Inventory-System

Assumptions

1. The firm provides this product to its distributors together with a recommended retail price (RRP).

2. The Australian firm was established in January 1st, 2000. And there were 1000 cantilever umbrellas in stock at the moment.

3. The distribution number of the cantilever umbrella on that day to the distributors was 36.

4. Each cantilever umbrella’s RRP was $705 AUD

5. If the inventory stock drops to 400, the firm will restock 600 cantilever umbrellas back to the warehouse (Not consider any cost related to restocking fee).

6. Cantilever Umbrella has a peak selling season. It is from 1st November to end of February each year. During the peak season, the company is expected to have a 35% increase in quantity for distribution, and it is also expected to have 20% increase in RRP as it is hard to supply enough umbrellas to meet the demand.

7. The stocking system is updated daily at 11:59 pm.

8. At the beginning of the new financial year each year (1st July), the company will impose a 10% increase in the supply of cantilever umbrellas to its distributors (rounded up) and 5% increase of the RRP due to inflation.

9. Based on statistics, global financial crisis happens every 9 years, and lasts for another 2 years, the number of cantilever umbrella distributed to distributors will drop by 20% in the first year when global financial crisis hit the market, the number will continue to drop by 10% and 5% for the next 2 years when the economy is recovering.

10. In order to make up the losses, during the year that a global financial crisis starts, the company will add an additional 10% increase in RRP to the product, the increase of the product RRP will become 5% in the next year, and 3% the year after to make up the loss.

11. It is expected that 5% of items will be defective and returned to warehouse every month.

12. Defective items will be refurbished and redistributed at 80% of original price (original price is the RRP at the time the product is returned) in the following months.

13. This firm assesses the quantity of product distributed and total revenue earned from distributors every year