James Long, the owner of Longs Inc., is a distributor of one size fit all T-shirts. T-shirts
Question:
James Long, the owner of Longs Inc., is a distributor of one size fit all T-shirts. T-shirts are purchased from the manufacturer in Asia before the beginning of the season and are stocked and sold to resellers. At the end of the season, unsold T-shirts are all sold to the local discount stores at a deep discount. Consider the following situation regarding a T-shirt, which comes in two popular colors, red and green.
T-shirt (color)
| Average demand
| Std. dev. of demand
| Unit Selling Price ($)
| Unit Purchasing Cost ($)
| Unit Holding Cost (for the entire season)
| Unit Salvage Price ($)
|
Red
| 10,000
| 3000
| 15
| 10
| 0.5
| 8
|
Green
| 15,000
| 4000
| 15
| 10
| 0.5
| 8
|
Assuming that demand for T-shirts are Normal,
a) Find the optimal quantities to be ordered for each T-shirt color and the overall average total cost for the season associated with this operation.
Instead of ordering the T-shirts with colors to the Asian Manufacturer and then stocking them at the warehouse, James is considering ordering white T-shirts to the manufacturer and then complete the dying of the T-shirts locally, as needed. This way, only white T-shirts will be stocked as dying can be completed expeditiously in no time. Each white T-shirt will cost $6. Unsold white T-shirts will be salvaged at the end of the season at $4.5. In addition, the unit holding cost of stocking white a T-shirt for the season is $0.3. Finally, the dying cost will be $1 per T-shirt.
b) Which supply chain concept(s) discussed in class is (are) being considered here?
c) Assuming that the demand for Red and Green T-shirts are independent, calculate the optimal order quantity for the white T-shirts, the average total cost for the season associated with this operation. Based on your analysis, should James take this action?
Supply Chain Network Design Applying Optimization and Analytics to the Global Supply Chain
ISBN: 978-0133017373
1st edition
Authors: Michael Watson, Sara Lewis, Peter Cacioppi, Jay Jayaraman