Loss Of Sales Research Articles

Pre-distribution vs. post-distribution for cross-docking with transshipments☆

Cross-docking operation is a logistics service mode aims to remove the storage and picking up functions of a warehouse, and coordinate goods loading between delivery vehicles and shipping vehicles. Transshipment is another logistic technique that allows goods to be conveyed from an overstocked store to a nearby understocked store, to avoid backordering or loss of sale. This paper models and analyzes two typical cross-docking operations: pre-distribution cross-docking operations (Pre-C) and post-distribution cross-docking operations (Post-C) when transshipments among retail stores are applied. The different operational performances are investigated and compared. The analytical results show that, considering the inventory cost, transshipment cost and operations cost at the cross-dock, the suitability of Pre-C and Post-C are highly sensitive to operations environment factors such as the uncertainty of demand, the unit operations cost at the cross-dock, and the unit inventory holding and shortage cost.

Specialization and competition in healthcare delivery networks

Hospital networks, which offer multiple services at multiple locations, are investigating strategies to fight the growing competition from specialty hospitals. Specialty hospitals focus on a selective range of profitable services, have better control over costs, and deliver higher (perceived) quality. A hospital network too can create specialized facilities; however, this may lead to the loss of sales from services that it no longer offers. Using a spatial model, we study when it is profitable for the network to specialize, and how to determine which facilities provide the greatest value through specialization. We find that a hospital network, when facing specialized competitors, can often improve its overall profitability by specializing some of its facilities; and that among its different facilities, the network's best choice for specialization is the facility that is closest to the competitor, and thus most directly affected. Interestingly, we find that the value of specialization is contingent upon the competitive pressure that the specialized competitor exerts on the network. Specializing one facility yields the greatest benefits for the network when the competitor is located at the fringe of the market, thus presenting a reduced threat to the hospital network. On the other hand, if the specialized competitor is located at the core of the network's customer base, we find that the attractiveness of specializing one facility is much smaller and that the hospital network might fare better with a strategy based on diversification, i.e., offering a full-menu of services at every facility.

Stochastic Combinatorial Optimization Approach to Biopharmaceutical Portfolio Management

Key strategic decisions in biopharmaceutical portfolio management include drug selection, activity scheduling, and third party involvement. Optimizing strategies is complicated by uncertainty, dependency relationships between decisions, and multiple objectives that may conflict. This paper presents the development of a stochastic combinatorial multiobjective optimization framework designed to address these issues. The framework simulates portfolio management strategies while harnessing Bayesian networks and evolutionary computation concertedly to characterize the probabilistic structure of superior decisions and evolve strategies to multiobjective optimality. This formulation is applied to a case study entailing a portfolio of five therapeutic antibody projects. Optimization was driven by two objectives that conflicted here: maximizing profitability and maximizing the probability of being profitable. Initial analysis of competing strategies along the Pareto optimal front indicated that strategies with clear differences in comprising decisions can compete with similar reward-risk profiles. Hence optimization yielded results that were not intuitive but instead suggested that flexibility between strategies can exist in such large-scale problems. A cluster analysis was used to identify the prevalence of broad and superior building blocks along the Pareto front. In-house development of drugs generally emerged as a preferred constituent of superior strategies which suggested a drive toward minimizing contracting fees, premiums, royalty charges, and losses in sales revenue to third parties; no budgetary constraints were imposed in this case study. It appeared that strategies for scheduling activities had the most overarching impact on performance. Strategies for portfolio structure appeared to have the greatest degree of flexibility relative to other strategic components.

Data Services at Armistead

Data Services provides flexible, scalable data processing and information storage to the fast-food industry. Sales have grown steadily, but the company has operated at a loss since its founding five years ago. Data Services management is enthusiastic about the company's prospects. The chief executive of Armistead, the insurance company that owns Data Services, is under pressure from corporate officers to slough off the subsidiary. A business analysis is done not only to help the CEO decide whether to continue investment in Data Services, but also to determine if the company is well managed. Information includes the day-to-day operations of Data Services, its sales process, profit and loss statement, revenue and expense analysis, and cost allocations.

