Amazon uses VMI so it doesn’t need to manually place purchase orders when stock runs low, as it has millions of SKUs to manage. This method of inventory management allows suppliers to take care of their own products within a retailer or e-tailer’s inventory. Over half of the products listed on Amazon are sold by third party sellers. Third party vendors send their inventory to Amazon’s warehouses and the company takes care of the rest. From picking and packing, processing customer payments, to sending it off for shipping – this fulfillment strategy has benefits for all parties. Amazon simply provides the channel for vendors to sell their products.

How does Amazons’ adoption of VMI when merged with other Inventory Management practices and technology create competitive advantage? Give multiple examples. 400 words

It is suggested that VMI has a benefit of creating closer business partnerships. What benefits does this generate? 300 words

In preparing for the holiday season, Fresh Toy Company (FTC) designed a new doll called the Dougie that teaches children how to dance. The fixed cost to produce the doll is $100,000. The variable cost, which includes material, labor, and shipping is $34 per doll. During the holiday selling season, FTC will sell the dolls for $42 each. If FTC overproduces the dolls, the excess dolls will be sold in January through a distributor who has agreed to pay FTC $10 per doll. Demand is extremely uncertain. Forecasts are for expected sales of 60,000 dolls with a standard deviation of 15,000. The normal probability distribution is assumed to be a good description of demand. FTC has tentatively decided to produce 60,000 units, but it wants to conduct an analysis regarding this production quantity before finalizing the decision.

a) Create a what-if spreadsheet model using the formulas that relate the values of production quantity, demand, sales, revenue from sales, amount of surplus, revenue from sales of surplus, total cost, and net profit. What is the profit corresponding to average demand (60,000 units)?

b)Modeling demand as a normal random variable with a mean of 60,000 and a standard deviation of 15,000, simulate the sales of The Dougie doll using a production quantity of 60,000 units. What is the estimate of the average profit associated with the production quantity of 60,000 dolls? How does this compare to the profit corresponding to the average demand (as computed in part a)?

c)Before making a final decision on the production quantity, management wants an analysis of more agressive 70,000 unit production quantity and a more conservative 50,000 unit production quanty. Run the simulation with these two production quantities. (Use Excel Analytical Problem Solver)