User

Due to a labour disagreement between the union representing tugboat crews, the Australian Institute of Marine and Power Engineers $($AIMPE$),$ and Flinders Port Holdings, the operator of the container port at Port Adelaide, South Australia, a shipment of $5,000$ pairs of Rossi boots has been delayed for SHIPPING DELAY $($DAYS$).$ The boots should have left on ORIGINAL SHIP DATE. $(5,000$ pairs of boots, in boxes, fit in a single standard $40$ shipping container.$)$

Shipping the boots from Port Adelaide, South Australia to Vancouver, British Columbia by sea will take SEA SHIPPING DAYS. Shipping the boots by air from Adelaide International Airport $($ADL$)$ to Vancouver International Airport $($YVR$)$ will take AIR SHIPPING DAYS. The problem is that shipping by sea is much cheaper than shipping by air. Shipping by sea will cost SEA SHIPPING COST PER PAIR USD while shipping by air will cost AIR SHIPPING COST PER PAIR USD. And even after the shipment of boots arrives in Canada it will take LOGISTICS DAYS IN CANADA to get the shipment of boots unpacked and sorted, delivered to the stores, and put out on the sales floor.

But the entire situation is complicated by the fact that based on the ORIGINAL EXPECTED ARRIVAL DATE, Canadian Tire, the exclusive Canadian retailer, has included the boots in its weekly flyer that will be delivered to homes in the greater Vancouver area. $($Canadian Tire is testing the Rossi brand in the Vancouver market before rolling out the boots in stores across Canada.$)$ Sales of items feature sin the flyer are MUCH higher during the week that the flyer is in effect.

Canadian Tire is buying the boots at COST PER PAIR EXW AUD, and expects to sell BOOT SALES PER DAY DURING FLYER $($PAIRS$)$ of Rossi boots starting on the FLYER START DATE. $($The buyer at Canadian Tire expects the sales to be at this average number each day.$)$ If Canadian Tire does not have the boots in stock it is expected that consumers will buy boots from different brands$/$retailers rather than wait until Canadian Tire has the Rossi boots in stock.

Based on the original ETA for the boots how much will Canadian Tire lose in retail sales if the boots are all shipped by sea? Should the Canadian Tire buyer get some or all of the boots shipped by air? Please make the necessary calculations and justify your decision.

One final point. The footwear buyer at Canadian Tire has been set gross margin target of $50\%$ by the VP of Merchandising. Her annual bonus, potentially up to $17\%$ of her $$92,000$ CAD annual salary, depends on meeting the gross margin target. If the buyer$$s gross margin in below $50\%$ she will get none of the bonus. If it is over $50\%$ she will get half of the bonus. If it over $52\%$ she will get $$ of her bonus. If it is over $54\%$ she will be all of her bonus.

ORIGINAL SHIP DATE $-4-$Apr$-24$

SHIPPING DELAY $($DAYS$)-17$

COST PER PAIR EXW AUD $-$ $ $87\mathrm{.}00$

AUD per CAD Exchange Rate $-$ $ $1\mathrm{.}12$

SEA SHIPPING DAYS $-24$

AIR SHIPPING DAYS $-4$

SEA SHIPPING COST PER PAIR USD $-$ $ $0\mathrm{.}484$

AIR SHIPPING COST PER PAIR USD $-$ $ $5\mathrm{.}173$

USD per CAD Exchange Rate $-$ $ $0\mathrm{.}730$

ORIGINAL EXPECTED ARRIVAL DATE $-30-$Apr$-24$

LOGISTICS DAYS IN CANADA $-3$

FLYER START DATE $-3-$May$-24$

Boot Sales per Day before and after flyer $($Pair$)-24$

BOOT SALES PER DAY AFTER FLYER $($PAIRS$)-194$

Canada Customs Duty $-9\mathrm{.}1\%$

MSRP $-$ $ $179\mathrm{.}00$