The Impact of Brand Delisting on Store Switching and Brand Switching Intentions

A tool retailers often use to improve their negotiating position with brand manufacturers is to delist – or threaten to delist – the manufacturers’ brand. Because brand manufacturers rely mainly on retailers to sell their products to consumers, a brand delisting will cause a sales loss for the brand manufacturer. Therefore, many brand manufacturers feel enormous pressure to give in and improve buying conditions to favor the retailer. The question thus emerges: Can a brand manufacturer resist a retailer's threat to delist its brand(s)? If a brand delisting severely hurts retail sales, it is easier for a brand manufacturer to resist. The authors study the impact of brand delistings on store switching and brand switching using a controlled online experiment and in-store shopper survey. They develop and test a conceptual model with several antecedents of consumers’ reactions to a brand delisting and conclude that brand equity, market share, and the products’ hedonic level drive store and brand switching.

Supply chain contracts with capacity investment decision: Two-way penalties for coordination

Supply chain contracting has been discussed usually under the two compliance regimes, forced and voluntary. Various contracts show different coordination characteristics in these two regimes. However, in practice, the enforcement of contracted quantities in case of forced compliance is always an issue of concern. We propose a price compliance regime for contract where the penalties, in the form of price for non-compliance on quantity, are enforceable on both parties. In this paper, we model a contract where a supplier needs to build capacity before demand is realized under the proposed price compliance regime. A need for investment in capacity can be of the form of new capacity installation or capacity enhancement or updation, and is prevalent in practice, especially in industries that witness short product life cycles, have a high rate of new product launches or deploy high technology. When a supplier makes an investment decision under uncertainty of demand, she might under-invest in capacity. This is a major concern for a manufacturer, since it directly leads to loss of sales. We include the capacity and cost to build the capacity as variables in the contract modeled and analyze how the manufacturer can influence the capacity decision of the supplier with the given contract. We analyze the impact of various penalty parameters on the supplier's capacity decision, supply chain efficiency and relative allocation of supply chain profit across partners. Further, we consider a special case of uniformly distributed demand and find analytical closed-form conditions for a sub-set of coordinating contracts. We also consider a special case where the buyer and supplier arrive at a consensus on capacity-related decision and capacity is verifiable by the buyer.

The impact of collaborative store ordering on shelf availability

PurposeThis paper aims to focus on the store ordering and replenishment practices which appear to be the major cause behind the problem of out‐of‐stock situations. A collaborative store replenishment practice, enabled by an internet‐based platform is examined. By enabling information and knowledge sharing between retail store managers and suppliers' salesmen, this practice leads to increased order accuracy and, as a result, to fewer out‐of‐stock situations.Design/methodology/approachThe research presented in this paper has been empirical in nature, involving a field experiment with a major retailer and several suppliers in Greece. Pre‐ and post‐experiment measurements were conducted and the quantitative results were statistically analyzed in order to assess the impact of collaborative store ordering on shelf availability. The quantitative measurements were repeated over several years, offering a longitudinal view on the experiment. Qualitative findings from the field experiment are also discussed.FindingsThe empirical results from the field experiment show a reduction in out‐of‐stock situations by more than 50 percent combined with no significant statistical variation in total observed inventory levels. Qualitative findings regarding the practical aspects of the process as well as organizational issues are also acquired.Originality/valueLow shelf availability and the respective sales loss is one of the major issues retailers and suppliers face today. This paper examines a new replenishment process, involving supplier‐retailer collaboration supported by daily information sharing of POS data and other information over an internet platform, which leads to increased shelf availability by addressing one of its major causes. Thus, the empirical results presented in the paper have important implications for practitioners. In addition, the paper contributes from a methodological perspective to the academic community, by describing the way the field experiment was conducted and the quantitative results were analyzed as a means to evaluate a new business practice and Internet‐based collaboration platform.

