Supply Chain Strategies II: Improving Responsiveness & Advanced Topics (back to catalog)

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...Various companies are beginning to provide software tools that aid in demand management. These tools take into account both available inventory and also the cross-elasticities of different products in suggesting pricing strategies for multiple products. How does this work? The portion dealing with available inventory is similar to the yield management algorithms mentioned above, while the portion dealing with cross-elasticities takes into account the differing price-elasticities of demand for various products. There may be some products where the consumer demand is highly price-elastic, meaning demand is highly responsive to a given change in price; and there may be products which are less price-elastic. For example, we would say toothpaste has low price elasticity; if the price of toothpaste increased somewhat, we would still expect consumers to purchase the product at the same rate as before. For the products below, which do you think are more price-elastic and which less so?

Product Price Elasticity Answer
Low High
Expensive restaurant
MP3 player

If products have different price-elasticities, algorithms can make use of this to suggest particular pricing strategies to maximize a firm's objective. Perhaps the firm wants to maximize profit, revenue, or market share. Different objectives would produce different strategies, but the general idea is that using sophisticated strategies can add significantly to a firm's performance...


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SCM103 Specifications

Title: Supply Chain Strategies II: Improving Responsiveness & Advanced Topics

4.2 / 5  (1364 ratings)

Total Reading Time: Approx. 1 - 2 hours (for average readers)

Word Count: Approx. 8,400 words


Certificate: Counts toward Fundamentals of Supply Chain Management

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  1. Introduction to Responsive Strategies
  2. Accurate Response and Risk-Based Production Planning
  3. Build-to-Order (BTO), or Mass Customization
  4. Pre-positioning and Fast NPI
  5. Component Commonality
  6. Hedging Demand Uncertainty: The Newsvendor Model
  7. Hedging Uncertainty, Continued
  8. Quantifying the Benefits of Supply Flexibility
  9. Supply Uncertainty
  10. Avoiding Supply Uncertainty
  11. Reducing and Hedging Supply Uncertainty
  12. Demand Management
  13. Risk Sharing
  14. Risk Sharing, Continued
  15. Risk Sharing, Continued (2)
  16. The Role of Software
  17. Conclusions
  18. Test Your Knowledge
  19. Feedback
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