3 translate the annual sales for an average retailer into the number of large packs that retailers will order per year. Repeat for the small pack order. (round if necessary.) Include the initial order in the calculation.
4. SSI would like to determine its potential sales for the first year on the basis of the information in question 3. However, there is some concern that the estimate of average retail sales is too high. SSI assumes only 40% of the participating retailers will actually achieve the average sales and reorders (this group is designated as high performers). Twenty percent of the retailers are expected to have medium performance success and will only sell /reorder 75 percent of the average suggested order. Low-performing retailers represent the remaining 40 percent and will achieve half the sale/reorder expected on average. Calculate the orders ( separate initial and reorder quantities) for the 6-month trial period if 45 percent of retailers exclusively order/reorder large packs and the remaining retailers exclusively order/reorder small packs. Calculate the second 6 months accounting for the dropout. (Round if necessary.)
Assume the “performer” ratios remain the same after the trial period (i.e. 40 percent are average performers, 20 percent sell 75 75 percent of the average, and 40 percent sell 50 percent of the average).
5. Assume retailers pay $205 for a large pack (initial or reorder) and $115 for a small pack. On the basis of the first year’s sales calculated in question 4, determine the profit to SSI if three distribution centers are used. Repeat for the for-distribution center network. Which network, if either, should be used? What factor(s) aside from cost/profit might influence the network decision?