Zara is a Spanish clothier headquartered in A Coruna Spain, where the first store opened in 1965. It is claimed that Zara needs just two weeks to develop a new product and get it to stores, compared with a six-month industry average, and launches around 10,000 new designs each year. Zara has resisted the industry-wide trend towards transferring fast fashion products to low-cost countries. The company was described by a Louis Vuitton fashion director as possibly the most innovative and devastating retailer in the world.Suppose you have been assigned as the production manager of a new line of mens blazers with a target delivery date within 3 weeks. Your market analysts claim that the market can easily bear the price of $120 per blazer. Production costs stand at $40, since it is sourced locally. They expect demand to be about 500 units with a standard deviation of 100. Any unsold blazers will be salvaged at discount stores for $20 per piece.a. What is the newsvendor quantity for this fashion item?b. In the event of a stock out, customers can occasionally become hostile and complain to their friends, which adversely affects the reputation of the brand. Management calls this phenomenon the cost of good-will and assigned it a value of $20, for each time a stock out happens. Should the good-will cost be included in shortage cost or excess cost?c. Incorporate the cost of good-will and calculate the new newsvendor quantity.d. Is the newsvendor a reasonable model for the fashion industry? Why?
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