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    Sport Obermeyer Solution

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    srinathvl
    The document discusses planning initial production of 10 styles of parkas across two factories in Hong Kong and China. It determines the optimal order quantity for each style based on forecasted demand and standard deviation. For Hong Kong, it sets the minimum order to 600 units and adjusts the optimal quantities accordingly, totaling 10,151 units. For China, the minimum is 1200 units, so some styles are increased to meet that while staying below optimal levels, bringing the total to 13,076 units.

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    Sport Obermeyer Solution

    Uploaded by

    srinathvl
    13K views7 pages
    The document discusses planning initial production of 10 styles of parkas across two factories in Hong Kong and China. It determines the optimal order quantity for each style based on forecasted demand and standard deviation. For Hong Kong, it sets the minimum order to 600 units and adjusts the optimal quantities accordingly, totaling 10,151 units. For China, the minimum is 1200 units, so some styles are increased to meet that while staying below optimal levels, bringing the total to 13,076 units.

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    solution to case Sport Obermeyer

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    The document discusses planning initial production of 10 styles of parkas across two factories in Hong Kong and China. It determines the optimal order quantity for each style based on forecasted demand and standard deviation. For Hong Kong, it sets the minimum order to 600 units and adjusts the optimal quantities accordingly, totaling 10,151 units. For China, the minimum is 1200 units, so some styles are increased to meet that while staying below optimal levels, bringing the total to 13,076 units.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    13K views7 pages

    Sport Obermeyer Solution

    Uploaded by

    srinathvl
    The document discusses planning initial production of 10 styles of parkas across two factories in Hong Kong and China. It determines the optimal order quantity for each style based on forecasted demand and standard deviation. For Hong Kong, it sets the minimum order to 600 units and adjusts the optimal quantities accordingly, totaling 10,151 units. For China, the minimum is 1200 units, so some styles are increased to meet that while staying below optimal levels, bringing the total to 13,076 units.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 7

    SUCM

    12/07/2021 1
    How many to produce initially?
    • 10 different styles with different forecasted
    demand and Standard deviations
    • Minimum order at least 10000 units
    • Production to be done in Hong Kong vally
    • Price difference between various styles is to
    be ignored.

    12/07/2021 2
    Data
    •Retail price of parka (p)= $112.50

    •Cost of producing each parka (c) = $85.5 Style Forecast Average Forecast St. Dev Unit Price

    Gail 1017 388 110

    •Salvage value of each parka (s) = $76.5 Isis 1042 646 99

    Entice 1358 496 80

    •Expected profit from each parka sold = 24% Assault 2525 680 90

    Teri 1100 762 123

    (of 112.50) = $27 Electra 2150 807 173

    Stephanie 1113 1048 133

    •Expected loss on each parka left = 8% (of Seduced 4017 1113 73

    Anita 3296 2094 93

    $112.50) = $9 Daphne 2383 1394 148

    Total 20000

    • optimal service level is CSL*

    •Corresponding optimal order level is O*

    12/07/2021 3
    The Optimal Service Level
    • Expected benefit from extra unit = (1-CSL*) (p-c)
    • Expected loss from extra unit = (CSL*)(c-s)
    • The marginal contribution of raising order size to
    O*+1 = (1-CSL*)(p-c)-CSL*(c-s)
    • At optimal level the marginal contribution should be
    zero
    • CSL*=P(D<=O*) = (p-c)/(p-s) = 0.75
    • Z= 0.6745
    • O*= μ +0.6745σ
    Source: Supply Chain Management by Sunil
    12/07/2021 Chopra, Peter Meindl 2nd Edition, Pearson 4
    Education
    The Optimal Order Level
    Optimal Order
    Style Forecast Average Forecast St. Dev Unit Price Quantity

    Gail 1017 388 110 1278

    Isis 1042 646 99 1477

    Entice 1358 496 80 1692

    Assault 2525 680 90 2983

    Teri 1100 762 123 1613

    Electra 2150 807 173 2694

    Stephanie 1113 1048 133 1819

    Seduced 4017 1113 73 4767

    Anita 3296 2094 93 4708

    Daphne 2383 1394 148 3323

    Total 26354

    •The demend is speculative at this stage


    •We need only 10,000 as the minimum order to start products
    •The company should order only the minimum number to minimize the risk due to
    speculated projections.
    12/07/2021 5
    Final Order for HK production
    Forecast Optimal Order Adjusted HK Final
    Style Average Forecast St. Dev Unit Price Quantity Order Order

    Gail 1017 388 110 1278 484 600

    Isis 1042 646 99 1477 560 600

    Entice 1358 496 80 1692 642 642

    Assault 2525 680 90 2983 1131 1131

    Teri 1100 762 123 1613 612 612

    Electra 2150 807 173 2694 1022 1022

    Stephanie 1113 1048 133 1819 690 690

    Seduced 4017 1113 73 4767 1808 1808

    Anita 3296 2094 93 4708 1786 1786

    Daphne 2383 1394 148 3323 1260 1260

    Total 26354 10000 10151

    *Order for Gail and Isis styles were modified as the minimum order for Hong Kong
    unit for any style is 600

    12/07/2021 6
    Shifting to China
    Forecast Optimal Order Adjusted HK Final China Final
    Style Average Forecast St. Dev Unit Price Quantity Order Order Order

    Gail 1017 388 110 1278 484 600 1200

    Isis 1042 646 99 1477 560 600 1200

    Entice 1358 496 80 1692 642 642 1200

    Assault 2525 680 90 2983 1131 1131 1200

    Teri 1100 762 123 1613 612 612 1200

    Electra 2150 807 173 2694 1022 1022 1022

    Stephanie 1113 1048 133 1819 690 690 1200

    Seduced 4017 1113 73 4767 1808 1808 1808

    Anita 3296 2094 93 4708 1786 1786 1786

    Daphne 2383 1394 148 3323 1260 1260 1260

    Total 26354 10000 10151 13076

    •China plant has a minimum requirement of 1200 units per style so Gail, Isis, Entice,
    Assault, Teri and Stephanie ordering quantities has been increase
    •However, they are still below the optimal level.

    12/07/2021 7

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