Question

Incorporate the fluctuations of supply and demand into the costs incurred and decide way management calculates estimations for further product needs.

Answer 1

Demand is basically the quantity consumers are willing and able to buy at each possible price during a given time period, with other things kept as constant. Amounts purchased per period at each possible price. The fluctuations in demand happen due to variety of reasons:

1.Money income of consumers

2.Prices of other goods

3.Consumer expectations

4.The number or composition of consumers in the market

5.Consumer tastes

Hence, matching demand with supply depends on the capacity that the company has to produce goods matching the demand. Since these two factors are variable, there has to be an efficient capacity utilization for the company. This is where management must decide on the costs to be incurred and calculate the estimates for the products. Now, it depends on the company whether the company changes its product line completely to suit the consumer preferences or brings changes in the existing product line.

The supply chain management involves proactively working with some or all of the organizations in a company's supply chain to improve service and to manage or to reduce costs. Company may opt for material requirements planning to efficiently manage materials in scheduling production. These techniques may help manage the fluctuations in demand andsupply in an effective manner.