This Hamptonshire Express case study looks into the challenges a newspaper publisher is facing, most especially when it comes to inventory and other operational decisions.

V.G. Narayanan and Ananth Raman

Harvard Business Review (698053-PDF-ENG)

March 01, 1998

### Case questions answered:

- How many Hamptonshire Express newspapers should Sheen stock?
- How many hours should Sheen invest?
- How many newspapers should Armentrout stock, etc.?
- Given the new “Private Eye”, how do Armentrout’s decisions change?
- How does the buyback price change Armentrout’s stocking decision?
- How would a VMI scheme influence Sheen and Armentrout’s decisions?

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## Case answers for Hamptonshire Express

This case solution includes an Excel file with calculations.

### 1. How many Hamptonshire Express newspapers should Sheen stock?

The optimal stocking quantity for Hamptonshire Express newspapers is Q=584 units (fill rate: 98%) and is higher than the mean of 500 units because the cost of overstocking is lower ($.20) than the price of understocking ($.80) an additional unit.

The fillrate increases slower than the stocking quantity as the probability of selling decreases with each additional unit.

Anna’s profit increases from a loss of $40/day to a maximum um $332/day and decreases again to $259/day at a stocking quantity of 1000 units.

#### 2. How many hours should Sheen invest?

The relationship between channel effort and demand is intuitive – channel members can usually increase demand for their products by investing additional efforts into product design, advertising, and promotions.

- Sheen has a (marginal) opportunity cost of her time of $10. Therefore, she should invest until the revenues equal the value of her time investments.
- The optimal time investment is four hours.

#### 3. How many newspapers should Armentrout stock, etc.?

**Problem 3a/b**: For a given effort of Sheen (4h) varying the stocking quantity, we find that the optimal stocking quantity for Armentrout is at Q=516 units (fill rate 86%). This is lower than in Problem 1 because the overall margin is now…

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