for Furniture Industry
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.
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,