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Maintaining optimum inventory Problem

Question

sAnyLogo Inc. supplies firms with apparel containing their logo to be used for promotional purposes. Currently AnyLogo has four major customers - IBM, AT&T, HP, and Cisco. During the holiday season, the logos are adorned with a Christmas motif. Demand from each firm for apparel with the Christmas motif is normally distributed as shown in following Table.

  IBM AT&T HP Cisco
Mean 5000 7000 4000 4000
SD 2000 2500 2000 2200

AnyLogo currently produces all the apparel including the Logo embroidery in Sri Lanka in advance of the Holiday season. Each unit costs $15 and is sold by AnyLogo for $50. Any leftover inventory at the end of the holiday season is essentially worthless and is donated by AnyLogo to charity. Holding the apparel in inventory adds another $3 to the cost per unit donated to inventory. However, the donation allows AnyLogo to recover $6 per unit in tax savings. Based on this data, answer the following questions.

a. What production quantities do you recommend for AnyLogo for each of the four customers?

b. Now suppose that AnyLogo faces a capacity shortage due to labor unrest at the supplier factory and produce no more than 18,000 apparels in total. What are the production quantities now for each of the four customers?

Summary

The question belongs to Supply Chain Management and it is about AnyLogo, a company which supplies apparel with company logos to companies such as IBM, AT&T, HP, Cisco, etc. Each of the company orders an average number of apparel with high amount of standard deviation. AnyLogo sells them to these companies, donates the left over material in charity and earns a tax rebate as well. The company wants to know the right number of apparel for each of the four customers. These calculations have been given in the solution in the Excel sheet.

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