Pricing seasonal demand

Speculation refers to decisions (regarding inventory or capacity) made in advance of demand realization. Price variation may suggest use of speculation as a strategy, with purchases during low price points in anticipation of price increases. Long lead times for supply may suggest buffer safety stock and thus speculative inventory. Uncertain demands may require capacity buffers or speculative capacity. Product supply disruptions may imply stocks to be purchased whenever product is available. Seasonal demand or supply may demand that products are purchased and inventoried when in season. Inventories may also have to be held to smooth production. 

While their in-season demand levels are correlated, both retailers have to order inventory in advance in the start of the season and thus face their own independent single-period demand uncertainty models (newsboy models). Let Xj and X2 refer to the discount factor for early orders, thus the retail prices are (for Retailer 1) andpX2 (for Retailer 2) for early orders. 

They also find that the cost of learning is a consequence of censored information and shared with the consumer in the form of a higher selling price when demand uncertainty is additive. They also apply the results to three motivating examples a market research problem in which a product is introduced in a test market prior to a widespread launch a global newsvendor problem in which a seasonal product is sold in two different countries with nonoverlapping selling seasons and a minimum quantity commitment problem in which procurement resources for multiple purchases may be pooled. 

Price promotions demand short-term adjustment in the price of an existing product/service. They are often prompted by disappointing sales resulting from an economic downturn, competitor activities, or seasonal trends. Such adjustment must take into account an estimate of price elasticity in order to ensure that the alteration of prices is worthwhile. 

There are over 400 products which makes it complicated and difficult to plan and manage the production and inventory of both raw materials and finished products. It is also difficult to forecast product demand as the products have different demand patterns. The demand of some products are highly stochastic while others are steady. Some products have seasonal demand patterns. And the demand of some products are related to the demand pattern of other products. To solve this problem, we have to design different forecast models for each products. Since the demands for over 400 products must be met, the plant must carefully plan and manage its production and raw materials supply. The charactristics of raw materials used in TCM also result in the difficulty in planning raw material procurement. Most of the raw materials of TCM production are natural, so the price often varies in different seasons. This also offers the procurement department opportunities to gain extra profit from properly planning its procurement and inventory. 

A key point from the Red Tomato supply chain examples we have considered in this chapter is that when a firm is faced with seasonal demand, it should use a combination of pricing (to manage demand) and production and inventory (to manage supply) to improve profitability. The precise use of each lever varies with the situation. This makes it crucial that enterprises in a supply chain coordinate both their forecasting and planning efforts through an S OP process. Only then are profits maximized. 

LPG is a by-product of natural gas treating processes or an incidental gas recovered during the oil extraction process. It generally comprises propane, butane, or a combination of both. As the spot market price for propane and butane varies with the seasonal demand, the receiving terminal and power plant facilities must be designed to handle 100 percent propane, 100 percent butane, or any combination of the two. 

United States Imports of Spices and Oleoresins. The consumption of spices has continued to increase in the United States into 1993 (7). The demand for ethnic foods, and the trend toward less salt, glycerides, and fat, has stimulated more spice and condiment use. The United States consumes approximately 25% of the spices produced in the world. In 1993, imports accounted for about 65% of U.S. seasoning needs compared to 80% in the early 1980s. In 1991 approximately 50% by value of U.S. imported spices entered New York, the principal port of entry around 1983 more than 75% was imported through this port. The volume of spices and oleoresins (spice extracts) into the United States has been increasing steadily, but the value of imports has varied because of specific shortages and large price variations (Table 1). 

The price of butanes and butylenes fluctuates seasonally depending on the demand for gasoline ia the United States. Siace much chemical-product usage is determiaed by price—performance basis, a shift to development of butylene-based technology may occur. Among the butylenes, demand for isobutylene is likely to iacrease (and so its price) as more derivatives such as methyl methacrylate and methacrylic acid are produced from isobutylene iastead of the coaveatioaal acetoae cyanohydria process. 

Unpredictable movements in the price level are uncommon in energy markets. The magnitudes of these price shocks can be substantial 1973 and 1979 oil price shocks, electricity price swings in June 1998, and 2000 oil price increases exemplify the potential magnitudes of these price fluctuations. Energy price dynamics usually consist of three components deterministic part, seasonal and cyclical influences, and noise. In a market situation with no demand or sup-... 

In a petroleum refinery a large number of different products are produced, and the demand for some of these products is seasonal. For instance, there is not much need for residential fuel oil in the summer. The price of products also varies from day to day. To optimize the company s profit, it is therefore necessary periodically to vary the amount of each product produced. This can be done by changing the amounts of material sent to cracking units and reformers and by changing the conditions in these and other process steps. Some petroleum companies provide a computer with the data on market prices, current inventories, and crude oil compositions. The computer output then specifies the operating conditions that will yield the greatest profit for the company. The computer could then make the changes in these conditions directly, or this could be done manually. 

The Australian domestic nitric acid market was found to suffer from cyclical variations, with seasonal highs and lows each year. This fluctuation is attributed to the major acid consumers (fertilizer and explosives manufacturers) being susceptible to seasonal variations in demand, and to the level of world commodity prices. However, the overall trend has been for 3% annual growth. Current Australian production is 200 000 tonnes each year (100% acid basis). Exports from and imports into Australia are virtually non-existent. A protective barrier in the form of high shipping costs, has in the past effectively closed the domestic market. 

As highlighted in Section 2.3.2, the major proportion of all nitric acid produced in Australia is used for the production of ammonium nitrate. Ammonium nitrate is in turn used in the agricultural industry as a fertilizer and in the mining industry as an explosive. Both of these areas have shown large demand fluctuations over the last decade. The collapse of world commodity prices, the expansion and recent decline of the agricultural sector for overseas markets, and seasonal weather variations have all had a significant impact. 

The demand for electricity varies by the time of day, the week and the season. The cost and price of electricity are high at times of peak power demand and low at times of low power demand. The high cost of peak power reflects the fact that the facilities needed to produce much of this power are operated for only a few hundred or a thousand hours per year. This is shown in Table 2, which lists the marginal prices of electricity in 2004 for nine US electric grids (FERC, 2004). 

For any FISC there exist two major markets for packed fruit regional (RPFC) and overseas (OPFC). Concentrated juice only possesses the overseas market (OCJC). Two types of demands are considered. A fixed demand is conformed by the amounts of packed fruit and juice agreed with the different clients before the fruit season. For such compromises there is a specific time delivery schedule. An eventual demand represents the possibility of allocating the excess of goods at a lower price in any period (X15andX16). 

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