A New Customer-Oriented Methodology to Evaluate Supply Chain Lost Sales Costs Due to Stockout in Consumer Goods Sectors
This paper presents a new methodology to compute costs arising in consumer goods sectors when a purchase intention is lost due to stockout of the searched good. This occurs only at the final tier of a consumer good supply chain, yet it can affect any upst
- PDF / 1,970,734 Bytes
- 19 Pages / 439.37 x 666.142 pts Page_size
- 6 Downloads / 153 Views
Introduction ................................................................................................. 290 2
Background ................................................................................................. 290
3
The Lost Sales Cost Computation Methodology ........................................ 292
4
Empirical Evaluation ................................................................................... 299
5
Concluding Remarks ................................................................................... 303
6
Appendix: List of Abbreviations ................................................................. 304
7
References ................................................................................................... 306
Summary: This paper presents a new methodology to compute costs arising in consumer goods sectors when a purchase intention is lost due to stockout of the searched good. This occurs only at the final tier of a consumer good supply chain, yet it can affect any upstream tier. Thus, the methodology proposed here encompasses all the relevant tiers within a consumer goods supply chain: the retailer, the producer of the final good, and the producer of components within the final good. The paper also provides a practical application of the proposed methodology to the Italian fashion sector, through which it is shown that, within the investigated branch of industry, a relevant amount of sales is lost due to stockout, that the corresponding costs affect upstream stages even more seriously than downstream ones, and that companies tend to seriously underestimate this phenomenon at all stages. Keywords: Supply Chain Management, Lost Sales Cost, Stockout, Fashion Industry
S. Seuring et al. (eds.), Cost Management in Supply Chains © Springer-Verlag Berlin Heidelberg 2002
290
M. Perona
1 Introduction The main function of stock within a supply chain is to face the uncertainties existing within its tiers and between the chain and served market. Stock can ensure flexibility, elasticity, capacity and time margins among the supply chain actors and toward the final customer, allowing the chain to be effective even when facing a disruption in one of its actors or an unexpected behavior by the final market. Nevertheless, any amount of stock is connected to certain costs. For instance, consider a retailer managing a stock of finished products in order to face the uncertainties characterizing its final customer demand and/or procurement process by its suppliers. The retailer has to suffer some stock carrying costs connected to running capital, warehousing and handling operations and obsolescence. Yet, stocks kept at the point of sale can ensure benefits both to the retailer and its supply chain. In fact, a greater availability of the products on the shelf can increase the probability of satisfying a greater amount of final customers. This in tum can reduce the risk of lost sales on the final market and the impact of lost sales costs. It is important to find a correct trade-of
Data Loading...
