Business Studies

Each reply must be a paragraph long of at least 135 words or more not including references which should supported by citing at least 2 peer-reviewed journal articles between 2017-2021 for each reply. The 2 discussions that need reply will be posted below. Your replies must be in current APA format and must include a reference list. Make sure that you are adding new and relevant information with each reply. Reference sample make sure to include DOI-Drollinger, T., Comer, L. B., & Warrington, P. T. (2006). Development and validation of the active empathetic listening scale. Psychology & Marketing, 23(2), 161-180. https://doi.org/10.1002/mar.20105
Reply 1:
Given the uncertainty associated with player demand, how should Reebok approach inventory planning for NFL replica jerseys?
It seems as if Rebook is facing the bullwhip effect as the variability in demand increases through various teams become prominent in the supply chain. For example, as the authors explain, although the consumer demand for jerseys is year-round, the NFL season drives much of the demand. Sales are highest in August and September in anticipation of the season (Simchi-Levi et al., 2021). As the season starts, certain teams and players get a sales bump due to their performances. Later in the season, consumer demand is driven by holiday presents and the anticipation of the playoffs (p. 160). During the playoffs, the demand is strongly correlated to weekly performance. A team that loses sees its sales disappear, whereas teams that win and continue to play experience strong sales (p. 160). The two Super Bowl teams sell much higher than normal up to the game. The Super Bowl winner continues to sell for one to two weeks following the championship, but then sales decline rapidly until the start of the next season (p. 160). Most player trades and free-agent signings occur during the off season of February to April. Consumers react to these player movements by demanding the newest superstar jersey for their favorite team (p. 160). All these inconsistencies cause significant operational inefficiencies including poor forecasting, stockouts, high inventory, lower service levels, capacity planning issues, higher costs and increased supply chain risk (Zhao et al., 2019). Thus, it is imperative to explore strategies to efficiently cope with the bullwhip effect. One upcoming and mostly unorthodox approach to the bullwhip effect is psychological or behavior.

Explain that traditional studies on the bullwhip effect have focused on the operational perspective, including its causes (Lee et al. 1997; Lin et al., 2017) and mitigation solutions, such as reducing lead time and increasing information transparency (Lee et al. 1997; Wang and Disney 2016; Yang, 2021). However, human factors—psychological or behavioral causes—may lead to the bullwhip effect (Sterman 2006), because irrational decisions can be produced by individual cognitive limitations (Gino and Pisano 2008; Loch and Wu 2005) and stressful environments (Sterman and Dogan 2015) (p. 1). Thus, even under a rational operational decision-making process (e.g. when the order decision is mathematically optimal), irrational behaviors still strongly influence the bullwhip effect level in supply chain systems (Sterman 1989a) (p. 1).

An increasing number of studies have explored the behavioral causes of the bullwhip effect in supply chains over the past three decades. The topics studied include inventory information sharing (e.g. Croson and Donohue 2003, 2006), training and communication (Wu and Katok 2006), reactions to reverse bullwhip effect and supply shock (Rong et al. 2008), trust in collaboration (Cao et al. 2014) and human judgement in forecasting (Baecke et al. 2017) (p. 1). Specifically, Sterman’s (1994, 2000) double-loop learning model, which involves the cognitive processes that influence how humans perceive environmental elements and detect useful information to make effective decisions is a strategy Reebok should explore in addition to the forecasting methods they already are utilizing (p. 1). In other words, as football runs high on emotions, it would be only plausible to factor in a psychological and/or behavior approach.

What should Reebok’s goal be? Should Reebok minimize inventory at the end of the season? Or maximize profits? Can Reebok achieve both? What service level should Reebok provide to its customers?
Reebok’s goal should be to maximize profits while minimizing inventory at the end of the season. Rebook can achieve both by applying the service of delayed differentiation to its customers. In a supply chain in which delayed differentiation is utilized, generic products are shipped as far as possible down the supply chain before variety is added (Simchi-Levi et al., 2021). This could mean that a single product is received in the DC, and there it is modified or customized according to customer demand as seen by the warehouse (p. 156). This also entails the concept of risk pooling because by shipping a generic product to the warehouses, it has aggregated customer demand across all products (p. 156). This implies a more accurate demand forecast with a much smaller variability, leading to reduced safety stock. This process of aggregating demand across products is also similar to the process of aggregating across retailers. This method will also satisfy customer service by having “hot” items in stock, resulting in revenue flowing in.

