Nike sells clothing products through online channel along with its retail locations. Management is faced with the decision of which products to carry and sell through retail locations and which products to carry at a central warehouse and sell through the online channel. Nike currently has 1000 retail locations in the US. Weekly demand for shirts is normally distributed with a mean of 850 and a standard deviation of 100. A shirt costs $25. Weekly demand for sweaters at each store is normally distributed with a mean of 40 and a standard deviation of 50. Each sweater costs $110. Nike has a holding cost of 25% of the unit price per unit per year. Nike has two inventory policies to utilize: continuous review model and periodic review model. The lead-time for all products is 2 weeks and the reorder interval is 3 weeks. The targeted CSL is 90%.

How much reduction in holding costs can Nike expect by moving each of the two products from the stores to online channel? Apply both continuous and periodic models.

Which of the two products should Nike carry at stores, and which should it carry at the central warehouse for the online channel? Why?

What other information does the company need to make a comprehensive evaluation between centralization and decentralization

Which inventory policy model (periodic vs. continuous) would you suggest Nike to use?

Define all parameters of the model and type all the necessary equations that you have utilized in your computations. Include all your EXCEL worksheets.

b)

Using the continuous review policy in the above problem, if the standard deviation of lead time is 1 week, compare centralization and decentralization options for sweaters. Recommend which option to use.

Define all parameters of the model and type all the necessary equations that you have utilized in your computations. Include all your EXCEL worksheets.