Problem 11.6 Gap has started selling through its online channel along with its retail stores. Management has to decide which products to carry at the retail store and which products to carry at the central warehouse to be sold only via the online channel. Gap curren'dy has 900 retail stores in the United States. Weekly demand for size large Khaki pants at each store is normally distributed, with mean of 800 and a standard deviation of 100. Each pair of pants costs $30.00. Weekly demand for purple cashmere sweaters at each store is normally distributed, with a mean of 50 and a standard deviation of 50. Each sweater costs $100.00. Gap has a holding cost of 25%. Gap manages all inventories using a continuous review policy, and the supply lead time for both products is four weeks. Gap seeks a target CSL of 95%. 1. How much reduction in holding costs can Gap expect by moving each of the two products from the stores to online channel? Refer to the spreadsheet analysis, the holding cost saving on Khaki pants are 214653338, and the saving on purple cashmere sweaters are 3577556.64