Are the models in Section 2.2.2 helpful here? What is the cost of underage for a dressed jersey? What is the cost of overage for a dressed jersey? How might Reebok decide between dressed jerseys and blank jerseys?
The models in Section 2.2.2 consists of finding a set of orders that minimizes purchasing and carrying costs while meeting all demand (that is, without shortage) (Simchi-Levi et al., 2021). Reebok sells jerseys to retailers at a wholesale price of $24.00 per jersey with the average costs for a dressed jersey delivered to Indianapolis $10.90, respectively.

Retailers cost – purchasing price from manufacturer = Underage cost

$24.00- $10.90 = $13.10

The average price that Reebok gets from a discounter for a dressed jersey is $7.00.

purchasing price from manufacturer – salvage cost = Overage cost

$10.90 – $7.00 = $3.90

13.10/(13.10 + 3.90) = 77% probability of not falling short.

The margin profit of blank jerseys is $12.10 while dressed jerseys is $13.10.

Thus, Reebok should use the Indianapolis plant as it entails not having to sell the overage at a discounted price in order to reduce inventory.

Using the forecast for the New England Patriots, what is theoptimalquantity to order for each player? For blank jerseys? What profit do you expect for Reebok? How much and what type of inventory is expected to be leftover at the end of the season? What service level?
Retailer wholesale: $24.00

Retail sales: $50.00

Delivery to Indianapolis: $10.90

Blank jersey: $9.50 dollars

Decoration for blank jersey: $2.40 dollars

The salvage value of dressed jerseys: $7.00 dollars

Blank jersey: $8.46

Reebok’s cost holding cost: 11%
Holding cost for unsold blank jersey: $1.04

Cost of overage=9.50-8.46=1.04 dollars

Cost of underage=24-11.90=12.10 dollars

Reply 2:
How Reebok needs to approach inventory planning for NFL replica jerseys

The objective for Reebok should be to increase earnings while considering manufacturing expenses, sales income, inventory holding expenses, and the salvaged value of surplus jerseys. Because demand for jerseys remains unpredictable, Reebok needs to look back at previous demand patterns to determine how much inventory to maintain at specific stages throughout the season (Cho et al., 2018). They would be able to monitor demand rise and decrease as a result of this, allowing them to develop a production cycle that is more suited to them and their inventory.

Reebok’s goal and whether to minimize inventory or maximize profit

The demand for jerseys is highly seasonal and unpredictable since much relies on the firm’s success. Considering the uncertainties, Reebok should utilize delay to put the option to display the player’s identity on the shirt back as far as feasible. This is because the farther the horizon, the worse the predicting becomes. Reebok’s primary objective or goal should be to maximize earnings while keeping monogrammed jersey inventory low (Kourentzes et al., 2020). Reebok needs to boost their blank jersey inventory closer to the season’s conclusion should they wish to have extra inventory. They will be able to sell them during the off-season due to this. Reebok’s overall activities would increase if it changed its business strategy to a pull system. The use of a pull system would aid in the regulation of raw material flow in the production process. This will aid in the replacement of items that have been purchased. This will also help the supply chain to remain leaner while also lowering overall inventory levels. Utilizing this concept, consumers’ orders would be able to control the manufacturing schedule depending on current demand. This method is entirely foolproof because of the volatility in estimating jersey sales. Using the pull approach will also minimize lead time, work in the pipeline, turnover time, cycle time, and enhance total cash flow. Reebok will be able to achieve its aim of maximizing earnings while reducing overall inventory by employing this technique. As a result, client satisfaction will rise, enabling them to provide excellent levels of service they expect.

Importance of model in section 2.2.2, the cost of underage jersey and average dressed jersey. How might the company decide between dressed jerseys and blank jerseys?

According to the case, blank jerseys are $9.50, and dressed jerseys are $10.90 plus an extra cost of $2.40 due to the 11 percent withholding price of unprinted jerseys. This, in turn, would represent both the inventory’s capital and storing costs. As a result, the cost of holding extra blank Patriots is anticipated to be $1.045 for every unit. Utilizing the Indianapolis site for production, the current price per blank is $9.50, plus $2.40 for decoration, for an overall cost of $11.40 (Simchi-Levi et al., 2008). The underage for dressed jerseys would be $24.00 wholesale less $10.90 for dressed jerseys supplied to the Indianapolis producer minus $13.90 for an underage. Overage would be $10.90 for a dressed jersey, minus a $7.00 reduction for a dressed overage of $3.90. A blank jersey’s underage would be $24.00 wholesale price minus $9.50 blank jersey cost minus $2.40 blank jersey decoration cost, for a total underage of $12.10. The overage of blank jerseys is $1.045, equal to the $9.50 blank jersey multiplied by the 11% rebook holding fee. For a total overage of $13.10, subtract the wholesale price from the dressed jersey cost of $10.90. There will be a $12.10 overage on the dressed jerseys finished in Indianapolis operations. Based on the preceding facts, Reebok might explore using the Indianapolis production plant provided they can meet the demand (Liu et al., 2019). This will be cost-effective for them. It would be more cost-efficient since the overage would not have to be sold at a reduced price to minimize inventory.

