Decision Support Systems

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 ounces) Cost (in cents) Selling Price (cents)

4 1 4 8

3.5 0.85 3.5 6

3 0.7 3 5

2.5 0.5 2.5 4

2 0.25 2 3

1.5 0.1 1.5 2

I began by finding out which nail is the most profitable to produce. The following information is from my spreadsheet calculation.

Nail (in inches) Weight( in ounces) Cost (in cents) Selling Price (cents) Profit units per 20oz pkg Profit

4 1 4 8 4 20 80

3.5 0.85 3.5 6 2.5 24 59

3 0.7 3 5 2 29 57

2.5 0.5 2.5 4 1.5 40 60

2 0.25 2 3 1 80 80

1.5 0.1 1.5 2 0.5 200 100

From these calculations it was obvious that the most profitable nails to produce would be the 4 inch followed by the 3.5 inch and then the 3 inch. To meet the package specifications of no more than 10 nails of each size, and no fewer than 5 of each size, I started by putting in the highest number of the most profitable in the package. I then had to take the package weight consideration. I then chose the second most profitable and the third most profitable into the package. The following calculations indication the correct quantities and weight to meet...

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...mand model in price optimization is crucial to its success (Lee, S. 2011). Whatever the Hardware store owner decides to do about packaging, it is obvious that with the given data the results will not truly be optimized to the extent of reaching the maximum margin obtainable.

Works Cited

Caldwell, S. (2001). Package profit mix-up. Beverage World, 120(1704), 48-52. Retrievedfromhttp://search.proquest.com/docview/213334397?accountid=38569

Breeden, J. L. (2006). Retail portfolio optimization. The RMA Journal, 89(2), 40-45. Retrieved from http://search.proquest.com/docview/209779006?accountid=38569

Lee, S. (2011). Study of demand models and price optimization performance. (Order No. 3500568, Georgia Institute of Technology). ProQuest Dissertations and Theses, , 89. Retrieved from http://search.proquest.com/docview/927604069?accountid=38569. (927604069).