The hottest set top box available is made by Set Top Box International. Right now, they outsell both BestBuy and Target in terms of sales. Inventory, however, is a problem for Set Top Box International. Given the brief lifespan of their product. when a new product is introduced, companies frequently write off a sizable amount of their inventory. They currently operate a completely automated facility Allstate Rd, Boston. Each year, they sell roughly 960,000 units. Right now, they manufacture product until they have a full truck load (4,000 set tops), at which point they send a complete truck load to their Illinois distribution center for $600.00. Following that, the distribution center mails out individual units to online clients for a shipping and handling fee of $22.00. Retailers receive LTL truck shipments from the distribution facility. 400 of each are shipped out at a time. For these shipments, the distribution center charges $400.00. The distribution center also has a fixed monthly fee of $5,000 dollars. Set Top Box International sells its units online for $100 each, while charging $82 to large retailers like Wal-Mart. 30% of their clientele are retail clients. Each Set Top is produced at a cost of $53.00 to Set Top Box International.

Start by using the information from problem 1: UPS visits INF International and assures them that UPS can ship directly to retail partners from the INF factory. UPS would need to recruit a part-time employee costing $2,000 to prepare monthly shipments. UPS will ship to any location INF desires for $400.00 each pallet of 400 set top boxes. How much money a month would INF Box International save, taking UPS up on its recommendation?

They would be worse off. It would add cost.

$6,600

$2,000

$3,400

Neutral – no loss but also no gains

$1,600