Texas A & M University Kingsville Prescriptive Analysis Case Study

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The objective of this assignment is to explore the use spreadsheet application for decision analysis and for solving constrained optimization problems.

Optimization. WebFood.com is a new company that allows customers to do grocery shopping over the Internet. It carries products that need three different types of care. Fresh items such as fruit, require special handling so that they always look fresh and do not spoil. Frozen items need cool or frozen storage so that they do not warm up. All the other items, including canned goods, paper products, and kitchenware, require minimal special attention and are just stocked on shelves. The warehouse for storing these items has 100,000 square feet of storage space. The Marketing Department thinks that no more than 60,000 square feet should be devoted to fresh goods, 45,000 to frozen goods, and 70,000 to all other items. At the minimum they must use 20,000 sq ft for Fresh, 20,000 for frozen and 20,000 for other type goods. The accounting department estimates that the storage cost is $5 per square foot for fresh items, $10 per square foot for frozen items, and $1 per square foot of all other items. Company policy limits the storage cost to $1,000,000. Frozen goods have the highest profit margin at $25 per square foot, followed by fresh items at $20 per square foot, and $15 per square foot from other items. The company wants to find out how much of the 100,000 square feet of storage should be allocated fresh goods, frozen goods and all other goods. They wish to maximize the net profits. Net Profits is computed net of total profits minus total costs. Answer these questions in your answer file

How should the available storage space be allocated for different types of goods?

What is the maximum profit the company can expect by such space allocation?

Which constraints are binding and which ones are not binding?

  1. Submission Instructions:
  2. Introduction: Introduce what optimization and decision analysis problems are. (150 words)
  3. Analysis

Write answers to the optimization problem

Conclusion: Include example problem domains where optimization will be used. Provide at least 100 words of detailed answer.

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