Q2: BOSS recently introduced a new men's suit, which is sold at all BOSS and NORDSTROM stores. The total manufacturing price of a suit is $300. Both companies sell the items at (almost) similar price of $600. As part of their coordination, NORDSTROM is allowed to sell any unsold items through NORDSTROM Rack, at a discounted price of $.c. The figure below shows part of this supply chain schematically. $600 $600 $x N NORDSTROM BOSS $300 rack HUGO BOSS NORDSTROM (1) What should the discounted price be in order to NORDSTROM keeps a 20% stockout policy? (ii) Assume that, on average, it costs $150 for BOSS to produce and ship an item either to BOSS boutiques or NORDSTROM DC. Also, assume that the average (aggregated) demand of BOSS products at NORDSTROM is 10,000 items a week, with standard deviation of 500, while the average (aggregated demand at all BOSS stores is 3,000 items a week with standard deviation of 300. Because of the importance of NORDSTROM, BOSS is considering to offer a new contract. SCM541. Krereine 3 The goal of this contract is diminish the stockout at NORDSTROM to 5%. Also, NORDSTROM will return all unsold items to BOSS, instead of selling them at NORDSTROM Rack. What should be the residual value in order to keep the stockout 5%? Is this deal beneficial for both parties? If required, assume that demand is normally distributed.] (iii) Recall, from part (ii), that the average (aggregated demand of BOSS products at NORD- STROM is 10,000 items a week, with standard deviation of 500. Also, remember that NORD- STROM buys each item at $300 and sells it at $600. Let's make some assumptions: (a) NORD- STROM is able to make a discount and sells all the unsold items at, on average, $250 at its own stores. (b) NORDSTROM uses a fixed-time period inventory model (as its inventory system deals with too many items), and its' order interval is one week. (c) Lead-time to receive orders from BOSS is fixed and equals to one week. Determine NORDSTROM target inventory level for this product. How would the target quantity change if the order interval changes to 3 weeks, everything else being equal? Q2: BOSS recently introduced a new men's suit, which is sold at all BOSS and NORDSTROM stores. The total manufacturing price of a suit is $300. Both companies sell the items at (almost) similar price of $600. As part of their coordination, NORDSTROM is allowed to sell any unsold items through NORDSTROM Rack, at a discounted price of $.c. The figure below shows part of this supply chain schematically. $600 $600 $x N NORDSTROM BOSS $300 rack HUGO BOSS NORDSTROM (1) What should the discounted price be in order to NORDSTROM keeps a 20% stockout policy? (ii) Assume that, on average, it costs $150 for BOSS to produce and ship an item either to BOSS boutiques or NORDSTROM DC. Also, assume that the average (aggregated) demand of BOSS products at NORDSTROM is 10,000 items a week, with standard deviation of 500, while the average (aggregated demand at all BOSS stores is 3,000 items a week with standard deviation of 300. Because of the importance of NORDSTROM, BOSS is considering to offer a new contract. SCM541. Krereine 3 The goal of this contract is diminish the stockout at NORDSTROM to 5%. Also, NORDSTROM will return all unsold items to BOSS, instead of selling them at NORDSTROM Rack. What should be the residual value in order to keep the stockout 5%? Is this deal beneficial for both parties? If required, assume that demand is normally distributed.] (iii) Recall, from part (ii), that the average (aggregated demand of BOSS products at NORD- STROM is 10,000 items a week, with standard deviation of 500. Also, remember that NORD- STROM buys each item at $300 and sells it at $600. Let's make some assumptions: (a) NORD- STROM is able to make a discount and sells all the unsold items at, on average, $250 at its own stores. (b) NORDSTROM uses a fixed-time period inventory model (as its inventory system deals with too many items), and its' order interval is one week. (c) Lead-time to receive orders from BOSS is fixed and equals to one week. Determine NORDSTROM target inventory level for this product. How would the target quantity change if the order interval changes to 3 weeks, everything else being equal