Using a newsvendor model for demand planning of NFL replica jerseys

Abstract

The thesis addresses the inventory planning process for NFL Replica jerseys. The analysis is conducted from the perspective of the manufacturer's North American distribution center, and how flexibility can be employed to meet customer demands. NFL replica jerseys can be stocked either completed with player name and number, called "dressed" or as "blank" jerseys that can be customized at the distribution center. Player demand can change drastically from year to year. The result is that common practice is to minimize inventory at year-end, and treat each season as a single period. The approach taken utilizes the newsvendor model to determine the optimal stocking levels of replica jerseys given an expected demand forecast. Two modeling approaches were compared, the traditional newsvendor problem and a newsvendor model with risk pooling. The traditional newsvendor problem separated selected players to order as dressed jerseys and remaining demand to order as "blank" jerseys. The second approach, the newsvendor with risk pooling, provides a more flexible inventory plan that satisfies selected player demand using a combination of dressed and blank jerseys. The newsvendor model with risk pooling resulted in the higher expected profits then the traditional newsvendor model, and comparable service levels, but at much lower inventory levels.