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Supply Chain Simulation Essay

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The Market
Jacobs Industries' only product is an industrial chemical that can be mixed with air to form a foam that is:
• Lightweight;
• Stable over a very wide range of temperatures;
• A very efficient thermal insulator;
• A very efficient acoustic insulator.
Jacobs sells its chemical to manufacturers of air conditioner retrofit kits. The manufacturers are all located in the region of Calopeia. They purchase the foam chemical as a substitute for competitors' products. If Jacobs cannot ship an order within 24 hours of receiving the order from the customer, the customer makes its purchase from a competitor without any loss of future demand.
The chemical is shipped in small plastic drums at a price of $1450 a piece. Demand for the …show more content…

Capacity costs are incurred as soon as the capacity expansion begins. It takes 90 days to complete a capacity expansion. Capacity cannot be retired.
Production in factories is carried out in batches, where each batch is an integer number of drums set by you. The cost to produce one batch equals $1500 plus the number of drums in the batch times $1000. For example, the cost to produce a batch of 10 drums is $1500 + (10)$1000 = $11,500.
The batch of finished drums is shipped from the factory to the warehouse as soon as production of the batch is completed. The drums can be shipped either by truck or one at a time by mail. One truck can carry 200 drums. One truck making a trip from the factory to the warehouse costs $15,000, regardless of how full the truck is. It costs $150 to mail one drum from the factory to the warehouse. Transportation times from the factory to the warehouse are 7 days for the truck or 1 day for mail. There is no practical limit to the number of drums a warehouse can hold.
Both the costs of producing the batch and then shipping it to the warehouse are incurred as soon as production of the batch starts. If there is insufficent cash to pay for the production and shipping of the batch, the factory will remain idle. Production of a batch is triggered when the finished goods inventory (both en route to the warehouse and in the warehouse) fall below the order point, which is set by

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