Problem 1: Mr. Dan Stockman is the procurement manager for Slicker Image (SI), an upscale retailer of novelty products. It is mid-August, and Mr. Stockman is wondering how many units of a new multi-function smart bracelet to order for the upcoming holiday season (November and December). The Malaysian manufacturer of this item, TechToys, requires orders to be placed in late August for delivery in late October, in time for holiday sales. Based on past experience with similar products, Mr. Stockman believes that the holiday demand (Nov-Dec) for the bracelet is Normally distributed with a mean of 3,000 units and standard deviation of 900. TechToys sells the item to SI at a unit price of $ 145 per unit, and SI has decided to set the retail price at $ 200 during the regular selling season (Nov-Dec). At the end of December, SI will mark down the price by 50% (i.e., sell the item for $ 100) to sell off any left-over items. TechToys incurs a cost of $ 105 per unit to manufacture this bracelet. For simplicity, ignore all supplier to SI (and vice versa) shipping costs.

Mr. Stockman is thinking about ordering 4,000 units from TechToys.

i. What Service Level does this ordering decision reflect?

ii. What is SIs fill rate, defined as Expected Regular Season (RS) Sales quantity divided by Expected Demand?

iii. What is SIs expected profit from procuring and selling the item during the upcoming season?

iv. What is TechToys expected profit with this SI ordering decision?