The Newsvendor Model

How a leading sportswear manufacturer trades off the cost of having too much against the cost of having too little

The Newsvendor Model and the sportswear manufacturing industry

In this consulting project, I advised the CEO of one of the worldwide leading sportswear manufacturers by applying the Newsvendor Model on how to calculate the optimal order quantity for a single-period product, sunglasses, to mitigate product underages or overages.

How to trade off cost of having too much against of having too little

The CEO the worldwide leading sportswear manufacturer is investing to expand its product portfolio. The CEO wants her customers to purchase custom-made sunglasses with the sportswear manufacturer logo. These will be sold to customers at the affordable price of $30.

Wishing to capitalise on the idea, several founded a start-up, aiming to supply sunglasses for sportswear brands. Their goal is to demonstrate the concept at the sportswear manufacturer before rolling out to other sportswear manufacturers that start similar expansion programmes.

The sportswear manufacturer decided to support the Founders, who have already lined up investors, booked production capacity with a reputable manufacturer, come up with…