The purpose of this assignment is to know how to apply normal probability distribution concepts to a real business case. The case study starts under Unit 4. and Unit 4.1 is the continuation.Describe a normal probability distribution that can be used to approximate the demand distribution. Sketch the distribution and show its mean and standard deviation.Compute the probability of a stock-out for the order quantities suggested by members of management team. For the coming season, Specialty plans to introduce a new product called WeatherTeddy. This variation of a talking teddy bear is made by a company in Taiwan. When achild presses Teddy's hand, the bear begins to talk. A built-in barometer selects one of fiveresponses that predict the weather conditions. The responses range from "It looks to be avery nice day! Have fun" to "I think it may rain today. Don't forget your umbrella." Testswith the product show that, even though it is not a perfect weather predictor, its predictionsare surprisingly good. Several of Specialty's managers claimed Teddy gave predictions ofthe weather that were as good as those of many local television weather forecasters.As with other products, Specialty faces the decision of how many Weather Teddy unitsto order for the coming holiday season. Members of the management team suggested orderquantities of 15,000, 18,000, 24,000, or 28,000 units. The wide range of order quantitiessuggested indicates considerable disagreement concerning the market potential. The prod-uct management team asks you for an analysis of the stock-out probabilities for variousorder quantities, an estimate of the profit potential, and help with making an order quantityrecommendation. Specialty expects to sell Weather Teddy for $24 based on a cost of $16per unit. If inventory remains after the holiday season, Specialty will sell all surplus inven-tory for $5 per unit. After reviewing the sales history of similar products, Specialty's seniorsales forecaster predicted an expected demand of 20,000 units with a .95 probability thatdemand would be between 10,000 units and 30,000 units. CASE PROBLEM 1: SPECIALTY TOYSSpecialty Toys, Inc. sells a variety of new and innovative children's toys. Managementlearned that the preholiday season is the best time to introduce a new toy, because manyfamilies use this time to look for new ideas for December holiday gifts. When Specialtydiscovers a new toy with good market potential, it chooses an October market entry date.In order to get toys into its stores by October, Specialty places one-time orders with itsmanufacturers in June or July of each year. Demand for children's toys can be highly volatile.If a new toy catches on, a sense of shortage in the marketplace often increases the demandto high levels and large profits can be realized. However, new toys can also flop, leavingSpecialty stuck with high levels of inventory that must be sold at reduced prices. The mostimportant question the company faces is deciding how many units of a new toy should bepurchased to meet anticipated sales demand. If too few are purchased, sales will be lost; if toomany are purchased, profits will be reduced because of low prices realized in clearance sales.

Expected selling price = $24 Cost = $16 Salvage value = $5

Describe a normal probability distribution that can be used to approximate the demand distribution. Sketch the distribution and show its mean and standard deviation. Compute the probability of a stock-out for the order quantities suggested by members of management team.

Describe a normal probability distribution that can be used to approximate the demand distribution. Sketch the distribution and show its mean and standard deviation. Compute the probability of a stock-out for the order quantities suggested by members of management team.

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

ChapterC: Cases

Section: Chapter Questions

Problem 1.8A

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Scenario 4 Sharon Gillespie, a new buyer at Visionex, Inc., was reviewing quotations for a tooling contract submitted by four suppliers. She was evaluating the quotes based on price, target quality levels, and delivery lead time promises. As she was working, her manager, Dave Cox, entered her office. He asked how everything was progressing and if she needed any help. She mentioned she was reviewing quotations from suppliers for a tooling contract. Dave asked who the interested suppliers were and if she had made a decision. Sharon indicated that one supplier, Apex, appeared to fit exactly the requirements Visionex had specified in the proposal. Dave told her to keep up the good work. Later that day Dave again visited Sharons office. He stated that he had done some research on the suppliers and felt that another supplier, Micron, appeared to have the best track record with Visionex. He pointed out that Sharons first choice was a new supplier to Visionex and there was some risk involved with that choice. Dave indicated that it would please him greatly if she selected Micron for the contract. The next day Sharon was having lunch with another buyer, Mark Smith. She mentioned the conversation with Dave and said she honestly felt that Apex was the best choice. When Mark asked Sharon who Dave preferred, she answered, Micron. At that point Mark rolled his eyes and shook his head. Sharon asked what the body language was all about. Mark replied, Look, I know youre new but you should know this. I heard last week that Daves brother-in-law is a new part owner of Micron. I was wondering how soon it would be before he started steering business to that company. He is not the straightest character. Sharon was shocked. After a few moments, she announced that her original choice was still the best selection. At that point Mark reminded Sharon that she was replacing a terminated buyer who did not go along with one of Daves previous preferred suppliers. What does the Institute of Supply Management code of ethics say about financial conflicts of interest?
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