Case Study on Decision Analysis

Use this information, to advise Cyclonic on their decision. Prepare an Executive Summary report (approximately 1 to 2 pages) that summarizes your findings and recommendations. Be sure to include the following in your report:

  1. (a) Organize the available data on cost, revenue, and probability estimates in a table.
  2. (b) Set up a decision tree to model the scenario presented to Cyclonic. I want to see two versions of your decision tree.
    1. First, show the tree with the algebraic formulations as your payoffs before you run the simulations (eg. example= $250*MIN(D, Q) – $150000 – $130Q)
    2. Second (completed after step (c)), after running simulations and optimization, show the decision tree with your payoffs (average profit calculated from the four simulations). Show your solved decision tree.
  3. (c) Use simulation to estimate the expected profit generated for each option under both weak and strong demand scenarios. HINT: for the simulations, use 500 samples each. You will have four worksheets with simulations – OUTSOURCE-WEAK; OUTSOURCE-STRONG; MANUFACTURE-WEAK; MANUFACTURE-STRONG)For the manufacturing option, use Optimization to calculate the optimal number of spin bikes to produce for both the weak and strong demand scenarios.
  1. (a) Provide a recommendation for Cyclonic including their decision to continue to outsource or vertically integrate the manufacturing. Included the expected return/cost for the decision based on your decision tree (and simulation and optimization values).
  2. (b) SENSITIVITY ANALYSIS (Note: for each of these scenarios, you only need to show your revised solved decision trees – see (ii) above – or summarize the revised expected values in a Payoff Table.

1. (10 points) Case Synopsis (include a brief summary of the case and the business issue(s)being studied)

2. (50 points) Methodology (including a discussion of what information was provided and how you used this information to analyze the problem)


3. (20 points) Findings and Conclusions (include summary of analysis results) Based on your analysis, respond to the following:


  1. Scenario 1: If the COVID vaccine distribution is expedited and people begin to feel safe and comfortable returning to gyms and fitness centers, the demand for at-home fitness equipment may decrease and the likelihood of a strong market may be reduced to 30%, would this change your decision to OUTSOURCE or MANUFACTURE? If so, how?
  2. Scenario 2: Despite the COVID vaccine distribution, people may still be hesitant and not feel comfortable returning to their gyms and fitness centers, the demand for at- home fitness equipment continues to increase making the likelihood of a strong market 90%. Would this change your decision to OUTSOURCE or MANUFACTURE? If so, how?

4. (20 points) Recommendations. For your management perspective, what other factors (not included in the model) need to be considered in making the recommendations? Do you agree with the decisions from your quantitative analysis? Why or why not?

Please find case study attached.

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