A retailer orders custom tchotchkes from a specialty manufacturer. It costs the manufacturer $1 to make a
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A retailer orders custom tchotchkes from a specialty manufacturer. It costs the manufacturer $1 to make a tchotchke. The manufacturer sells the tchotchke to the retailer at $7. The retailer in turn will sell the tchotchke to customers at $20. If the tchotchke is not sold by the end of the season it is worthless and will have to be discarded. Assume that demand is normally distributed with a mean of 1000 and standard deviation of 200.
- How many tchotchkes should the retailer order? What are the expected profits for the retailer and manufacturer? What is the total profit of the supply chain?
- Now consider a scenario where the manufacturer will buy-back any unsold tchotchkes from the retailer at the end of the season for $3. How many tchotchkes should the retailer order?
- What are the expected profits for the retailer and manufacturer? What is the total profit of the supply chain?
- Now consider a scenario where the manufacturer will sell tchotchkes to the retailer at cost ($1) but will take 53% of the sales revenue. How many tchotchkes should the retailer order?
- What are the expected profits for the retailer and manufacturer? What is the total profit of the supply chain?
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