News and Notes

News and Notes

Online music piracy's controversy: pay sites versus free, who will prevail?

Online piracy may substantially undermine intellectual property rights of digital goods. There is much controversy concerning the issue of music piracy over the internet and the implementation of new information technology in Customer Relationship Management (CRM) with the rebirth of Napster and other pay sites. In particular, the exchange of Peer-to-Peer (P2P) electronic commerce is fast gaining acceptance in the user community. This paper concentrates on the music industry. In recent years, with the rapid growth of the internet, the situation of music piracy has become increasingly serious. File-sharing technologies have created new market dynamics and posed a great challenge to the music industry to try and retain customers. Consumers have created anonymous online networks to exchange audio files at little cost. This has led to millions of shared, illegal copies of music files and related sales losses to the industry. Legal efforts to counter this trend have lagged the advances in technology. Factor analysis and related hypothesis-testing procedures of 285 professionals in the service sector in the Pittsburgh, PA have uncovered several interesting scenarios of traditional music store selling with those of online-based strategies.

Analyzing price and product strategies with a comprehensive system dynamics model—A case study from the capital goods industry

Price reductions and/or product enhancements are widely seen as appropriate ways to increase market share. However, the key findings of this analysis demonstrate the opposite: decreases in price combined with product enhancements can lead to substantial loss in sales revenue and, ultimately, profit. The discussion draws on findings from a comprehensive system dynamics model, which has been developed in a major company in the capital goods industry. The purpose of this research is to analyze the price and product strategies in the capital goods industry. In the case company, testing intuitive beliefs with the help of a formal system dynamics model proved to be beneficial in the strategic decision-making process. The model had a significant impact on the case company, especially when challenging basic assumptions about mechanisms of markets and competition.

Modified atmosphere packaging of fresh meats–sudden partial adaptation caused an increase in sustainability of dutch supply chains of fresh meats

AbstractIn the past decade, a major transition evolved in the Dutch fresh meat industry with ramifications for the entire meat business. In 1995, more than 95% of all fresh meat products for consumers were either sold loose or packed in the traditional way, i.e. on a white styrofoam tray with stretch wrap. Almost a decade later, about half of the meat industry has adapted the modified atmosphere packaging (MAP) technology. Strikingly, the first trials with this technology had already been conducted in The Netherlands in 1964, but it took four decades for the technology to conquer the Dutch meat industry. This paper argued that the partial adaptation of MAP diminished the product losses in fresh meat sales and hence the environmental impact of meat production and consumption. Copyright © 2007 John Wiley & Sons, Ltd.

The Impact of a Product-Harm Crisis on Marketing Effectiveness

Product-harm crises are among a firm’s worst nightmares. A firm may experience (i) a loss in baseline sales, (ii) a reduced own effectiveness for its marketing instruments, (iii) an increased cross sensitivity to rival firms’ marketing-mix activities, and (iv) a decreased cross impact of its marketing-mix instruments on the sales of competing, unaffected brands. We find that this quadruple jeopardy materialized in a case study of an Australian product-harm crisis faced by Kraft peanut butter. We arrive at this conclusion by using a time-varying error-correction model that quantifies the consequences of this crisis on base sales, and on own- and cross-brand short- and long-term effectiveness. The proposed modeling approach allows managers to make more informed decisions on how to regain the brands’ pre-crisis performance levels.

