000 7000
8000 11% $150,000.00 $200,000.00 $250,000.00
10000 11% $150,000.00 $200,000.00 $250,000.00
12000 28% $150,000.00 $200,000.00 $250,000.00
14000 22% $150,000.00 $200,000.00 $250,000.00
16000 18% $150,000.00 $200,000.00 $250,000.00
18000 10% $150,000.00 $200,000.00 $250,000.00
Average Profit $150,000.00 $200,000.00 $250,000.00
Maximum:

This is the expected (or average) total profit:

Total Average Profit: $350,000.00 $440,000.00 $530,000.00

 Profit vs Order Quantity

Profit ($)
$1,200,000.00

$1,000,000.00

$800,000.00

$600,000.00

$400,000.00
centage or revenue to $200,000.00

$0.00
5,000 8,000 11,000 14,000 17
Quantity

Profit for a Given Distributor Order Level

8000 9000 10000 11000 12000 13000 14000 15000
$320,000.00 $280,000.00 $240,000.00 $200,000.00 $160,000.00 $120,000.00 $80,000.00 $40,000.00
$320,000.00 $360,000.00 $400,000.00 $360,000.00 $320,000.00 $280,000.00 $240,000.00 $200,000.00
$320,000.00 $360,000.00 $400,000.00 $440,000.00 $480,000.00 $440,000.00 $400,000.00 $360,000.00
$320,000.00 $360,000.00 $400,000.00 $440,000.00 $480,000.00 $520,000.00 $560,000.00 $520,000.00
$320,000.00 $360,000.00 $400,000.00 $440,000.00 $480,000.00 $520,000.00 $560,000.00 $600,000.00
$320,000.00 $360,000.00 $400,000.00 $440,000.00 $480,000.00 $520,000.00 $560,000.00 $600,000.00
$320,000.00 $351,200.00 $382,400.00 $404,800.00 $427,200.00 $427,200.00 $427,200.00 $409,600.00
$427,200 $427,200 $427,200

Profit for a Given Distributor Order Level

8000 9000 10000 11000 12000 13000 14000 15000
$300,000.00 $325,000.00 $350,000.00 $375,000.00 $400,000.00 $425,000.00 $450,000.00 $475,000.00
$300,000.00 $350,000.00 $400,000.00 $425,000.00 $450,000.00 $475,000.00 $500,000.00 $525,000.00
$300,000.00 $350,000.00 $400,000.00 $450,000.00 $500,000.00 $525,000.00 $550,000.00 $575,000.00
$300,000.00 $350,000.00 $400,000.00 $450,000.00 $500,000.00 $550,000.00 $600,000.00 $625,000.00
$300,000.00 $350,000.00 $400,000.00 $450,000.00 $500,000.00 $550,000.00 $600,000.00 $650,000.00
$300,000.00 $350,000.00 $400,000.00 $450,000.00 $500,000.00 $550,000.00 $600,000.00 $650,000.00
$300,000.00 $347,250.00 $394,500.00 $439,000.00 $483,500.00 $521,000.00 $558,500.00 $590,500.00

$620,000.00 $698,450.00 $776,900.00 $843,800.00 $910,700.00 $948,200.00 $985,700.00 $1,000,100.00

ntity

Dist. P
Mfg. P
Total P.

14,000 17,000

16000 17000 18000

$0.00 -$40,000.00 -$80,000.00
$160,000.00 $120,000.00 $80,000.00
$320,000.00 $280,000.00 $240,000.00
$480,000.00 $440,000.00 $400,000.00
$640,000.00 $600,000.00 $560,000.00
$640,000.00 $680,000.00 $720,000.00
$392,000.00 $360,000.00 $328,000.00

16000 17000 18000

$500,000.00 $525,000.00 $550,000.00
$550,000.00 $575,000.00 $600,000.00
$600,000.00 $625,000.00 $650,000.00
$650,000.00 $675,000.00 $700,000.00
$700,000.00 $725,000.00 $750,000.00
$700,000.00 $750,000.00 $800,000.00
$622,500.00 $650,000.00 $677,500.00
$677,500

$1,014,500.00 $1,010,000.00 $1,005,500.00

$1,014,500
This is the global optimal solution to the two stage swimsuit
manufacturing case from the inventory chapter:

These are the cost parameters:

Item Price
Distributor sells for: $125.00
Salvage: $20.00
Fixed Production Cost: $100,000.00
Variable Production Cost: $35.00

This is the system's expected (or average) profit calculations:

Demand Probability
5000 6000 7000 8000
8000 11% $350,000.00 $440,000.00 $530,000.00 $620,000.00
10000 11% $350,000.00 $440,000.00 $530,000.00 $620,000.00
12000 28% $350,000.00 $440,000.00 $530,000.00 $620,000.00
14000 22% $350,000.00 $440,000.00 $530,000.00 $620,000.00
16000 18% $350,000.00 $440,000.00 $530,000.00 $620,000.00
18000 10% $350,000.00 $440,000.00 $530,000.00 $620,000.00
Average Profit $350,000.00 $440,000.00 $530,000.00 $620,000.00
Maximum:
System Profit ($)

Profit vs Order Quantity

$1,200,000.00

$1,000,000.00

$800,000.00

$600,000.00

$400,000.00

$200,000.00

$0.00
5,000 8,000 11,000 14,000 17,000

Quantity
 Profit for a Given Order Level
9000 10000 11000
$605,000.00 $590,000.00 $575,000.00
$710,000.00 $800,000.00 $785,000.00
$710,000.00 $800,000.00 $890,000.00
$710,000.00 $800,000.00 $890,000.00
$710,000.00 $800,000.00 $890,000.00
$710,000.00 $800,000.00 $890,000.00
$698,450.00 $776,900.00 $843,800.00
17,000
12000 13000 14000 15000
$560,000.00 $545,000.00 $530,000.00 $515,000.00
$770,000.00 $755,000.00 $740,000.00 $725,000.00
$980,000.00 $965,000.00 $950,000.00 $935,000.00
$980,000.00 $1,070,000.00 $1,160,000.00 $1,145,000.00
$980,000.00 $1,070,000.00 $1,160,000.00 $1,250,000.00
$980,000.00 $1,070,000.00 $1,160,000.00 $1,250,000.00
$910,700.00 $948,200.00 $985,700.00 $1,000,100.00
 16000 17000 18000
$500,000.00 $485,000.00 $470,000.00
$710,000.00 $695,000.00 $680,000.00
$920,000.00 $905,000.00 $890,000.00
$1,130,000.00 $1,115,000.00 $1,100,000.00
$1,340,000.00 $1,325,000.00 $1,310,000.00
$1,340,000.00 $1,430,000.00 $1,520,000.00
$1,014,500.00 $1,010,000.00 $1,005,500.00
$1,014,500
$1,200,000.00

$1,000,000.00

$800,000.00

Row 47
$600,000.00
Row 48
Row 49

$400,000.00

$200,000.00

$0.00
5000 6000 7000 8000 9000 10000 11000 12000 13000 14000 15000 16000 17000 18000
 $1,200,000.00

$1,000,000.00

55
$800,000.00

$600,000.00

$400,000.00

$200,000.00

$0.00
5000 6000 7000 8000 9000 10000 11000 12000 13000

Distributor Profit
 Distributor Profit

Manufacturer
Profit

Total Profit

10000 11000 12000 13000 14000 15000 16000 17000 18000