Question

Use the principles of supply and demand to address a predetermined goal. Be clear on what the current market indicates and why and what your future goal is.

Answer 1

demand

The law of supply and demand is a theory that explains the interaction between the sellers of a resource and the buyers for that resource. The theory defines what effect the relationship between the availability of a particular product and the desire (or demand) for that product has on its price. Generally, low supply and high demand increase price and vice versa. Perfect examples of supply and demand in action include PayPal.

• The law of demand says that at higher prices, buyers will demand less of an economic good.
• The law of supply says that at higher prices, sellers will supply more of an economic good.
• These two laws interact to determine the actual market prices and volume of goods that are traded on a market.
• Several independent factors can affect the shape of market supply and demand, influencing both the prices and quantities that we observe in markets.

  Economics involves the study of how people use limited means to satisfy unlimited wants. The law of demand focuses on those unlimited wants. Naturally, people prioritize more urgent wants and needs over less urgent ones in their economic behavior, and this carries over into how people choose among the limited means available to them. For any economic good, the first unit of that good that a consumer gets their hands on will tend to be put to use to satisfy the most urgent need the consumer has that that good can satisfy.

  For example, consider a castaway on a desert island who obtains a six pack of bottled, fresh water washed up on shore. The first bottle will be used to satisfy the castaway's most urgently felt need, most likely drinking water to avoid dying of thirst. The second bottle might be used for bathing to stave off disease, an urgent but less immediate need. The third bottle could be used for a less urgent need such as boiling some fish to have a hot meal, and on down to the last bottle, which the castaway uses for a relatively low priority like watering a small potted plant to keep him company on the island.

  In our example, because each additional bottle of water is used for a successively less highly valued want or need by our castaway, we can say that the castaway values each additional bottle less than the one before. Similarly, when consumers purchase goods on the market each additional unit of any given good or service that they buy will be put to a less valued use than the one before, so we can say that they value each additional unit less and less. Because they value each additional unit of the good less, they are willing to pay less for it. So the more units of a good consumers buy, the less they are willing to pay in terms of the price.

  By adding up all the units of a good that consumers are willing to buy at any given price we can describe a market demand curve, which is always downward-sloping, like the one shown in the chart below. Each point on the curve (A, B, C) reflects the quantity demanded (Q) at a given price (P). At point A, for example, the quantity demanded is low (Q1) and the price is high (P1). At higher prices, consumers demand less of the good, and at lower prices, they demand more

  suppy

Supply chain refers to the processes that are involved in moving the products from the supplier to consumers. It is a network of organizations, people, resources, activities and information involved in upstream and downstream. Supply chain management (SCM) is the process of handling the flow of goods or services. The activities involved from acquiring raw materials to the final delivery of the product to consumers come under SCM. Supply chain management minimize the waste, cost and time consumed in the production process

1.Adapt Supply Chain to Customer’s Needs

The businesses and supply chain professionals understand customer’s needs. Customers are divided into different groups called ‘segments’ in order to understand them better. On the basis of sales volume or profitability, the primitive way to segment customer is ABC analysis. It can also be done by product, trade channel and industry. Anticipating the customer’s needs is also very important. Once the needs of the customers are anticipated, the supply chain should be aligned to cater to the needs.

2. Customize Logistics Network

After the segmentation of the customers based on different requirements, SCM managers have to tailor logistics networks to serve different segments. The SCM manager has to prioritize the deliveries and make suitable provisions to quickly distribute those goods that are marked as urgent.

3. Align Demand Planning Across Supply Chain

Supply chain professionals are trained to share data with trading partners in order to avoid the unnecessary stock. The demand data must be used wisely by the SCM managers.

4. Differentiate Products Close to Customers

Standardization and differentiation are two completely opposite things. Some cosmetic companies manufacture only 1 SKU that can be sold throughout Asia instead of 1 SKU per country. Due to the economy of the sales, standardization can drastically bring down the cost.

5. Outsources Strategically

Though outsourcing is all the rage, the managers must outsource strategically. The core expertise should not be outsourced ever. This principle stands the test of time.

6. Develop IT that Support Multi-Level Decision Making

The IT projects should not be done in isolation and before IT projects, the business process reengineering should be done. This provides a proper understanding of process insufficiencies and helps to determine the kind of innovation needed.

7. Adapt Both Services and Financial Metrics

The activity-based costing (ABC) is applied to determine the customer’s profitability. It is even better to exploit Time Driven Activity Based Costing in order to understand changes in activities, process, product and customers.