Even though I grew up a few blocks from Wrigley Field, home of the Chicago Cubs baseball team, I was a loyal White Sox fan and never set foot in Wrigley Field! Today, however, I am proud of the Cubs’ success. They won over 100 regular season games and may pull off the real feat of winning the World Series. But what does this have to do with Inventory Management, Chapter 12 of our text? The postseason run can bring big business for local team merchandise companies — if they understand the single-period inventory model.
“Nobody alive has ever seen the Cubs win the World Series, and there were no licensed goods the last time they were there,” said one sports paraphernalia maker. “No one has seen Cubs World Series merchandise in their lifetime, so I believe that every Cubs fan will want something. We can’t not have enough to supply the fans. But what makes me nervous is if there’s a number where you overbuy? The postseason is no automatic moneymaker.” In Chicago, where World Series experience is thin, there’s no precedent to say how much is enough, but not too much, writes The Chicago Tribune (Oct.6, 2016).
By the time a manufacturer is ready to produce T-shirts and hats, the playoff picture may have changed. Then there’s the problem of getting access to retailers. Manufacturers have to worry that the season might end before the products ever make it to stores. So they need to be ready to drop everything and crank up the presses to produce the tens of thousands of products on short notice. And that is where the single-period model comes to play. Companies need to compute the cost of underestimating (shortages) versus the cost of overestimating. This a great example of the real world inventory management.
Classroom discussion questions:
- How does the single-period model differ from the EOQ model?
- What are the factors that complicate the decision manufacturers must make immediately?