Supply chain management - gap

SUPPLY CHAIN MANAGEMENT CASE 2 Quantitative put Problems MSc12, 11 May 2004 Question 1. a) Which of the devil products should the GAP withdraw at the stores and which at the central warehouse for the online channel? chromatic pants info given : The mean ? 800 measure deviation ?100 equal$30,- Holding price 25% take away succession 4 hebdomads Target cycle service level95% z-value 1,645 recourse line of business khaki pants Service level * ? * ?( egest time) 1,645 * 100 * ?(4) Safety wrinkle for Khaki pants = 329 Cost Khaki pants Holding cost * condom bourgeon 0,25 * $30,- * 329 summate dimension cost of Khaki pants is $2.467,50 Cashmere sweaters Information given : The mean ? 50 Standard deviation ?50 Cost$100,- Holding cost 25% croak time 4 weeks Target cycle service level95% z-value1.645 Safety stock Cashmere sweaters Service level * ? * ?( Lead time) 1,645 * 50 * ?(4) Safety stock for Cashmere sweaters = 164,50 Cost Cashmere sweaters Holding cost * safety stock 0,25 * $100,- * 164,5 Total holding cost of Cashmere sweaters is $ 4.112,50 If one compares the total holding cost of the Khaki pants ($2.467,50) and the Cashmere sweaters ($ 4.112,50), one fuck conclude that the holding cost for the Cashmere sweaters are higher than the holding cost for the Khaki pants. For the reason that the inventory cost of Cashmere sweaters are high it is cardinal to distribute those sweaters by the online channel and distribute the pants by the retail stores.

b)How much Safety Inventory reduction can The Gap expect on moving each of the two products from the stores to the online channel? According to the case, we assume that the demand from one week to the next week is independent Khaki pants Standard deviation ? ?(1002* 900) = 3.000 Safety stock Service level * ? * ?( Lead time) 1,645 * 3000 * ?(4) Safety stock is 9.870 Cost Holding cost * safety stock 0,25 * $30,- * 9.870 Holding cost are $ 74.025,- The holding costs for retail distribution are: $2.467,50 * 900 = $ 2.200.750,- Cashmere sweaters Standard deviation ? ?(502* 900) = 1.500 Safety...

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