Supply Chain Designer: Skiwear Sourcing

• You are a ski jacket retailer, selling 2 different models.
• One is fashionable, overstock at the end of a season is lost.
• One is standard, overstock can be stored at a cost of 5.
• You can choose to produce on your own local factory when the demand is known.
• Or you can outsource offshore, but have to order before demand is known.
• Manage your orders and your local capacity.

• You can source ski jackets (fashion and standard) from an offshore supplier or you can produce them locally.
• The offshore supplier offers a lower per-unit cost but requires that you place an order before observing demand.
• You are given information about the mean and median demand for both jackets.
• Capacity is added 25 units at a time. You incur fixed costs for local capacity. If you decide to eliminate capacity, you will incur a charge.
• Local capacity can be used to produce either jacket type. You can only produce if you have enough capacity.
• You first place your offshore order and adjust your local capacity. You then observe demand and decide how to use the local capacity.

Now that you have observed demand, you can allocate your local production capacity.

After you finalize your local order, you can review your financial results for the year, then start a new year.

• Think twice about the margins you make on each of the 2 products. Which one should be your priority ?
• Consider what you lose by ordering without knowing the demand.
• Consider the increase of your local capacity as an investment to improve your flexibility & reduce your mismatch costs.

Expected Demand:

• Standard jacket 204
• Fashion jacket 120

Median Demand:

• Standard jacket 200
• Fashion jacket 100

• A container weights 2.3 tons empty
• Let's add 500kg of merchandise
• 2.8 tons from Shangai to Europe = 920kg of CO2
• For 1 unit it's 1.84 kg of CO2
http://www.airshed.co.nz/for-business/sea-freight-emissions