Rotterdam School of Management Supply Chain Management Bachelor 3

Assignment 2
REEBOK NFL JERSEYS
This assignment should be delivered through the Assignment Section on
Blackboard before Monday May 10, 8:00 AM (thus in the morning). Delivery
after this date and time will be rejected.
Student
number:

Surname:

First name:

International BA
(IBA) or Dutch
BA (BA)*
Last name and
student number
of team
members

*BA students are allowed to write the assignment in Dutch.

You are asked to answer the assignment questions in a copy of this document.
Please use the space below each question until the next question in the
assignment. Please provide answers in the following format: Calibri, size 11, and
single spaced. There is absolutely no necessity to use more space than given (in
fact correct answers can easily be given in about half the space in the box).
Please read each question carefully and show us how you calculated your final
answer. Only fully explained and deduced numerical answers are accepted
(please note: if you only give a number as an answer without showing how you
produced it, however correct, your answer will not be acceptable).
For each sub-question you can earn a maximum of 3 points (0 points for a wrong
answer and 3 for a flawless answer). In total you can earn 30 points which will
result in a score 10. We will divide your number of points by 3 to calculate your
final grade.
Notice that there are 7 pages in this document including 10 questions.
Please note that with safe assignment only ONE SINGLE submission is possible:
check your document carefully before submitting it, submissions by mail will not
be accepted.

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The questions are related to the Jersey case on page 172 from
Designing and Managing the Supply Chain: Concepts, Strategies and
Case studies 3rd edition (Simchi-Levi, Kaminsky and Simchi-Levi, 2000).
Question 1
What is the nature of uncertainty associated with player performance which
directly influences demand for the player and team specific jerseys?

What is Reeboks market position?

How can you characterize demand variability, seasonality, trend and
term? Do compare demand for team and individual jerseys!
How can you characterize the product, using Fishers classification?
What kind of SC strategy, according again to Fishers classification,
would be suitable with such a product and demand pattern?
What happens with unmet demand?
Which costs are most significant for Reebok?

Question 2
Why is a newsvendor model applicable for the NFL replica jerseys problem? That
is, what are the characteristics of this problem, which make it a good candidate
for a newsvendor model?
Hint: Describe also how stocking blank jerseys can be seen as salvaging
products, that is, getting a salvage price for the jerseys, which is less than the
wholesale purchase price.

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 Rotterdam School of Management Supply Chain Management Bachelor 3

Look up the single period model in the slides of week 2 (Selling Christmas trees).
Construct now a single period model for the New England Patriot jerseys, just as
we did during the lecture.
Question 3
Start with the blank jerseys. Identify all cost components using the following
notation: Reebok purchases blank jerseys from the CM at a cost of c1; c2 is the
cost of printing a blank jersey at Reeboks own warehouse in Indianapolis, p is
the wholesale price Reebok receives for a dressed jersey, and v is the salvage
price.

Question 4
Determine in two steps a formula for the profit function with this exact notation
and explain in detail what your formula means. Use further the notation D is
demand, Q is the order quantity: 1, profit when D Q , 2, profit when D>Q .
Do NOT fill in numerical values, use only the LETTERS!

1. Consider the case D Q , that is demand is less than the stock

(overstocking), so we assume that exactly D jerseys were dressed at the price
of c2 , Q jerseys had been purchased at a price of c1, and the rest is
stocked for the next season, that is, salvaged at a price of v. This
leads to:
( pc2 ) Dc 1 Q+ v( QD)
2. In the case of D>Q , that is, when stock-out occurs, all items are sold at the
price of p, produced at a price of c2, and purchased at the price of c1, that is,
( pc1 c 2 ) Q

Summarizing these findings in one formula yields:

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 Rotterdam School of Management Supply Chain Management Bachelor 3

profit=
{
( pc 2 ) Dc1 Q+ v ( QD ) , D<Q
( pc 1c 2 ) Q, D Q .

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 Rotterdam School of Management Supply Chain Management Bachelor 3

Question 5

Determine F(Q) . You can also use the overage/underage cost construction.

Since F is the normal CDF, look up afterwards the corresponding z in the

standard normal table. What would be the order quantity QB 1 for blanks if you
did not have any further considerations? What is the service level?

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 Rotterdam School of Management Supply Chain Management Bachelor 3

Risk pooling
The quantity QB 1 of blanks you would order under question 4, would only
serve the expected demand of the non-star players. However, a smart supply
chain manager will pursue to use risk pooling.
Based on expected demand for star players jerseys, Reebok will order a
corresponding order quantity with the CMs. However, we assume that excess
demand for star player jerseys (remember that demand is highly uncertain
with a large STD!) cannot be backordered at the CMs (too costly and too long
delay) but can be printed instead at the Indianapolis facility. Blanks are
therefore also used to satisfy excess demand for the star players: this
is the risk pooling concept. (Look up delaying differentiation and the risk
pooling concept again in your book.)

This means that order for blanks should be higher than QB 1 , depending on
demand and order quantity for the star players dressed jerseys. You need to
determine the new QB , step by step, as asked below. For this end you will use
the following approximation:
B =ns + ESC 1 + ESC 2 ++ ESC 6 ,

Where ESC 1 , , ESC 6 are the excess demand for the six NEP star players, and

ns is the expected demand for the non-star players, or other players. For the
B
standard deviation of the blanks use the formula B=
ns ns . Consider further

for the computation of ES C1 , , ES C 6 that there are that year no other

opportunities for ordering dressed jerseys from the CMs, that is, the lead time
L=1 year.

Question 6
Determine first the profit function for all six star players in the general form
profit i , i=1, ,6 , exactly as in question 4. You do this once, for all 6 profit

functions, by using the notation D i ,Q i , and NOT filling in numerical values!

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 Rotterdam School of Management Supply Chain Management Bachelor 3

Question 7
Q
Determine now the value of F( i ) , and the corresponding safety factors

z i . (Since F(Q i) is normal CDF, look up the corresponding z i in the
standard normal table.)

Question 8

Given the z i determine now the optimal order quantities Qi for each star
player separately, considering the mean and standard deviation for the demand
pattern of each dressed jersey.

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Question 9

Explain what this z i value means and what the reason is for this value!

Question 10

Use the formulae with ESC given previously ( B =ns + ESC 1 + ESC 2 ++ ESC 6 ),
and

B
B= in order to determine the order quantity QB for the blank
ns ns
jerseys when risk pooling is used.