Q4. NuGame Corp. (Newsvendor Model) NuGame Corp. has been making jerseys for the NBA for nearly...

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Q4. NuGame Corp. (Newsvendor Model) NuGame Corp. has been making jerseys for the NBA for nearly 40 years now. Recently, however, the company has faced declining market share due to the licensing of additional manufacturers by the NBA, and reduced profitability due to increasing cost of raw materials, passed on by its suppliers. In response, it has developed ways to better identify trends and customer desires (e.g., anything related to the team that is likely to win the NBA championships in any year), and to satisfy the demand with unique jerseys featuring players from that team. NuGame Corp. outsources the production of its jerseys to overseas manufacturers. Therefore, it is constrained to order jerseys only once each season. The product arrives in late November, before the start of the basketball season in December, and NuGame then ships the jerseys all over the country to its retail partners. NuGame would like to know how much should it order for each of the jerseys every year. Consider a small sample of the company's overall production planning problem. Company's demand forecast for next season for four of its most likely "hits" is in the table below. Each jersey style corresponds to a team and/or a player. Table 1 Average (mean) demand Standard Deviation of Demand Style 1 5000 700 Style 2 1500 1000 Style 3 2500 200 Style 4 2000 1000 A jersey (regardless of style) sells for $75.00 and costs $28.00. Year-old jerseys can only be sold for $16.00, as "hot" teams and stars can change every year. Assume that all of the old stock sells out at this discounted price. a) How many jerseys of each of the four styles should NuGame order? What are the company's expected profits? What are its expected mismatch costs? b) Each season, the company has many shortages of its most popular jersey styles, and large overages of its least popular jersey styles. To better match supply and demand, the company is considering the following strategy: it will design and produce a "basic" jersey, without any logos and pictures, using the same contract manufacturers overseas. It will stock the basic jerseys in a warehouse close to its headquarters in Chicago, wait until the NBA championships are well under way, update its forecast with the probability of a team winning, and then screen-print the logos and pictures on the basic jersey using a quick and simple process. A local print shop has offered to do this last step for NuGame at a cost of $7 per jersey. Assume that all other costs remain the same (a jersey sells for $75.00 and a basic jersey still costs $28.00 to make overseas, ship and stock at its Chicago warehouse; year-old jerseys are sold for $16.00). Assume that in this scenario, the company's updated forecasts for the four styles would be almost perfect - that is, the company can sell the expected demand (as forecasted in Table 1) with no variability. How many basic jerseys should NuGame order for the next season? What is the change in expected profits? c) Recommend at least two other options NuGame could pursue to better match supply and demand. Support your answer with arguments, data, or numbers to the extent possible. Q4. NuGame Corp. (Newsvendor Model) NuGame Corp. has been making jerseys for the NBA for nearly 40 years now. Recently, however, the company has faced declining market share due to the licensing of additional manufacturers by the NBA, and reduced profitability due to increasing cost of raw materials, passed on by its suppliers. In response, it has developed ways to better identify trends and customer desires (e.g., anything related to the team that is likely to win the NBA championships in any year), and to satisfy the demand with unique jerseys featuring players from that team. NuGame Corp. outsources the production of its jerseys to overseas manufacturers. Therefore, it is constrained to order jerseys only once each season. The product arrives in late November, before the start of the basketball season in December, and NuGame then ships the jerseys all over the country to its retail partners. NuGame would like to know how much should it order for each of the jerseys every year. Consider a small sample of the company's overall production planning problem. Company's demand forecast for next season for four of its most likely "hits" is in the table below. Each jersey style corresponds to a team and/or a player. Table 1 Average (mean) demand Standard Deviation of Demand Style 1 5000 700 Style 2 1500 1000 Style 3 2500 200 Style 4 2000 1000 A jersey (regardless of style) sells for $75.00 and costs $28.00. Year-old jerseys can only be sold for $16.00, as "hot" teams and stars can change every year. Assume that all of the old stock sells out at this discounted price. a) How many jerseys of each of the four styles should NuGame order? What are the company's expected profits? What are its expected mismatch costs? b) Each season, the company has many shortages of its most popular jersey styles, and large overages of its least popular jersey styles. To better match supply and demand, the company is considering the following strategy: it will design and produce a "basic" jersey, without any logos and pictures, using the same contract manufacturers overseas. It will stock the basic jerseys in a warehouse close to its headquarters in Chicago, wait until the NBA championships are well under way, update its forecast with the probability of a team winning, and then screen-print the logos and pictures on the basic jersey using a quick and simple process. A local print shop has offered to do this last step for NuGame at a cost of $7 per jersey. Assume that all other costs remain the same (a jersey sells for $75.00 and a basic jersey still costs $28.00 to make overseas, ship and stock at its Chicago warehouse; year-old jerseys are sold for $16.00). Assume that in this scenario, the company's updated forecasts for the four styles would be almost perfect - that is, the company can sell the expected demand (as forecasted in Table 1) with no variability. How many basic jerseys should NuGame order for the next season? What is the change in expected profits? c) Recommend at least two other options NuGame could pursue to better match supply and demand. Support your answer with arguments, data, or numbers to the extent possible.