Inventory Decesions and Pricing

Inventory decisions: •CYCLE INVENTORY: average amount of inventory satisfy demand. between receipts of supplier Shipments SAFETY INVENTORY: Inventory held in case demand exceeds expectation, demand is mcertain •SEASONAL INVENTORY: built up to counter predictable seasonal variability in demand LEVEL OF PRODUCT AVAILABILITY: fraction of demand trat is served on time from product held in Inventory •Inventory METRICS: affect COGS, C2C, assets & respon- siveness C2C aventory Inuentory average replenishment size average products wi more than specified # of days inventory, average safety inventory Seasonal muentory Pill rate •fraction of time out of stock obsolete inventory transportation: moving inventory from point to point in Supply chain moves product between different stages faster transport more expensive more responsive transportation decisions: TRANS. NETWORK DESIGN: collection of transportation mo- des, locations, & routes along which product can be shipped TRANS. MODE: air, tuck, sea, rail, Pipeline, Info goods sent via internet TRANS. metrics: average inbound transportation -average shipment size Cincoming) average inbound cost per shipment average outbound cost average ortbound shipment size •average outbound cost per shipment •fraction transported by mode INFORMATION: data & analysis concerning facilities, inventory. transportation, costs, prices, & customers Supply chain biggest driver of performance •Improve vtilization of assets to increase res- ponsiveness & cut costs Components of information decisions: DEMAND PLANNING: process of generating best estima- te of future demand based on his- torical sales, marketing, promos •COORDINATION & INFO RESHAPING: all stages of supply Chain work toward objective obje of of maxim- izing total profitability based on shared info -SALES & OPS PLANNING: SHOP process of creating an overall supply plan & meet anticipated level of sales Information metrics: •forecast horizon •frequency of update •forecast error •variance from plan •ratio of demand variability to order variability SOURCING: Choice of who performs activity in supply Chain, production, storage, transportation, & info management. set of business processes required to purchase goods & services components of outsourcing: IN-HOUSE OR OUTSOURCE: most significant SUPPLIER SELECTION: # of suppliers for each activity evaluation criteria of supplier PROCUREMENT: Obtaining goods/services w/in a Chair, goal decrease total cost of ownership & increase supply chain surplus Sourcing metrics: •days payable outstanding • average purchase price. range of purchase price •average purchase quantity •Supply quantity. Supply lead time •% of on time deliveries •Supplier reliability PRICING: determines how much firm charges for goods/services →affects buyer behavior affects supply & demand pricing components: PRICING & ECONOMIES OF SCALE: most chain activitres display economies of scale EVERYDAY LOW US. HIGH PRICING: EDLP = steady demand, nigh-low = peaks during discount week then Steep drop in demand FIXED PRICES VS. MENU PRICING: Firm decides whether it will charge a set price for Chain activities or have menu prices that vary w/ some attricorte (like response time, location of delivery) pricing metrics: profit margin days sales outstand Incremental fixed Cost per order Incremental variable cost per unit age sale price average average order size range of sale price •range of periodic sales