After getting the Leather Hide Store up and running, the Kysons expect to sell around 7280 hides per year. On top of the web business, the Kysons plan to keep selling on EBay, but they plan to reserve their EBay business to use it to get rid of overstocks or sell special orders. Leather is a natural product and is sold typically as full or half hides. The average hide covers 50 square feet; however, hides can range from 35-to-75 square feet. On average the Kysons pay $125 for the hides, including materials overhead and labor. The inbound freight cost is $8.00; labor to receive each hide and maintain it in inventory cost $5, plus $1 per month. Storage space cost $0.05/sq. ft. per month. The Kysons have decent credit and are able to borrow at and APR of 6%. The Kysons figure that insurance per hide runs about $0.25 per hide; taxes run about $2 per $100 value with a 30% tax rate; loss and damage runs about 4% per year; obsolescence runs 2% per year. While Mike and Kelly decide on the colors and quantity of hides, the actual ordering is Janets responsibility. Janet is their office manager. Janet earns around $700 per week (including salary and fringes) and spends half of her time processing orders and processes an average 4 orders per week. After operating their website for two months the Kysons hired you as a consultant to stream-line their ordering and inventory process. Over the most recent 4-week period, the Leather Hide Store had the following daily demand for hides: Week-1 Week-2 Week-3 Week-4 Monday 20 32 32 18 Tuesday 33 33 27 35 Wednesday 31 21 26 28 Thursday 30 29 29 34 Friday 24 30 21 27 Over the same 4 week period, they had 16 orders with the following order cycle times: 5, 3, 2, 7, 3, 3, 4, 3, 7, 6, 5, 4, 3, 3, 3, 2, and 5 days. After running the website for a year, the Kysons were very pleased with your earlier analysis. Now they want you to analyze their inventory requirements. The first phase consists of an ABC analysis of their product lines. Unfortunately, the Leather Hide Store does not have demand data per day according to product number or name; however, they do have the following demand information over the first year. Product Number Product Name Units Sold Price per Unit Profit per Unit ES1 Indigo 624 $245.70 $67.76 ES2 Black Cat 260 $167.40 $23.16 ES3 Black Magic 1282 $206.70 $35.50 ES6 Black Pebble 312 $167.40 $16.42 ES7 True Red 520 $245.70 $54.28 ES10 Roasted Red Pepper 312 $152.00 $19.90 ES13 True Burgundy 468 $171.60 $15.23 ES14 Pure Sand 104 $175.50 $16.44 ES18 Polo Brown 1560 $198.00 $20.06 ES19 Cheyenne 412 $247.00 $79.85 ES20 Harvest 936 $222.30 $55.15 ES26 Soft White 208 $202.80 $34.30 ES31 Soft Cream 282 $179.40 $23.03 Case Questions What is the inventory carrying rate? What is the current number of orders per year if Janet is making 4 orders per week? What is the economic order quantity What will be the number of orders per year based upon the economic order quantity What is the reorder point (use 99% service level) Using the information in the case to perform and ABC analysis How would you perform the ABC analysis and what criteria would you use? What would be your cut-off level? Make sure to explain your reasoning and support your solutions.