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At the core of this case is a distribution, or sourcing, problem that can be modeled and solved using linear programming (LP). There are also issues of whether to build (a) new plant(s)--and if so, what the capacity should be--and whether to expand or close one or more of the existing plants. These latter issues can be analyzed using a 0/1 LP facility-location model. Alternatively, because the number of options is limited, they can be analyzed using the straight LP model of the distribution problem as a tool to facilitate analysis.

Galaxy Micro Systems is negotiating with a vendor about the cost of service support for the warranty on Galaxy's new workstation. The vendor has offered Galaxy a choice between a fixed-price, lump-sum contract or a deferred-payment scheme based on the number of units installed. Uncertainty in the sales forecast complicates the choice. All uncertainties are expressed in terms of discrete probabilities.

The president of a well-established manufacturer of mattresses has asked his assistant to recommend whether to consolidate plants of three different locations. He must decide not only which criteria are most useful in making such a decision, but also how to weigh the different criteria in coming up with a single decision.

The president of a large and established manufacturer of laboratory equipment has to decide whether to invest $1 million for 30% equity in a start-up company in the field of lab robotics. The agreement would also allow his company the right to market the product. He already has a spreadsheet that projects the best guess of the future scenario and calculates several measures of performance (ROS, ROE, ROI, NPV, and IRR). He must decide which of the criteria are most useful. A relevant-cost issue that is introduced must be resolved, because it makes a big difference in the NPV. In the supplement, some background material is provided for a forecasting/judgmental assessment exercise based on this decision. The supplement could, assuming students have already been introduced to this topic, form the basis for a short workshop (an hour or less) on judgmental probability, or it could be used with a note on cumulative probability distributions for an introductory class on the topic. (The B case number is UVA-QA-0383, and a supplement to the A case is UVA-QA-0384.)

Students are asked in each of the situations presented, which alternative is better, assuming that they would put whatever money they receive in a secure investment that returns 10% annually.

This case describes the coal-procurement process of a small electric utility. The manager of the production fuel department must decide how much coal to purchase from each vendor and how to allocate the purchased coal among the utility's three coal-burning plants. The situation can be modeled and solved as a linear program. Sensitivity analysis can be used to help formulate a strategy for negotiating with the vendors and to address other special issues.

You are Pat Divso, a senior purchasing agent of Compressor Corporation, Inc. (CCI). You have been given a major purchasing assignment to find a solution to the deadlocked price negotiations with Scandia Steel AB, a major supplier of specialty high-carbon and stainless steels, and a strategically critical partner. You are now en route from your Paris office to Sweden where you will meet tomorrow, August 29, 1995, with Kaj Johansson (pronounced Ki), marketing director of Scandia Steel at Scandia's headquarters in Uppsala.

This case provides the background for one participant in a contract negotiation regarding price, duration, and exclusivity.

George Lasiter sells special-events T-shirts, and must decide how many to order for an upcoming concert. He has high, medium, and low estimates of both concert attendance and the percentage of attendees who will want a shirt. In addition, he has assessed the relative likelihoods of each estimate. The case can be used to introduce or reinforce the fundamental issues surrounding decision-making under uncertainty.

An analyst is about to make a presentation on the potential of Superior Industries International as an acquisition target. The issue for students is whether the synergies are enough to justify a 20% premium over the current price. A secondary objective of the case is to introduce the residual cash flow approach and to relate it to the weighted-average cost of capital (WACC) approach.

This case and its companion, "Myerson Industries" (UV0428), constitute the materials for a negotiating exercise. The excercise is a distributive-bargaining situation surrounding the negotiation of the price for the construction of a building (some minor opportunities exist for creating mutual value).

In this case, the managers of quality assurance must specify a fill-target for individual bottles of a new blood-pressure medicine. Higher targets lead to higher material costs but fewer seconds.

Thomas Stearns must decide whether to continue with planned software development and risk missing the completion deadline on a $20 million project or bite the bullet and make some costly hardware changes that will virtually eliminate the risk of missing the deadline. This introductory decision analysis case: (1) contains a compound (square-circle-square) decision, (2) encourages a discussion of the meaning of probability, and (3) requires the use of sensitivity analysis to handle the unspecified costs of missing the deadline.

This case and its companion, "Centralia Construction Corporation" (UV0345), constitute the materials for an excercise in role playing and negotiating. The exercise is a distributive-bargaining situation surrounding the negotiation of the price for the construction of a building (some minor opportunities exist for creating mutual value). Myerson is the purchaser of the building.

This case describes the situation faced by the general manager of the A's at the end of the 1980 baseball season. The A's star pitcher, in negotiating his contract, claims that attendance was noticeably higher at games in which he was the starting pitcher. Game-by-game data for the 1980 season on home attendance and ten variables affecting attendance are given. The case is suited for use near the end of a module on regression. It can be used to (1) review the t-test for a difference in means and relate the difference to regression with a dummy variable, (2) illustrate the importance of a model-building framework, even if used to evaluate someone else's models, (3) illustrate the use of dummy variables, and (4) point out the difference between conditional and marginal inference. The supplement, QA-0313, contains the results of several regression analyses of the A's 1980 home-attendance data and may be used with the A case to facilitate analysis of the situation. (The B case is UV3698.)

Peter Gordon, manager of a $1.6 billion investment in municipal securities at Price, has just received phone calls from the sales representatives of two investment banks, each offering attractive opportunities for the reinvestment of $50 million that will shortly become available. He may choose either but not both of the offers. The case can be used to review the contents of a "tombstone," to reinforce NPV and IRR concepts, to witness the inappropriateness of using IRR as a selection criterion among mutually exclusive projects, and to emphasize the reinvestment assumption of IRR.

Cummins, Epley, and Mayo, a U.S.-based construction firm, has been selected as the prime contractor for a road-reconstruction project in Saudi Arabia. Based on company cost estimates, the project provides a 15% return on costs, well below the required 18%. Because of a substantial advance payment and the specific timing of the payments, the project's IRR is 40%. This case can be used as an introduction to or a reinforcement of discounted-cash-flow techniques. It provides a dramatic portrayal of the time value of money, an opportunity for sensitivity analysis, and a possibility for using decision diagrams for structuring realistic contingencies.

Amore must set the fill-target for its eight-ounce macaroni and cheese pie. Unless five sample pies taken every 20 minutes average more than eight ounces, the entire 20-minute batch must be rejected. The case provides enough information to make an economic decision on the fill target. The case may be used to introduce the distribution of a sample average.

The manager of the Revenue Enhancement Department of an airline has to decide the optimal number of seats to reserve for discount customers on a particular flight. Historical data are given, as well as probability distributions of demand for both full and discount fares, in order to help make the decision. (The B case is QA-0340.)

This case is a good introductory linear-programming case; it introduces the notion of constraint exploitation and provides practice in deciding between alternative forecasting techniques (including exponential smoothing). The case contains a decision-uncertainty structure. A production planner must determine whether or not to take a contract for future delivery of a specified product at a stated price. The decision will affect the production mix in future periods. Uncertainty surrounding the future market price of the product is crucial. In the B case (UVA-QA-0391) a second constraining resource is introduced to the decision environment.