The Synopsis of the problem: Specialty Toys, a retailer of Children’s toys is planning to launch a new toy called “Weather Teddy”. Sales Managers at the stores are working relentlessly to forecast the most appropriate demand order quantity in such a way that profit could be maximized. The analysis of the problem calls for an ideal demand order quantity situation with lower probability of stock-out option. Following is the statistical information given: The cost of goods sold per unit = $ 16 The cost of Sales price Per Unit = $ 24 Surplus inventory sales price per unit = $ 5 Cost of excess inventory per unit = $ 16- $ 5 = $ 11 Expected Demand predicted by Sales Forecaster= 20,000 units Probability of demand between 10,000 units and …show more content…
The most likely case scenario of 20,000 unit sales | | | | Actual Sales Revenue ( In dollars) | 360000.00 | 432000.00 | 480000.00 | 480000.00 | Actual Cost of Sales | 240000.00 | 288000.00 | 320000.00 | 320000.00 | Profit Margin | 120000.00 | 144000.00 | 160000.00 | 160000.00 | Excess Inventory Cost | N/A | N/A | 44000.00 | 88000.00 | Net Profit (Profit-Loss From Clearance Sale) | 120000.00 | 144000.00 | 116000.00 | 72000.00 | | | | | | c. The best case scenario of 30,000 unit of sales ( In dollars) | | | | | Actual Sales Revenue | 360000.00 | 432000.00 | 576000.00 | 672000.00 | Actual Cost of Sales | 240000.00 | 288000.00 | 384000.00 | 448000.00 | Profit Margin | 120000.00 | 144000.00 | 192000.00 | 224000.00 | Loss from Clearance Sale | N/A | N/A | N/A | N/A | Net Profit (Profit- Loss from Clearance Sale) | 120000.00 | 144000.00 | 192000.00 | 224000.00 | Table 1: Project Profit
In the production and distribution of goods, inventory is the currency of service. An increase in service can virtually always be achieved through an increase in safety stocks, so a supplier inevitably faces a trade-off between service levels and inventory costs. This and related tradeoffs are discussed at least qualitatively in most operations management textbooks in some of the managerial literature, and in the research literature. It raises the question of just how much service inventory can buy; i.e., what is the marginal cost of a service improvement,
Specialty Toys, Inc., sells a variety of new and innovative children’s toys. Management learned that the preholiday season is the best time to introduce a new toy, because many families use this time to look for new ideas for December holiday gifts. When Specialty discovers a new toy with good market potential, it chooses an October market entry date.
Barilla, the leading pasta manufacturer in Italy, faces increasing problems related to demand fluctuation. Their distributors also suffer from high inventory holding costs and low service levels on the other hand. This report explains, why the company and their distributors are troubled with this situation and how Barilla intends to solve it. The problem Barilla experiences is called the “Bullwhip Effect”, i.e. that demand variability increases when moving up the supply chain. Several factors enforce this Bullwhip Effect, e.g. high lead times, poor demand forecasting, and batch ordering. In this report we will point out, that exactly those aspects can be identified as the underlying reasons for Barilla’s problems. In a
Raising maximum distributor order, more than customer demand is one good choice made in the three games. According to the supply chain order, the maximum distributor order totals to 15units compared to a maximum demand of 9units. These figures prove that backordering costs will not occur during business operations. Good inventory management techniques require placing adequate orders to reduce backordering costs. The cost and time of backordering affects operations and hence the need to adequate inventory to match demand changes. An average customer order of 7units compared to average distributor order of 5units points to low backordering costs. A minimum customer order of 4units means that market demand is under control from
In this final paper for Managerial Finance I will attempt to show how the supply chain inventory management method can be affected depending on the situation of the retailer. Studying the control method for problems in inventory, which would include both, excesses in inventory as well as shortages, and hoping to minimize loss.
