discussion

In the retail world, there is a significant difference between steady-state and peak holiday demand. After reviewing the

Demand Forecasting Graph presentation

, analyze and explain the measures required to ensure customer satisfaction throughout the scenario below. In other words, where is the supply risk? As you read the scenario below, keep in mind the service-level agreement to have a certain amount of product on the shelves. Think about when to order, how much to order, and the delivery time that would ensure that the product is available to the customer at the right time and when it is in demand.

Scenario

This year, management has decided to offer a significant discount during peak season on current widget inventory due to the upcoming release of the new and improved Widget 2.0 arriving next year. Assuming each square on slide 2 of the Demand Forecasting Graph presentation (titled EOQ and Demand Adjustments) is equal to an economic order quantity, how and when would you recommend preparing for the estimated surge in demand for the sale? What other elements of the supply chain should be considered when preparing for this increase in demand?

Demand Forecasting Exercise 

for Summer Widgets

Safety Stock

Working Stock

Average Demand

Seasonal Demand

EOQ and Demand Adjustments

EOQ

• Boxes are the economic order quantity
for the item from suppliers
• This ensures the most cost-efficient

order for both price and delivery
time

• Blue line is steady-state seasonal demand
• Red line indicates that a sale is planned

just prior to peak season
• Yellow line is the fallout from poor

publicity about the health hazards of the
product, which are later debunked