Analytics Exercise 20-1 (Algo) BigtoSweaters.com is a new company started last year by two recent college graduates. The idea behind the company was simple They will sell premium logo sweaters for Big Ten colleges with one major unique feature. This unique feature is a special large monogram that has the customer's name, major and year of graduation. The sweater is the perfect gift for graduating students and alumni, particularly avid football fans who want to show support during the football season. The company is off to a great stort and had a successful first year while selling to only a few schools. This year they plan to expand to a few more schools and target the entire Big Ten Conference within three years You have been hired by Big10Sweaters.com and need to make a good impression by making good supoly chain decisions. This is your big opportunity with a startup. There are only two people in the firm and you were hired with the prospect of possibly becoming a principal in the future. You majored in supply chain operations) management in school and had a great internshot big retailer that was getting into Internet sales. The experience was great, but now you are on your own and have none of the great support that the big company hod. You need to find and analyze your own data and make some big decisions of course, Rhonda and Steve, the partners who started the company, are knowledgeable about this venture and they are going to help along the wir Rhonda had the idea to start the company two years ago and talked her friend from business school, Steve, into joining het, sodas into web marketing, has a degree in computer science and has been working on completing an online MBA She is as much an artist as a techie. She can really make the website sing Steve majored in accounting and likes to pump the numbers. He has done a great job of keeping the books and selling the company to some small venture capital people in the area. Last year he was successful in getting them to invest $2.000.000 in the company onetime investment). There were some significant strings attached to this investment in that it stimulated that only $100.000 per year could go toward paying the sainty of the two principals. The rest had to be spent on the webolte, advertising and inventory addition, the venture capital company gets 24 percent of the company profits before et during the four years of operation assuming the company makes a profit Your first job is to focus on the firm's inventory. The company is centered on selling the premium sweaters to college football fans through a website. Your analysis is important since a significant portion of the company's assets is the inventory that it carries The business is cyclic and sales are concentrated during the period leading up to the college football season, which runs between late August and the end of each year. For the upcoming season, the firm wants to sell sweaters to only a few of the largest schools in the Midwest region of the United States. In particular, they are targeting The Ohio State University (OSU), the University of Michigan (UM), Michigan State University (MSU). Purdue University (PU), and Indiana University (). These five schools have major football programs and a loyal fan base The firm has considered the idea of making the sweaters in their own factory, but for now they purchase them from a supplier in China The prices are great, but service is a problem since the supplier has a 20-week lead time for each order and the minimum order set 5.000 sweaters. The order con consist of a mix of the different logos, such as 2,000 for OS, 1500 for UM, 750 for MSU, 500 for u and 250 for u. Within each logo sub fot sizes are allocated based on percentages and the supplier suggests 20 percentage. 50 percent large. 20 percent medium, and 10 percent small based on their historical data Once an order is received, alocat subcontractor applies the monograms and ships the sweaters to the customet. They store the Inventory of sweaters for the company in a small warehouse en located at the subcontractor This is the company's second year of operation. Last year they only sold sweaters for three of the schools, OSU, UM and PU. They ordered the minimum 5.000 sweaters and sold all of them, but the experience was painful since they had too many UM Sweaters and not enough for OSU fans. Last year they ordered 2.340 OSU, 1360 LIM, and 900 PU sweaters of the 5.000 sweaters 30 had to be sold at a steep discount on eBay after the season. They were hoping not to do this For the next year you have collected some data relevant to the decision Exhibit 2012 shows.cost information for the product when purchased from the supplier in China. Here we see that the cost for each sweater delivered to the warehouse of our monogramming subcontractor is 563.03. This price is valid for any quantity that we order above 5.000 weiter. This order can be a mix of weater for each of the five schools were targeting the supplier needs 20 weeks to rocos. the ordet, so the order needs to be placed round Art for the upcoming football season exhort 2012 COST INFORMATION FOR THE SWEATERS China supplier cost Material 5. Labor 10.50 Overhead 1. Transportation within this Supplier profit 00 Agente 2.60 Freight (cea cari 1. Duty C 3.0 woli con Dati subcontract Hongrat 70 Total shcontractor sort 5310 Total (te) Esbit 2013 FORECAST DATOTTA ASY VAN WODAS STE'S FOOTBALL ACTUAL FORECAST FORECAST ATTEN HALLO VA MOC 10 . Ponpost Ostat HIERI Hithio State Tan T 11 Check my w Illinois Minnesota Northwestern Nebraska Total 70.21 59,545 50, 305 24,190 85,073 4.6209 7. 420 5,530 7.285 *380 sweaters were sold through eBay for $49 each(the customer pays shipping on all orders **Calculated assuming the demand at each school is independent . Our monogramming subcontractor gets $11.00 for each weiter. Shipping cost is paid by the customet when the order is placed In addition to the cost dato, you also have some demand information, as shown in Exhibit 2012. The exacles number for list year are given. The exhibit indicates the retail or "full price sales for the sweaters that were sold for $135 ch Swt that we had at the end of the season were sold through eBay for $49 each and were not monogrammed Keep in mind that these numbers do not accurately reflect actual demand since they stocked out of the OSU sweaters toward the end of the Beason As for advertising the sweaters for next season, Rhondas committed to using the same approach used last year. The implaced ads in the football program sold at each game. These worked very well for reaching those attending the one, but she rented there might be ways to advertise that would open soles to more She has hired a market research toho centy other advertising outlets but has decided to wotot least another year to try something different Forecasting demand is a major problem for the company. You have asked Rhonda and Steve to predict what they think she next year. You have also asked the market research form to apply their forecasting tools. Data on the forecasts are 2013. To generate some statistics you have averaged the forecasts and called the standard devotion for each school and not the market research, you have decided to use the aggregate demand forecast and standard deviation for the aggregate demand. The aggregate demand was calculated by adding the average forecast for each bem. The aggregate standard deviation was calculated by squating the standard deviation for each item (this is the variance) summing the variance for each item, and then taking the square root of this sum. This assumes that the demand for each school is independent, meaning that the demand for Ohio State is totally unrelated to the demand at Michigan and the other schools You will allocate your aggregate order to the individual schools based on their expected percentage of total demand. You discussed your analysis with Rhonda and Steve and they are ok with your analysis. They would like to see what the order quantities would be cach school was considered individually You are curious as to how much Rhonda and Steve made in their business last year. You do not have all the data, but you know at most of their expenses relate to buying the sweaters and having them monogramed. You know they paid themselves 550.000 each and you know the rent utilities, insurance, and a benefit package for the business was about $18.000 a. What was the net pre-tax profit for their business last year after deducting story and overhead (Do not found intermediate calculations. Round your answer to the nearest dollar amount) b. If they must pay so intes after deducting the venture Catalin payment, wie was the case in the occrued last year Do not round intermediate calculations. Round your answer to the nearest dollar amount)