The customers, wholesalers and retailers may order in large quantities with the expectation that they will receive a greater allocation of products that are in short supply. The impact on the supply chain is significant as the forecasted demand is greatly, and unrealistically, increased with these inflated orders. Eventually orders disappear and cancellations pour in, making it impossible for the manufacturer to determine the real demand for its products
Planning and Forecasting is a vital function of management especially as it is related to inventory management. Planning has four processes associated with it. They are establishing goals, formulating strategies, implementing the plan and evaluating its success. The planning process of inventory will assist the organization choose the correct inventory system resulting in reduced costs and increased efficiency. For any business, having large amounts of inventory could prove to be expensive. In most company’s the management team will forecast sales on a monthly basis in order to keep enough inventories to fill customer orders in a timely fashion but not have an overflow of stock. There are various types of
Bibliography:Agnetis, Alessandro, Nicholas G. Hall, and Dario Pacciarelli. "Supply Chain Scheduling: Sequence Coordination." Discrete Applied Mathematics 154.15 (2006): 2044-63Lee, C.-Y. 1986. The economic order quantity for freight discount costs. IIE Trans. 18(3) 318-320. -----. 1989. A solution to the multiple set-up problem with dynamic demand. IIE Trans. 21(3) 266-270.
Having grown up with two brothers I was always around toys such as action figures and toy guns. I did not have a sister to play with, so I usually played with my brothers. When I played with them, I started to question why all of their toys were just for boys. Why was there not any women action figures or ones with feminine colors? Gender-stereotyped toys are prohibiting children from a range of skills.
Many children misunderstood Joseph as he is an aggressive boy because who he is, tall and large for his age, moves around really fast, makes a mess, plays rough. However, he just cannot help himself to slowdown: he needed to understand the others' perception of what he does.
When offers of reduced pricing are accepted for equipment, meeting delivery expectations becomes an important part of enhancing the customer experience to maintain satisfied loyal customers. An inventory specialist in the current distribution center would be given the additional task of segregating and maintaining inventory levels to meet the needs of the customer loyalty department.
After analyzing the IT infrastructure and traditional filing system of PlayOn Toys, I have concluded what is crucial to improve and how the system can benefit from the improvements. My goal through this report is to expose you to how transitioning your system to a Database Management System and present you with an Enterprise Resource Planning System can benefit not only in the short term, but in the long term. As PlayOn Toys continues to progress in sales and growth as a company it will be inevitable that an inadequacy will occur within their traditional system. PlayOn Toys processes and outputs information with a traditional filing system; they are at risk and faced with various dilemmas such as, limited data sharing, duplication of data, and program data dependency. The issues will be examined and explained in the following section to understand the benefits of having a database management system implemented for PlayOn Toys.
The probability here suggests the demand that is less than or equal to the recommended order quantity, and C1 is the cost of stock out loss per unit, and C2 is the cost of unsold inventory per unit. According to the background information, Specialty will sell Weather Teddy for $24 per unit and the cost is $16 per unit. So, we can see that C1= $24 - $16 = $8. If inventory remains after the holiday season, Specialty will sell all surplus inventory for $5 a unit. So, C2 = $16 - $5 = $11. Therefore, we get P(Demand <=Q) = 8/(8+11) = 0.4211. And the sketch
In regards to operations management, production and planning are both integral aspects. Managers, through properly planning are better able to handle unexpected evening that might otherwise undermine the production process. In addition, proper planning allows managers to manage expenses while delivering excess value to the both consumers and shareholders at large. To facilitate this process, the chase strategy is often implemented. This strategy, although complex in theory, is rather simple in its application. Many companies experience variable demand for their products. In many instances, production and sales are cyclical in nature. The retail industry is notorious for the cyclical nature of its business. In many companies within the industry, sales tend to rapidly increase during the holiday gift giving season. Likewise, during the periods of June through August, sales tend to languish. This concept is also noticeable in products that have seasonal demand patterns, such as snow blowers or lawn mowers. In such cases, companies face several different options in determining how to meet demand. Generally, these options fall into two "pure strategies which consist of the chase strategy and the level strategy. Under the chase strategy, production is varied as demand varies. With the level strategy, production remains at a constant level in spite of demand variations. The chase strategy, when implemented properly provides a competitive advantage to firms who are meticulous in
Demand Forecasting Packaging and Count Decision Packaging and Count Decision Pricing Strategy ROI 1 week Packagin g 4 week