4. Seasonality in demand is a feature of many consumer products. i. Describe how
ID: 422743 • Letter: 4
Question
4. Seasonality in demand is a feature of many consumer products. i. Describe how the inventory management of firms at the wholesale and retail stage of supply chains can accommodate seasonality. (5 marks) ii. Describe how seasonal factors can be included in forecasting methods. Which forecast error measure would be of most interest to a firm serving a highly seasonal market? Explain your answer. (10 marks) ii. Is a price promotion likely to be better used in a peak demand season or a low demand season? Explain your answer, particularly with regard to the supply chain performance measures being used. (10 marks)Explanation / Answer
i. The inventory management of firms at the wholesale and retail stage of supply chains can accommodate seasonality by following FIFO method. The FIFO method which is known as First in First out, is a technique that is used in inventory management to sell those products first that has come first so that the business do not suffer loses as if the product becomes old, the value of the product falls and hence a business suffers loss. Therefore, FIFO technique in inventory management can serve the seasonality issue to a greater extent.
iii. The price promotion is likely to be better used in a low demand season. The reason being in the low demand season, a product is not sold much as compared to the normal season and there is a stack of items available at the retailers and this as a whole effect the whole supply chain as there would be lesser order from retailer to wholesaler and similarly from wholesaler to distributor and so on. Hence, to clear the stock and increase the performance of overall supply chain the price promotion is likely to be better in low demand season. Also, if there are abundance availibilty of product, the holding cost will be involved and this is a huge cost, so its better to clear out the product by giving discounts when the demand is low.
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