Question

You are a supply chain analyst for Good-Buy Inc., which is a large retail chain. Good-Buy

plans a one-month promotion that features a sale on accessories, including premium laptop bags.

The bags must be ordered six months in advance, which means they need to get their inventory

ordering decisions right. Good Buy predicts total demand for the bags to be normally distributed

with mean of 1000 and standard deviation of 250. You collect information from three sources

(VPs).

1. The VP of supply chain is most concerned about prots. He tells you that the bags are

purchased from a supplier at $15 apiece and will be priced at $40. Left over bags will be sold for

$5. What order quantity would make sense based on these numbers from the VP of supply chain?

2. The VP of Sales is concerned about aggregate sales. All he cares about is that you

maintain an in-stock probability level of at least 99%, in order to meet the most demand. What

order quantity would that correspond to?

3. The VP of Marketing is concerned about individual customers. All he cares about is

that you maintain a ll rate at least 99%. What order quantity would that correspond to?

Answer 1

The order quantiy works out to 1645 units for the company.