SYSTEMS S UPPLEMENT

reviewing her assessment of GMS-II sales from the regional about the forecast's simplicity. Focusing on three possible :em to capture adequately the possibility that sales could be range of values and that the extremes of the range could be d low figures of her forecasts. In addition, the three out­:xtraordinary wetght in the decision, even though they were my possible outcomes. 1ing system required that sales forecasts be made in the form bution functions, using the terminology below to describe 0.75, and 0.95 fractiles. Jansen saw this forecasting format

·ss her concerns with her rough-cut forecast. Th~ resulting

Sales by Regional Offices

If Major Purchase

....... 1,900

....... 2,500

.. . .. .. 3.000

.... ... 4,000

....... 5,500

I I I i I I ' I

i

I

I

I

I

I

I i

I I

1

If No Major Purchase

I

500 1,500

2,300

3,000 4,000

le. Virginia. All rights reserved.

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CASE 24 GEORGE'S T-SHIRTS

For the last six years, George Lassiter, a project engineer for a major defense contractor, had enjoyed an interesting and lucrative side business-designing, manufacturing, and hawking "special event" T-shirts. He had created shirts for a va ri ety of rock concerts, major sporting events, and special fund-raising events. Although his T-shirts were not endorsed by the event sponsors and were not a llowed to be sold within the arenas at which the events were held, they were cleverly designed, well produced, and reasonably priced (relative to the official shtrts). They were sold in the streets surrounding the arenas and in the nearby parking lots, always with the appropriate licenses from the local authori­ties. Lassiter had a regular crew of vendors to whom' he sold the shirts on con­signmt:nt for $100 per dozen. These vendors then offered the shirts to the pub­lic at $10 apiece.

A steady stream ofT-shirt business came to Lassiter, and he was generally working on several designs in various stages of development. His current prob­lem centered around the number of shirts he should have stenciled for a rock concert that was scheduled to be staged in two months.

This concert was almost certain to be a huge success. Lassiter had no doubt that the 20,000 tickets for the standing area around the stage would be instantly bought by the group's devoted fans. The major unknown was the number of grandstand seats that would be sold. It could be anywhere from a few thousand to more than double the number of standing tickets. Given the popularity of the performing group and the intensity of the advance hype. Lassiter believed the grandstand sales were more likely to be at the high, rather than the low, end of the spectrum. He decided to think in terms of three possibilities (a high, a medium, and a low value), specifically, 80,000, 50,000, and 20,000 grandstand seats. Despite his optimism, he believed that 50,000 was as likely as either of the other two possibilities combined. The two extreme numbers were about equally likely; maybe 80,000 was a little more likely than 20,000.

A second unknown was the percentage of the attendees who would buy one of his shirts. To the credit of his designs and the quality of the shirts, the number generally (about 6 times out of 10) ran about 10 percent of the attendance, but sometimes it was in the range of 5 percent. On a rare occasion, sales would be in the vicinity of 15 percent (maybe I time out of I 0, if Lassiter's memory served him right).

Sev'eral weeks ago, Lassiter had requested a cost estimate for this concert's design from the s ilk screener/shirt supply house with which he had been work­ing for several years. He used this particular firm a lmost exclusively because he

Copyright €:1 by the University of Virginia Darden School Foundation, Charlonesville, Virginia. All right~ re...,rved.

121

122 Quwllitative Business Analysis Casebook

had found it to be reliable in both quality and schedule and to have reasonable prices. The estimate had arrived yesterday. It was presented in the usual batches of 2,500 shirts with the usual volume discounts:

Order Size . Cost

10,000 . . . . . .... . .. . . .. $32,125 7,500 .... . ...... .. ... . .. $25,250 5,000 . . . . ........ ... .. .. $17,750

The order had to be one of the quoted multiples of 2,500 shirts. On the basis of his volume estimates, Lassiter was prepared to place an order

for 5,000 shirts. With his sales generally about 10 percent of attendance, he didn't believe he could justify an order for 7,500 shirts. Such an order would re­quire the concert' s attendance to be 75,000, and while he was optimistic about the popularity of the event, he wasn't quite that optimistic. Also, in the past, he had taken the conservative route and it had served him well. He had never had an appreciable number of shirts left over, but those that were left were sbld to a discount clothing chain for $1.50 per shirt.

CASE 25 HARIMANN INTERNATIONAL

My first impression was that the so late in the season. Not only w but the order would be profitab keep some of my workers on th These small gestures often pay deadline to ship the goods seems I could be left with a substantial . move at this time of the year. 1 h ble, and I don' t know what else I

Harimann International was a De textiles (primarily table linens ar million Indian new rupees (INR Vikram Dhawan after his gradua ics from St. Stephen's College. I term, the business was to be a s

· Dhawan believed that the experi( invaluable assistance durino the J

"' successful business would pr9vid Dhawan's decision to be an e;

variety of incentives the Indian country's international trade def several targeted countries, any p status. In addition, if the order n several other attractive incentivt paid for imported raw materials u drawback), a cash incenti ve desi. products in world markets (cash censes to replenish domestic ra\\ goods (replenishment licenses).

During the first year of operat linen household goods. He bougi packaged them according to cust

This ca~e wa~ prepared in conjunctiOn wi th Prof S. Uppal (Darden).