Quick&Chic is an online fashion retailer for occasion wear with monthly changing offerings. As the operations manager of the company, you are responsible for managing the required level of inventory each month.

All fashionable cloths have to be ordered four months in advance to the selling month from a contract manufacturer at an average purchase cost of €120 per unit. During the promotion month, the advertised items are sold at an average

Regular price of €390 each. Due to the fast changing trends in the fashion business, outdated items that have not been sold during their intended promotion month can only be sold at a discount price of €90 per unit in the following months.

Just as many online retailers, Quick&Chic faces a considerable level of demand uncertainty and does not know how many customers will order online during the promotion month. To tackle this problem, the company has collected several months of demand data that can be summarised as follows:

i. What is the optimal level of product availability given the price and cost structure of the fashion products? (6 marks)

ii. Given that the demand distribution remains unchanged, how many pieces should be ordered from the contract manufacturer in advance to the selling month? (12 marks)

iii. If the company was able to reduce the lead time of its fashion items, what was the impact on forecasting, service levels and inventories? 
 

Demand 300 400 500 600 700 800 900 1,000 1,100 1,200 1,300 1,400 1,500 Frequency 1 325167 6 8 5 4 1 3