Sportsman Textiles (ST) manufactures the Galaxy jerseys that Wonder Line (WL) sells to its customers. ST has recently installed computer software that enables its customers to conduct "one-stop" purchasing using state-of-the-art Web site technology. WL's ordering cost per purchase order will be $40 using this new technology.
Required:
1. Calculate the EOQ for the Galaxy jerseys using the revised ordering cost of $40 per purchase order. Assume all other data from Exercise 20-21 are the same. Comment on the result.
2. Suppose ST proposes to "assist" WL. ST will allow WL customers to order directly from the ST Web site. ST would ship directly to these customers. ST would pay $12 to WL for every Galaxy jersey purchased by one of WL's customers. Comment qualitatively on how this offer would affect inventory management at WL. What factors should WL consider in deciding whether to accept ST's proposal?