The optimal quantity to order for each player and the profit expected for Reebok?

The New England Patriots will have to acquire 111,853 jerseys with the anticipation of getting 26,993 left over, according to their prediction. The profit margin for a dressed jersey is $13.90, whereas the profit on every unit for blank jerseys remains $12.10. The order of 54,807 dressed jerseys should profit $663,164.70, while the order of 30,053 blank jerseys will profit $363,641.3. For a total inventory cost of $28,207, there leaves an estimated 26,993 leftover. The total amounts to $663,164.70 + ($363,641.30-26,993.00), which equals $999,813.00. Reebok’s projection will be based on historical data, which will assist the company in enhancing its service quality. Reebok could investigate other interactions in specific stages of the supply chain process to lower overall expenses and enhance current service standards (Simchi-Levi et al., 2008). Rebook established a competitive edge over other rivals by offering a wide range of options, service level modifications, and pricing adjustments to clients who valued variety.

ANSWER

2 Discussion Replies

Reply 1

Hello, your post presents an insightful analysis. I agree that Reebok faces the bullwhip effect as their jersey demand distortion travels upstream throughout all critical networks of the suply chain, causing all the uncertainities. I believe the company can address this uncertainty by adopting a centralized demand information (CDI) system to reduce the bullwhip effects and inventory costs (Kholidasari et al., 2019). This system would assist in information sharing across all supply chain networks/members helping them forecast the demand downstream. The misinformation will prevent a case of producing jerseys that do not meet the demand at that particular time/season. Moreover, Reebok can practice delayed differentiation, such as producing blank jerseys and later customizing after acquiring specific data (Tiedemann, 2020). This customization can be done at the retailer or distribution levels. This will increase demand forecasting accuracy, improve inventory management and eliminate the uncertainities and inventory costs.

Reply 2

Hello, your post presents insightful and knowledgeable arguments. I believe Reebok should focus on increasing profits while minimizing costs but not minimizing the inventory. Minimizing its inventory exposes Reebok to more risks than benefits. Minimizing the inventory may benefit Reebok by minimizing its holding costs and risks of having excessive unnecessary already dressed jerseys; however, operational costs and operations may be affected adversely (Oluwaseyi et al., 2017). For instance, operational costs of financing shipping may increase as just-in-time may become expensive, mainly when the company needs to fulfill unexpected demands or run out of materials. Rushing orders from suppliers may increase procurement costs (Bhargava, 2017). Moreover, minimizing the inventory may reduce the services level, interfering with the changing sales cycles and eventually its profitability. Since jerseys take 4-8 weeks to arrive in warehouses, the demand cycle will have changed within that specific time, negatively affecting sales and profitability. Thus, Reebok should focus more on profit maximization.

References

Bhargava, A. (2017). A Study on The Challenges And Solutions To Just In Time Manufacturing. International Journal of Business and Management Invention (IJBMI), 6(12), 47–54. https://www.ijbmi.org/papers/Vol(6)12/Version-3/F0612034754.pdf

Kholidasari, I., A Bidiawati, J., & Sari, M. E. (2019). The evaluation of bullwhip effect on distribution system of a supply chain using centralized demand information method. IOP Conference Series: Materials Science and Engineering, 602(1), 012051. https://doi.org/10.1088/1757-899X/602/1/012051

Oluwaseyi, A., Onifade, M. K., & Odeyinka, O. (2017). Evaluation of the Role of Inventory Management in Logistics Chain of an Organisation. LOGI, 8(2), 1–11. https://doi.org/10.1515/logi-2017-0011

Tiedemann, F. (2020). Demand-driven supply chain operations management strategies – a literature review and conceptual model. Production & Manufacturing Research, 8(1), 427–485. https://doi.org/10.1080/21693277.2020.1856012