Mr. Jones, a recent MBA graduate, the only entrepreneur in his graduating class, will establish a distinctive newspaper concession on the corner of two busy streets near his alma mater.

After conducting in-depth interviews, he has decided to stock three daily newspapers: the Hong Kong Chronicle, the New York Times, and the Barrie Bugle. Having successfully avoided all courses requiring arithmetic during his academic career, he has contacted you to advise him on the kind of ordering policy that he should follow.

a. You first make the assumption that the daily demand for each of the three papers is normally distributed. The mean number of papers sold during the first 4 days of the week appears to be 50% greater than on Fridays and Saturdays. Mr. Jones has a small kiosk (acquired through a student loan from the bank) that can stock only 500 papers each day. In keeping with analytic modeling tradition, you assume, for mathematical convenience, that the cost of being short of any of the three papers on any particular day is $0.06 and the cost of not selling a paper on any particular day is $0.02. Recommend inventory stocking rules for Mr. Jones.

b. Illustrate with the following numerical example for a typical Tuesday:

Paper Mean Daily Demand Variance Daily Demand Chronicle 400 10,000 Times 200 8,100 Bugle 300 10,000

c. After collecting your exorbitant consulting fee, you confess to your bartender, explaining the shortcomings of the numerical example and ordering policy above. Criticize your answers to

(a) and

(b) in light of reality.

d. How would you ascertain whether it was worthwhile for Jones to go deeper into debt to buy a larger kiosk (capable of holding 1,000 copies)?? Lp852