Initial purchase of short-term life cycle products with uncertain demand

Targus, a consumer products distributor of laptop cases and accessories, lacks formal processes for deciding on initial purchases of short-term life cycle products with uncertain demand. This thesis reviews the current processes for the initial purchases and determines where the Company can reduce inventory risks related to the initial purchase. The research and analysis has three aspects: interviews of eight Targus managers was used to understand current initial purchases practice, a sample of initial purchase data was selected to analyze forecast errors and life cycle management, and the newsvendor problem was applied to the data sample to determine the optimal purchase which was then compared to Targus' purchases. It was found that Targus has a tendency to under-purchase items for the initial purchase and does not establish potential profitability of products prior to introduction. This thesis recommends the Company to incorporate a newsvendor approach as a basis to benchmark its initial purchases for the initial product introduction process.

Department dc:contributor.department

Massachusetts Institute of Technology. Engineering Systems Division.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2005

Author dc:creator

• Takenaga, Eugene T

Advisor dc:contributor.advisor

• Larry Lapide.

• Engineering Systems Division.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/33372

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/33372