Preparation Questions:

1. Given the uncertainty associated with player demand, how should Reebok approach inventory planning for NFL replica jerseys? Consider the newsvendor model. 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?

2. Using the forecast for the New England Patriots, analyze the cases where (a) dressed jerseys are used for the star players and blank jerseys for the other players and (b) blank jerseys are used for all players. For each case: What is the optimal quantity of dressed jerseys 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 left over at the end of the season?

3. Could Reebok use a “partial postponement” strategy, satisfying demand for each star player with dressed and with blank shirts? What would be the advantages of such a strategy? How should Reebok determine the order quantities under such a strategy? (Calculations for such a strategy are a little tricky, therefore sketch your reasoning in your report)