Conclusion and Closing Remarks
Because the results of the model
have not been confirmed, or evaluated, it is impossible to validate the results
at this point in time. However,
sensitivity analysis has been completed with each constraint and a few
observations have been noted. Two
key observations occur as a result of determining whether to buy a particular
brand from Asia or California. This
decision is presented by x5 and x6 (which refers to Acme recliners), and x10
and x11 (which refers to Acme bedroom sets consisting of headboard, nightstand,
dresser, mirror, and chest). In
this respect, the particular issue that is addressed by the model is the
evaluation of the price break that occurs from purchasing larger quantities
from Asia (x5 and x10), compared to smaller quantities purchased from
California (x6 and x11).
It was determined by the model
that demand needs to be 164 or greater for the recliners, and 12 or greater for
bedroom sets, in order for the purchase from Asia to be considered the more
profitable decision. However, the
model currently only assumes a one-time transportation cost, which holds true for
Asia, but not California, and it does not consider order quantity minimums that
occur when ordering from Asia (200 recliners and 20 bedroom sets). In addition to these limitations, the
model does not consider the additional carrying costs that occur as a result of
unsold, excess, inventory as a result of buying more than demand- this
consideration will be feasible with a multi-period model. It is suspected that the additional
transportation costs that occur when buying from California will reduce the
above figures (164 and 12).
However, the additional carrying costs that occur as a result of the
inventory, from the Asian large order quantity minimum, will have an effect as
well, possibly offsetting some of the reduction mentioned above- the
significance of the effect is not known.
In addition to the LP model, to assist
with decision-making, an Excel file has been established. The file contains several spreadsheets
(tabs) possessing various mathematical model’s;
1) Yield Management, 2) ABC Inventory Management, 3) Simulation, and 4) a sheet
to assist with buying decisions by comparing itemized cost and quantity
constraints of buying the same product from Asia compared with California.
Work Cited
1. “The
American Furniture Industry: What Will It Take to Survive?” Anderson
Bauman Tourtellot Vos
(ABTV) in collaboration with Michael K. Dugan, September 2009, pp.1-16.
2. “Identifying
Future Competitive Business Strategies for the U.S. Residential Wood Furniture
Industry: Benchmarking and Paradigm Shifts,” Albert Schuler and Urs Buehlmann, March 2003, pp.
1-15.
3. “What
is the Right Supply Chain for Your Product?” Marshall L. Fisher, Harvard
Business Review, March-April 1997, pp. 105-116.
4. Service
Management: Operations, Strategy, Information Technology, James A. Fitzsimmons
and Mona J. Fitzsimmons, McGraw-Hill Irwin, New York, 2008, pp. 18.
5. “First
Research Industry Profile: Furniture Stores” Written by First Research,
2005, pp. 1-8.
6.
“Doubling
Profits Is Easier Than you Think”, Larry Stark, for Furniture World
Magazine,
http://www.furninfo.com/absolutenm/templates/Article_Retailing.asp?articleid=4424&zoneid=6 2009,
November 28.
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