Question

Axe Ski Shop has five large retail stores across three western states. They operate a central warehouse that receives their clothing, ski equipment, and snowboard equipment from various wholesalers. (The central warehouse also has offices for the Axe system employees.) Each retail location currently sends weekly orders to the central warehouse and the warehouse then sends a truck to each location with their weekly orders. This past season was a disaster. Several of the retail locations regularly ran short on ski and snowboard boots, one of the retail locations had excess clothing inventory all winter long, and customers’ special requests to the warehouse either were ignored or were received late. In some cases the items would show up on the weekly delivery but were wrong sizes. Overall, customer satisfaction dropped and online reviews of their stores has reached an all-time low.

To fix these issues Axe’s central management has decided to install a company-wide communication system for their inventory so all five retail locations and the central warehouse can see inventory levels by SKU at all locations. Orders to the warehouse will be automatically generated based on inventory levels which will alleviate several of the issues described above. This new system will also let the retail locations request items shipped from store to store as needed to meet customers’ special requests.

The communication system will be rolled out incrementally to each location over the spring/summer months (shown in Table 1), starting with the warehouse, so that the system is fully functioning by August. Axe wants to purchase and install the optimum number of servers required to run the system but isn’t sure whether they need to install all servers in March or if they can install the servers incrementally as well. The number of employees at each location dictates when server capacity is needed, shown in Table 2. Ultimately, the system needs to handle all company employees. There is variation in server capacity, shown in table 3 below.

Additional cost and budget information includes a maximum budget of $18,000 total for the months of March and April. A discount during these same months is available on the workstation servers (10%) and the full rack servers (25%). Any servers purchased during May-July will not receive a discount.

1. Set up and solve five different optimization spreadsheet models to determine how many servers to purchase during each month, March-July. Answer the following questions:
   1. How many of each server is purchased and when?
   2. What is the total capacity, in number of employees, of the system?
   3. What is the total cost if this purchase schedule is followed?
2. Set up a sixth optimization spreadsheet model that considers the five months as a whole.
   1. How many of each server is purchased and when?
   2. What is the total capacity, in number of employees, of the system?
   3. What is the total cost if this purchase schedule is followed?
   4. How much savings is realized by solving this for the whole five months instead of month by month?
3. If you could relax one of the constraints, could you save Axe even more? Explain the change you would suggest and the resulting solution.

Table 1

March	April	May	June	July
Central Warehouse	Denver	Salt Lake	Colorado Springs	Bozeman Boise

Table 2

Location	# of Employees
Central Warehouse	50
Denver	200
Salt Lake	180
Colorado Springs	75
Bozeman	35
Boise	30

Table 3

Type of Server	Number of Employees Supported	Cost of Server
MiniDesktop	Up to 30	$3000
Desktop	Up to 80	$5500
Workstation	Up to 200	$12000
Full Rack	Up to 1000	$25000

Answer 1