Question

Suppose your business model is to buy products wholesale and sell directly to customers through an online selling platform. You are trying to decide what product to sell (For example office supp, cleaning supp, home improvement supp, school supplies, and groceries, etc).

What type of product would you sell and what type of inventory strategy would you use? Justify your chosen strategy and explain how you would manage your inventory. (Consider "Pressures for Small Inventories" and "Pressures for Large Inventories" in your textbook to help craft your answer). Address the following questions in your response:
- How will you keep up with demand?

Answer 1

In deciding what products to sell through an online platform, home improvement supplies could be a viable option due to market demand and growth. A hybrid inventory strategy that combines just-in-time and safety stock approaches, along with an inventory management system, will help manage inventory levels and keep up with demand. Balancing inventory pressures and leveraging economies of scale will be key to maintaining competitiveness.

Step-by-step explanation:

When deciding on a product to sell, it's important to consider market demand, profitability, and competition within the industry. One could consider selling home improvement supplies, as this market has shown resilience and growth, especially with the increase in do-it-yourself projects spurred by more people spending time at home. The inventory strategy to be used should be a hybrid of just-in-time (JIT) to minimize holding costs and avoid overstocking and a safety stock approach to handle unexpected surges in demand.

To manage inventory effectively and keep up with demand, implementing an inventory management system that can track sales data, predict trends, and automate restocking based on real-time inventory levels is critical. These systems can also help with reordering inventory, reducing both stockouts and excess inventory. A critical consideration is balancing the pressures for small inventories, such as reduced holding costs and lower risk of obsolescence, against pressures for larger inventories like customer satisfaction and preparing for supplier uncertainties.

The ability to quickly adapt to changing market demands while efficiently managing costs will be instrumental in the success of the online business. Utilizing technologies such as data analytics and leveraging economies of scale, like those utilized by Amazon, are ways to enhance production models and cost structures to stay competitive in the market. Identifying the right product mix and appropriate inventory strategy while considering the market structure and your firm's market power will dictate the overall business approach to product selection, production processes, pricing, and employment.