Question 3 Answers

Calculation of annual sales into number of packs

Large packs contain 180 units Small packs contain 92 units

Annual Demand is 2912 units. Required number of packers calculated below

Large Pack 16.1778 packs rounded to nearest whole packet 16 packs

Small Pack 31.6521 packs rounded to nearest whole packet 32 packs

4. SSI would like to determine its potential sales for the first year on the basis of the infor- mation in question 3. However, there is some concern that the estimate of average retail sales is too high. SSI assumes only 40 percent of the participating retailers will actu- ally achieve the average sales and reorders (this group is designated as high perform- ers). Twenty percent of the retailers are expected to have medium performance success and will only sell/reorder 75 percent of the average suggested order. Low-performing retailers represent the remaining 40 percent and will achieve half the sales/reorder expected on average. Calculate the orders (separate initial and reorder quantities) for the 6-month trial period if 45 percent of retailers exclusively order/reorder large packs and the remaining retailers exclusively order/reorder small packs. Calculate the second 6 months accounting for the dropout. (Round if necessary.) Assume the "performer" ratios remain the same after the trial period (i.e., 40 percent are average performers, 20 percent sell 75 percent of the average, and 40 percent sell 50 percent of the average). Total Number of Target Retailers 320,000 290,000 210,000 Sales Regions Eastern Midwestern Western Percent of retailers for initial contact: 20% Projected retailers who will participate after initial contact: 30% Retailers who will continue after 6-month trial period: 55%. Expected average retail sales transactions: $1.40 per customer purchase. Expected average unit sale: 1.12 units per customer purchase. Expected average customer traffic/retail store: 100/day. Expected average number of customers who will purchase product: 10% Weight Cubic Feet Product Included Cost of Display Unit Units of Product Production Costs Largo 25 lbs. 2.75 24 lbs. $35 180 $190 Small 14 lbs. 2.00 12 lbs. $18 92 $98 Costs Handling Storage Transportation of average package Ordering costs/order Total logistics costs/order Three Distribution Centers $3.00 .11 6.25 .75 $10.11 Four Distribution Centers $3.00 .21 5.90 .75 $9.86 4. SSI would like to determine its potential sales for the first year on the basis of the infor- mation in question 3. However, there is some concern that the estimate of average retail sales is too high. SSI assumes only 40 percent of the participating retailers will actu- ally achieve the average sales and reorders (this group is designated as high perform- ers). Twenty percent of the retailers are expected to have medium performance success and will only sell/reorder 75 percent of the average suggested order. Low-performing retailers represent the remaining 40 percent and will achieve half the sales/reorder expected on average. Calculate the orders (separate initial and reorder quantities) for the 6-month trial period if 45 percent of retailers exclusively order/reorder large packs and the remaining retailers exclusively order/reorder small packs. Calculate the second 6 months accounting for the dropout. (Round if necessary.) Assume the "performer" ratios remain the same after the trial period (i.e., 40 percent are average performers, 20 percent sell 75 percent of the average, and 40 percent sell 50 percent of the average). Total Number of Target Retailers 320,000 290,000 210,000 Sales Regions Eastern Midwestern Western Percent of retailers for initial contact: 20% Projected retailers who will participate after initial contact: 30% Retailers who will continue after 6-month trial period: 55%. Expected average retail sales transactions: $1.40 per customer purchase. Expected average unit sale: 1.12 units per customer purchase. Expected average customer traffic/retail store: 100/day. Expected average number of customers who will purchase product: 10% Weight Cubic Feet Product Included Cost of Display Unit Units of Product Production Costs Largo 25 lbs. 2.75 24 lbs. $35 180 $190 Small 14 lbs. 2.00 12 lbs. $18 92 $98 Costs Handling Storage Transportation of average package Ordering costs/order Total logistics costs/order Three Distribution Centers $3.00 .11 6.25 .75 $10.11 Four Distribution Centers $3.00 .21 5.90 .75 $9.86