Read "Walmart.com" then briefly answer the following question: You are a materials manager at Walmart and have been notified that the material cost of $3.81 is now for a 1,500 cubic inches box (material cost has increased). How does that impact savings? Based on the information included in the segment, what recommendations would you be able to provide? What information is missing? Less than 100 words

Walmart.com* Bentonville, Arkansas With more than 245 million customers per week visiting its 11,000 stores across the globe, Walmart is the worlds largest retailer. In 2000, in response to increasing online shopping, Walmart launched its Internet site Walmart. com. To serve its online customers, Walmart created a network of distribution centers in the United States. One of these distribution centers, located in Carrollton, Georgia, was selected as the site for a study on how Walmart might better manage its packaging for online orders. In its peak shipping season (November to December), the Walmart distribution center in Carrollton ships over 100,000 packages per day. The cost of fulfilling an order includes the material cost (the cost of the carton and packing materialpaper that fills the empty space when the product is smaller than the volume of the box), labor for handling, and the shipping cost. The study conducted in Carrollton, called the Carton-mix Optimization Study, had as its objective to determine the number and size of cartons to have on hand for shipping Walmarts products to its online customers that would minimize raw material, labor and shipping costs. A number of constraints limited the possibilities for the variety of cartons to have on hand. For example, management provided a minimum and maximum carton size. In addition, for boxes automatically constructed (as opposed to manually built), a line would be limited to one-size carton. As with any study of this type, data had to be collected to build a cost model that could then be used to find the optimal carton mix. The material costs for existing cartons were known, but what about the cost of a carton in a size that is not currently used? Based on price quotes from its carton suppliers for various sizes, a simple linear regression model was used to estimate the cost of any-size carton based on its volume. The following model was used to estimate the material cost of a carton in dollars per carton (y) based on the volume of the carton measured in cubic inches per carton (x): y=-11+0.0014x For example, for a carton with the volume of 2,800 cubic inches, we have -11+ 0.0014(2800)= 3.81. Therefore, the estimated material for a carton of 2,800 cubic inches in volume is $3.81. The simple linear regression model was embedded into an optimization algorithm in Microsoft Excel to provide Walmart managers a recommendation on the optimal mix of carton sizes to carry at its Carrollton distribution center. The optimization model based on this regression provided documented savings of $600,000 in its first year of implementation. The model was later deployed across Walmarts other distribution centers with an estimated annual savings of $2 million. In this chapter, we will study how to estimate a simple linear regression model, that is, a linear model in which a single variable is used to estimate the value of another variable.