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Comm 101 15 - Oct 25 - Marketing & Supply Chain Management.docx

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COMM 101
Jeff Kroeker

October 25, 2012 CLASS 15: MARKETING AND SUPPLY CHAIN MANAGEMENT Guest Speaker: Mahesh Nagarajan Prototyping • Design process to approval • Working on an idea to perfect it • The first version of the product • Incomplete, not ready yet to sell, some element of the final product, receive feedback Agenda • Demand forecasting • Acting on a forecast • Information sharing in a supply chain • The role of distribution channels and intermediaries • Mass customization Operations and marketing • Get the product to the right place at the right time in the right amounts/quantity o Efficiently o Maximize profit in long term • Marketing: o Why does marketing care? • What do we mean by “right” and “efficiently” • The need for a forecast of demand Why do firms screw up on forecasts? • Consumer behaviour is complex, trends change quickly • Hard to predict, Hard to quantify consumer behaviour, uncertainty, variability • Over-optimism • Uncontrollable factors, unexpected exogenous conditions • Forecast a range of plausible values, difficult to predict what will happen in the future due to consumer behaviour • Too much inventory, losing customers, losing efficiency, reputation, lost storage, making wrong product, opportunity cost, decreasing liquidity (too much inventory, can’t turn all to cash fast), lost in investor confidence How do we deal with variance or variability? • Don’t know what demand will look like tomorrow, weekly, monthly, etc. • Price fluctuates o Oil, transportation (airlines) • Prediction & forecast – Some kind of statistics, data, market research o Know customer base Forecast • What exactly is a forecast? What should a forecast tell you? o Give range, possible numbers and probability of chance happening o Never give a single number Empirical distribution • Village Idiot’s solution (assuming you see real demand) • Distribution [2, 5, 7, 7, 7, 8, 3, 2, 7, 4, 5, 3] o 4, 8 with probability = 1/12 each o 2, 3, 5 with probability = 2/12 each o 7 with probability = 4/12 Example: • Average disregards variability – dangerous! • Need information on costs of stock, having too much or too little, revenue, risk, the product o E.g. food that expires • Act on forecast – relative cost of buying too much or too little Role of distribution channels and intermediaries – function they perform, what value do they add? • Wholesaler, middleman, agent, go-between, broker, retailer, VARS = intermediaries
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