Life cycle profit – reducing supply risks by integrated demand management

Abstract

Technology advances and competitive pressure have shortened the life cycles for many products (e.g., in the mobile phone industry) and drastically increase the penalty of holding obsolete finished goods inventories. Standard planning methods lead to high forecasting errors and - as a consequence - to high safety inventories. In this context, an appropriate service level is of major interest. We propose a new model for the integrated analysis of alternative pricing strategies and their effects on the service level. In particular, we show how our model supports the identification of the best service level in terms of customer satisfaction life cycle profit.