Determining the optimal level of product availability

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Reference no: EM132466703

Chapter 13 : Determining the Optimal Level of Product Availability

Exercise 1 and Exercise 7

EXERCISE 1

Green Thumb, a manufacturer of lawn care equipment, has introduced a new product. Each unit costs $150 to manufacture, and the introductory price is $200. At this price, the anticipated demand is normally distributed, with a mean of u = 100 and a standard deviation of o = 40. Any unsold units at the end of the season are unlikely to be valuable and will be disposed of in a post-season sale for $50 each. It costs $20 to hold a unit in inventory for the entire season.

QUESTIONS TO ANSWER:

1. How many units should Green thumb manufacture for sale?

2. What is the expected profit from this policy?

On average, how many customers does Green Thumb expect to turn away because of stocking out?

EXERCISE 7

The manager at AnyLogo is considering the purchase of high-speed embroidery machines that will allow it to embroider on demand. In this case, the apparel will be made in Sri Lanka without any logo; the logo embroidery will be postponed and will be done in the United States on demand. This will raise the cost per unit to $18. However, AnyLogo will not have any holiday or company-specific apparel to be disposed of at the end of the season. The apparel without logos can be sold for $18 a unit to retailers. The cost of holding inventory and shipping adds $4 to the cost of any apparel left over after the holiday season. With all other information as in Exercise 6,

QUESTIONS TO ANSWER:

Do you recommend that the manager at AnyLogo implement postponement?

What will be the impact of postponement on profits and inventories?

Attachment:- Chapter 13-14-Supply Chain Management.rar

Reference no: EM132466703

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