Solution 3:-

Products Mean of weekly Standard Price

demand Deviation of ($/each)
Weekly Demand
Headband 800 100 20
Fur-lined coat 120 50 60

Baby &us has 400 retail stores in United States

Baby &us has holding cost of 25%
The supply lead time for both products is four weeks.
The targeted cycle service level is 98 per cent (z = 2.055).
Assume the demands for both products are independent

a First consider the retailing option. For headband and fur-lined coat, obtain their overall annu

b Consider the option of a central warehouse. For headband and fur-lined coat, obtain their an

c Based on your results in (a) and (b), which of the two products should Baby&us carry at the

d Apart from the inventory costs, what are the other factors that Baby&us should consider be
 2055

3082.5

oat, obtain their overall annual holding costs of the safety stocks at all retailers.

ur-lined coat, obtain their annual holding costs of safety stocks at their respective central warehouses

hould Baby&us carry at the stores, and which should it carry at the central warehouse for the online channel? W

Baby&us should consider before making the decision? (5 marks)

 41100 822000

61650 1233000

164400 822000

82200 1233000

warehouses

the online channel? Why?

 Solution 4:-

Demand 50 100 200 300 400 500

Probabilities 5% 15% 20% 25% 20% 10%
F(d) 5% 20% 40% 65% 85% 95%

Sportmart purchases the skis from a manufacturer at $80 per pair and retails for $220. The
Any unsold skis at the end of the season have a salvage value of $40 per pair.
Furthermore, in a recent commercial advertisement,
Sportmart promises to pay customer $10 (in the form of coupon for buying other goods ava
(that is if Sportmart has zero inventory at the time a customer wants to buy the skis).

a What is the optimal order quantity of Sportmart? What is the expected profit of Sportmart?

Next we shall consider coordination between Sportmart and its manufacturer of the skis. Fo

c Suppose that the manufacturer and Sportmart want to coordinate and work together to ach
How many skis should Sportmart order? What is the supply chain profit? (12 marks)

d The first plan under discussion is for the manufacturer to refund Sportmart $b per pair of sk
What is the optimal value for $b such that the supply chain profit can be maximised? (6 ma

Demand 50 100 200 300 400

Probabilities 5% 15% 20% 25% 20%

Price 220
Cost 80
Salvage price 40

Demand 50 100 200 300 400

Profit (7,000) 2,000 20,000 38,000 56,000
Probabilities 5% 15% 20% 25% 20%

Expected profit 24,650

 600
5%
100%

etails for $220. The production cost is $50 per pair for the manufacturer.

ng other goods available in the store) if there is a stockout of the skis

buy the skis).

profit of Sportmart? What is the manufacturer’s profit? (12 marks)

turer of the skis. For the following two questions, Sportmart will not offer the coupon for stockout.

work together to achieve the maximum supply chain profit. How should this work?
(12 marks)

art $b per pair of skis that does not sell during the winter season.
e maximised? (6 marks)

148.24 41.76

0.94 0.76

Price 220 71.76

Cost 50
Salvage price 40

Demand 50 100 200 300 400

Profit 4,000 13,000 31,000 49,000 67,000
Probabilities 5% 15% 20% 25% 20%

Expected profit 42,500

 0.82

for stockout.

500
85,000
10%