Cyber Monday

Tomorrow marks one of the busiest internet shopping days of the year. Companies are having to boost their inventories, but how much? Their first priority is to make a sale. This is very difficult throught the internet, because customers can cross-check prices between companies a lot easier. The price of the product needs to be reasonable to competitors. National retail chains are hoping to earn close to $700 million on Monday, and inventory is very important. With the easy use of e-commerce shopping, if a product is not in stock, the customer can go to another company. Retail companies need to look at lead times of products. If they are low on products and can get them quick and easily, there is no need to stock these, but order as needed. If they are difficult to obtain in a quick manner, how much do they need to have in inventory? What is the best way to avoid backorders and stockouts on this busy Monday?

Inventory Management on Black Friday

With today being the biggest shopping day of the year for many retailers, the question arises, "How have inventory management practices differed in preparation for this day?"

There is no doubt that many retailers depend on the Holiday shopping season to keep their companies in the black. So, with the importance of this day being so high, it is absolutely imperative that companies not run out of their most popular products. Thus, a great deal of forecasting and planning has, no doubt, gone into the inventory that is in stores today.

Firms that share information freely with suppliers should be more prepared for today than ones who do not. This is the case because of the bullwhip effect. Firms that are transparent with their suppliers will communicate their actual demand figures to those suppliers and will most likely receive that amount of product. However, firms who have a history of shortage gaming and over-ordering are more likely to cause a bullwhip effect in their supply chains. They will either over-order or order from multiple suppliers in order to ensure their receipt of the products. This will cause unnecessary fluctuations in an already turbulent supply chain.

Does anyone else have any other ideas as to how inventory management policies could change as a result of an increase in sales like the one experienced on "Black Friday?"

Probablistic Demand

In our studies of Probablistic Demand, I have learned that different probability distributions apply in different situations. In addition, I see the value of these models in their ability to approximate profitability based on different input factors and situations. However, I'm a little unclear as to what makes one probability distribution apply in one situation and another distribution in another situation. Can anyone shed any light on this subject?

When minimum cost doesn't equal maximum profit

I guess the only time that minimum cost doesn't equal maximum profit is when there are points in the profit function where revenue would increase enough to outweigh the increase in cost. This could occur if there was some sort of additional revenue at a particular point of sales. For instance, if certain customers cost more to service than others, servicing the more profitable customers to a level beyond the point of minimum cost may payoff with additional revenues that make the profit even higher.