Decision support systems play a vital role in informing business leaders during the decision making process. Without the information provided by these types of systems business owners would find it difficult to remain competitive and profitable. Given the current question, of the most profitable packaging for nails using the following parameters:
“The nails will be sold in boxes of up to 30 nails. There must be no more than 10, but no fewer than 5, of each of three types of nails in each box. The nails in each box should weigh no more than 20 ounces. You’re looking for the combination with the highest profit”
Also taking into consideration the following data:
Nail (in inches) Weight( in ...view middle of the document...
5 25 8.5 17.5 7 5.95
3 20 7 10 5 3.5
2.5 15 5
2 10 2.5
1.5 5 1
Total 67.5 22 19.45
Now that we have the mathematical most profitable packaging it is necessary to discuss the elements that affect the profitability of this packaging scenario. First, I do not think this is the most profitable way to sell this product. You must first consider the desirability or demand of the product itself. If the nails were packaged in this fashion, who would purchase this product? Probably not very many people, because 4 inch nails are less desirable than 1.5 inch nails. Whereas optimization models can be used to predict market shares based on relative utilities or attractions, the overall sales of the demand group (or category) itself does not change it is predictable (Breeden, J. L. 2006). There are definitely sizes of nails that are not represented in this example. Before I became a business owner I was a product buyer for several retail locations. I can attest that the desirability of a product will follow a bell curve of normal distribution. I believe the 4 inch nails would fall to the far right of the bell curve meaning they are less desirable. Why would you package less desirable nails with even more less desirable nails because mathematically it is the most profitable packaging? You wouldn’t. Consequently, you would find out which is the best-selling nail size and package it with the more profitable, less desirable nails. That scenario would probably be heavy on the midsize nails and then have some of the most profitable nails in it. Without sales history I would not be able to say which packaging would be best. A second scenario exists and that is selling all the nails by bulk weight. This approach would utilize no packaging at all. Price your bulk nails off the cost of the second or third highest cost...