Chapter 17: Problem 10

List some supply chains in which holding the bulk of the stock at the demand level (e.g., at retail outlets) and making use of lateral transshipments might make sense.

Short Answer

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Answer: Holding the bulk of stock at the demand level and using lateral transshipments is beneficial in industries such as fast-fashion, grocery retail business, pharmaceuticals, consumer electronics, and seasonal items, as it helps to swiftly respond to regional demand fluctuations, minimize inventory holding costs, and improve overall sales performance.

Step by step solution

1. Fast-Fashion Industry

In the fast-fashion industry, quick inventory turnover and efficient stock management are crucial to respond to the fast-changing trends and customer needs. Holding the stock at retail outlets and using lateral transshipments allows retailers to swiftly respond to regional demand fluctuations, quickly replacing low-performing products and optimizing inventory turnover.

2. Grocery Retail Business

In the grocery retail industry, products generally have a short shelf-life and are characterized by high demand variability. Holding the bulk of stock at the retail outlets helps in minimizing stock spoilage and reducing costs related to excess inventory. Using lateral transshipments allows retailers to distribute the stock among stores as per their regional demand fluctuations, ensuring product availability and customer satisfaction.

3. Pharmaceuticals

Distributing pharmaceuticals requires a strict consideration of the expiration dates of drugs. Holding stock at demand level, such as pharmacies, and using lateral transshipments ensure that products are distributed to outlets with higher demand and a lower probability of the drugs expiring before being sold.

4. Consumer Electronics

In the consumer electronics industry, products often have short product life cycles and rapid technological advancements. Retail outlets need to be able to swiftly respond to changes and have the latest products available for customers. Holding stock at demand level and using lateral transshipments can help maintain inventory levels catered to customer preferences and minimize inventory holding costs related to obsolete products.

5. Seasonal Items

Seasonal items like winter clothing, outdoor equipment, or holiday-specific products have a fixed sales window, and the demand may vary significantly among regions or outlets. Holding the bulk of the stock at retail outlets and making use of lateral transshipments will ensure optimal inventory allocation, reducing the risk of overstocking or stockouts and improving overall sales performance.

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List some supply chains in which holding the bulk of the stock at the demand level (e.g., at retail outlets) and making use of lateral transshipments might make sense.

Short Answer

Step by step solution

1. Fast-Fashion Industry

2. Grocery Retail Business

3. Pharmaceuticals

4. Consumer Electronics

5. Seasonal Items

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