HP UPS Case
HP-UPS:
The main cost difference in two scenarios should be the following:
Cost
Without UPS
With UPS
Inventory
High
Low
Trans-shipment
Low
High
Exchange rate impact
Low
High
Interest Impact
High
Low
Base material cost
Low
High
Lost sales
High
Low
Obsolescence
High
Low
If the costs increase in transshipment, exchange rate and base material cost is more than that reduced through inventory reduction(combined should have less variation than separate individual), interest impact reduction (reduced inventory), lost sales reduction and obsolescence reduction, the decision should be to go with a universal printer. The simulations can give us a certain idea of where the costs are headed, but the biggest advantage of the printers with UPS will come towards the end of product life cycle, which the game is not modeled to cater for.
We are using the order up to formula (service level of98%) to calculate the number of units required in each case, but the simulation does not catch the less inventory for two reasons (in case of with UPS):
1. There is no trend to demand, so both US and Europe continue to sell perfectly randomly
2. The simulation does not take the life cycle of the product into account
Based on the data, and the aforementioned factors, and the past trend with the printer viper, the idea is that the configuration with UPS should be cheaper than the configuration without UPS. Further, as far as trans-shipping is concerned, we are transferring to match any excess demand from US to Europe, or vice versa, to immediately meet for any shortfalls in the future, even before they happen, provided there is stock available from the place being shipped. Furthermore, the allocation of the units is also based on the demand received in the previous periods. If the demand in the previous period is excess in Europe, more units will be allocated to Europe to avoid any lost sales, (the same holds true for any excess demand in US).
The main cost difference in two scenarios should be the following:
Cost
Without UPS
With UPS
Inventory
High
Low
Trans-shipment
Low
High
Exchange rate impact
Low
High
Interest Impact
High
Low
Base material cost
Low
High
Lost sales
High
Low
Obsolescence
High
Low
If the costs increase in transshipment, exchange rate and base material cost is more than that reduced through inventory reduction(combined should have less variation than separate individual), interest impact reduction (reduced inventory), lost sales reduction and obsolescence reduction, the decision should be to go with a universal printer. The simulations can give us a certain idea of where the costs are headed, but the biggest advantage of the printers with UPS will come towards the end of product life cycle, which the game is not modeled to cater for.
We are using the order up to formula (service level of98%) to calculate the number of units required in each case, but the simulation does not catch the less inventory for two reasons (in case of with UPS):
1. There is no trend to demand, so both US and Europe continue to sell perfectly randomly
2. The simulation does not take the life cycle of the product into account
Based on the data, and the aforementioned factors, and the past trend with the printer viper, the idea is that the configuration with UPS should be cheaper than the configuration without UPS. Further, as far as trans-shipping is concerned, we are transferring to match any excess demand from US to Europe, or vice versa, to immediately meet for any shortfalls in the future, even before they happen, provided there is stock available from the place being shipped. Furthermore, the allocation of the units is also based on the demand received in the previous periods. If the demand in the previous period is excess in Europe, more units will be allocated to Europe to avoid any lost sales, (the same holds true for any excess demand in US).