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Zero/Near-Zero Sales Volume in Channel 1




Zero/Near-Zero Sales Volume In Channel 1

"Why is our sales volume equal to zero units in region 3, channel 1? The last simulation round's sales volume for this product in this channel and region was 8,646 units."

Retailers in channel 1 are intermediaries in the inventory pipeline from manufacturers to final end-user customers. Retailers routinely carry finished goods inventory, to have adequate on-hand supplies to meet final end-user customer demand which varies through time.
If retailers' sales volume is relatively consistent/constant over time, then retailers will be re-ordering relatively predictable volumes from manufacturers. If retailers' inventory is sufficient to meet customer orders (and retailers' on-going target inventory levels) without replenishment from manufacturers, then retailers will not need to make any new purchases from manufacturers in the current simulation round.

There are, of course, noteworthy differences between retail and direct channels ... for example, there's no inventory buffer stock in a direct sales channel (direct from manufacturer to final end-user customer).

Details of the sales and inventory transactions for your product in region 3, channel 1 are reported in the following table (data sources include Research Study #12 and Research Study #14):
Region 3, Channel 1
Round #7 Ending-Quarter Channel 1 (Retail Channel) Inventory [Source: RS #12] 5,982
 - Round #8 Channel 1 Sales Volume (To Final End-User Customers From Retailers) [Source: RS #14] - 2,083
+ Round #8 Orders From Manufacturer [Source: Sales Volume on the Manufacturer's P&L Statement] + 0
= Round #8 Ending-Quarter Channel 1 (Retail Channel) Inventory [Source: RS #12] = 3,899
Retailers had sufficient on-hand inventory to meet all current final end-user customer sales requirements and retailers' on-going target inventory levels without re-ordering any more units from the manufacturer (your firm). It follows that your sales volume in region 3, channel 1 was zero units in this simulation round.

Why the large drop in sales volume? From your own research studies, your competitive product positioning in this channel and region has become very weak (above-average price, low product quality, low service quality, and average availability), thus explaining declining market share for your product. Perhaps your firm really doesn't have the product that meets customers' needs in this region and channel, given your competitors' current products and positionings in region 3, channel 1.

For further reading on this bullwhip effect in supply chains, the following two web-based articles may be referenced:

  • Bullwhip Effect (Wikipedia.org)
  • The Bullwhip Effect (QuickMBA.com)
  • revised 11/26/2012
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