Based on the success of your "WSOM Rocks" experiment, you launch the new WSOM Spirit Shop and are responsible for sourcing and selling a line of 6 spirit items (see exhibit A). Most of your sales will likely occur during September, so you have plenty of time to line up your supply plans given that it is currently late April. Having done a particularly spectacular job on the Sport Obermeyer case, you have quite insightfully created a supply chain with dual sourcing capabilities. One vendor is located in Vietnam and provides very low costs, but with longer lead times. The second vendor is located in Cleveland and offers higher costs with super short lead times.  The Vietnamese vendor has a minimum order of 50 units (per item). The Cleveland vendor does not have a minimum order. Detailed lead times and vendor costs can be found in the WSOM Spirit Shop spreadsheet, Exhibit B (this spreadsheet can be found on Canvas in the Final Exam module). Note, the Vietnamese vendor's pricing includes the cost of delivery to Cleveland. You have six undergraduate marketing majors on your team who have provided sales forecasts (see Spirit Shop spreadsheet, Exhibit A). There is a July early-order opportunity for students to place orders at a discount (to be fulfilled in September). Historically, these early orders have been very accurate indicators of total demand. Assume that any units not sold will be shipped to a surplus clothing store at a cost of $2.50 per unsold item. Note that your sourcing options are different than in QQ-1 (you cannot source from Toronto, nor do you have the nearly instantaneous back-room capabilities). Questions:

1. Using the data provided, make a recommendation for how many units of each style you should order from the Vietnamese vendor and from the Cleveland vendor. Explain the rationale behind your recommendations (and show your calculations).  [3 points]
2. Assume the Cleveland vendor goes out of business. How would your answer above change? What additional/alternate analytic techniques would you employ (hint, this now becomes a single period "newsvendor" problem)? [1.5 points]
3. What is your total expected profit under each of the two scenarios above? [1.5 points]
4. In light of your analysis, which model (one supplier or two suppliers) would you choose, and why? [1 point]

Exhibit A: WSOM Spirit Gear
		Individual Forecasts						Average Forecast	Standard Deviation	2 x Std. Deviation
Item	Selling Price	Fred	Felix	Fanny	Faith	Fatima	Frank
Baseball cap	$25	90	100	95	125	85	115	102	15.38	30.77
Men's T-shirt	$30	75	85	110	160	95	120	108	30.45	60.91
Women's T-shirt	$23	135	160	165	95	105	125	131	28.36	56.72
Men's Sweatshirt	$55	250	200	285	245	270	280	255	31.30	62.61
Women's Sweatshirt	$65	90	100	110	125	80	205	118	45.24	90.48
Delux backpack	$75	255	225	190	305	175	200	225	48.27	96.54
Totals		895	870	955	1,055	810	1,045	938	98.27	196.54
Hint: recall that Excel can calculate standard deviation using the "=stdev" function

Exhibit B: Vendors
	Vietnam		Cleveland
Item	Mfg Cost	Lead Time (Wks)	Mfg Cost	Lead Time (Wks)
Baseball cap	$15.00	12	$27.50	1
Men's T-shirt	$7.50	12	$15.00	1
Women's T-shirt	$9.50	12	$15.00	1
Men's Sweatshirt	$20.00	12	$45.00	1
Women's Sweatshirt	$17.50	12	$32.50	1
Delux backpack	$25.00	12	$67.50	1

Answer rating: 100% (QA)

To make a recommendation for how many units of each style to order from the Vietnamese vendor and the Cleveland vendor we can use the Newsvendor model ... View the full answer