Case Analysis

Case Analysis

For the past two months our sales on copper fitting has almost doubled due to the increasing demand from the market and the competitorsЎ¦ unsuccessful selling promotion. However, the problem rises from the overwhelming demand. Many back orders are just piled up on the warehouse managerЎ¦s desk, and some of the customers lost their patience with us.

What we really need right now is to limit or reduce the abnormal demand from the customers by raising the price of our products, but to gain a reputation from our customers, we should consider completing all the backorders with a original price. In a long term, the solution to solve this inventory shortage still relies on sufficient and on-time supply from our supplies.

The main reason causing this tremendous and unusual high demand from the customer is the losing

market share of our competitors. Also, there is a possibility that some customers have the false expectation about the future price of the market. They heard the rumor about the cost of raw copper material might go up, so they predict that the price of the copper fitting should go up as well. Consequently, they start to make more purchases and store more inventories more than usual to save some money after the price of copper rises.

After a serious discussion with our marketing and warehouse managers, we found a strategy to solve this inventory shortage crisis. We can purchase overstocked merchandises a very low cost from our competitors, since their business is slow, and they do not have enough cash flow. Since most of our competitors are local, we can save a bundle from the shipping and handling if we buy their products. But the disadvantage