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?

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

Working Notes :

1) Full Rack Server - not at all required as none of the Warehouse has more than 200 Employees , for which Work Station would be sufficient.

2) Given the Constraints - Maximum Budget $ 18000 for March - April

Answer 1 a ) is as under

Desktop 1 in March

Workstation 1 in April

Workstation 1 in May

Desktop 1 in June

Desktop 1 and Mini Desktop 1 , each in July

Answer 1 b ) Total number of Employees of the system - 560

Answer 1 c ) Total Cost of systems purchased - 42300

Working and Spreadsheet is attached herein below :

	March	April	May	June	July
	Central Warehouse	Denver	Salt Lake	Colorado Springs	Bozeman
					Boise
	Central Warehouse	Denver	Salt Lake	Colorado Springs	Bozeman & Boise	Total
No of Employees	50	200	180	75	65	570
Requirement
Currency	$	$	$	$	$	$
Desktop 1	5500
Workstation 1		10800	12000
Desktop 1				5500
Desktop 1					5500
Mini Desktop					3000
Total	5500	10800	12000	5500	8500	42300
Note 1	In March - will purchase one Desktop required to handle 50 employees only and for which One Desktop would be sufficient . Even two mini desktop will not do as it will cost 6000 and there is no discount on Desktop or Mini Desktop
Note 2	Will purchase 1 Workstations in Apr , for Denver as we have a budget of Max 18000 for March - April . Though , it we had budget , we could have purchased one more workstation for Salt lake as there is requirement and the discount also in March - April but no discount on Purchases during May - August
Note 3	In July , will purchase will purchase two systems - One Mini desktop for Bozeman and One Desktop for Boise as they are two different warehouses and One system can't work for them.
Note 4	Full Rack Server will not be required as there is no need to Purchase this heavy system
Note 5	We could purchase 3 Desktops , had we not had a budget limitation and could avail the discounts of 10%. Moreover, the Investment into Systems would not be usable till June and July , till we started our Warehouse in Colorado Springs , Bozeman and Boise.