Question $3$

Revisit Later

Consider the Zero$-$Shopstop supply chain in the fashion apparel business. Zero, the manufacturer has introduced a new range of fashion shirts. The experts at the retailer, Shopstop estimate that the demand for the upcoming season to be $3000$ units. Since this is a new product, no historical data is available to scientifically forecast the demand for that product based on its past data. However, the ratio of actual sales and forecast demand $($A$/$F$)$ for similar product offerings in the past season is found to be normally distributed with a mean of $0\mathrm{.}85$ and a standard deviation of $0\mathrm{.}37.$ Due to the short selling season and long lead time, only one ordering opportunity is available for Shopstop, that too well in advance of the selling season. The selling price of the fashion product is Rs$.2400/$unit and the wholesale price charged by the manufacturer is Rs$\mathrm{.}1500/$unit$.$ The production cost for the manufacturer is Rs$.\frac{1100}{?}$ unit. Any unsold unit at the end of the season is salvaged by Shopstop at Rs$.\frac{900}{?}$ unit. Currently, the company is involved in a wholesale price contract with Shopstop. You are being approached by this supply chain to answer the following questions.

$($a$)$ Will the current wholesale price contract coordinate the supply chain? Why? $(5$