European printed circuit board (PCB) technology and environmental trends: their impact on PCB supply from China

PurposeTo give an introductory overview of the key issues that need to be addressed when manufacturing PCBs in China for the European market.Design/methodology/approachThe paper gives an overview of key issues impacting manufacturers supplying printed circuit boards into Europe. The demand for higher performance and the need to comply with legislation such as the European RoHS Directive are posing significant challenges for non‐European fabricators. The paper introduces some of the key issues including materials substitution, the move to lead‐free assembly and new laminate requirements in the context of increasingly stringent quality and performance criteria.FindingsLow cost manufacturers in China supply a large proportion of the PCBs used by the European electronics industry. If this supply is to continue as board complexities and performance requirements increase, PCB fabricators will need to pay careful attention to a wide range of issues including European legislation, choice of laminates, reliability and manufacture in compliance with industry specifications. Failure to meet these requirements will be costly and could result in the loss of European sales opportunities.Research limitations/implicationsThere are significant challenges for overseas board manufacturers wishing to supply an increasingly demanding European market. Strategic alliances with partners in Europe can offer one route for better understanding these demands and meeting customer requirements without incurring unnecessary costs.Originality/valueThe paper attempts to highlight some of the issues and potential problem areas that need to be addressed when using low cost manufacturing routes to supply high quality circuit boards into the European market.

The Short- and Long-Term Impact of an Assortment Reduction on Category Sales

In a collaborative study with a major Dutch retailer, the authors assess the short- and long-term effects of a 25% item reduction on category sales. On an aggregate level, a major assortment reduction can lead to substantive short-term category sales losses but only a weak negative long-term category sales effect. Short-term category sales losses are caused mainly by fewer category purchases by former buyers of delisted detergent items. However, the results also show that the assortment reduction attracts new category buyers. These new buyers partially offset the sales losses among former buyers of the delisted items. The collection of supplemental process data on assortment perceptions and actual search time in the test stores before and after the assortment reduction provides evidence that delisting results in an increase in perceived search efficiency and a decrease in actual search time.

Escape from Designers' Dilemma on Creeping Featurism

Creeping featurism is a serious problem that provides a surplus of complexity to users, and causes user dissatisfaction and eventual sales loss. The purpose of this study is to find the opposite of creeping featurism. In examining the situation of design practitioners, this paper discusses why it is hard to get out of the design traps of creeping featurism and why simplicity is not enough for achieving the opposite. It was suggested that we need new design management strategies to prevent and escape creeping featurism.

Evaluating the Effects of EAS on Product Sales and Loss: Results of a Large-Scale Field Experiment

Retailers and suppliers suffer large sales losses because certain popular and profitable (key) merchandise items are lost and chronically unavailable for customer purchase. A combination of poor item handling, process design, and/ or execution, as well as theft, creates item loss and low on-shelf availability. Further, merchandise losses tend to cluster by item, location, and time. Retailers attribute a large part of key item loss to self-use (non-expert) shoplifting, and deploy electronic theft control systems, such as hidden electronic article surveillance tagging (EAS), to help deter sales floor theft. Earlier studies report on the efficacy of EAS on item loss, but the studies looked at visible tags and often suffered from relatively weak designs. This paper discusses a 21-store quasi-experimental field test of several hypotheses derived from retailer assumptions about the effects of hidden EAS tags on key item losses, shelf availability, and store sales. Results of the investigation indicated that source-tagged EAS did not reduce item loss, increase item on-shelf availability, or increase item store-level sales in the test (EAS protected) stores at a greater level than was found in the non-EAS control stores (using differences of differences analysis). Explanations for the lack of hidden EAS tag efficacy are explored and include suggestions for improving EAS impact.

Sales Responses to Recalls for Listeria monocytogenes: Evidence from Branded Ready-to-Eat Meats

The extent to which brand names insulate firms from the spillover effects of food safety events is a potentially important difference between branded products and the undifferentiated commodity products examined in earlier studies. This paper uses empirical models to measure sales losses experienced by frankfurter brands following a recall for a foodborne pathogen. Results indicate sales of recalled brands declined roughly 22% after a recall. Brand recovery, on average, began two to three months after a recall and sales approached prerecall levels within four to five months. There is no evidence that nonrecalled brands experienced sales losses.

Detection of Pfiesteria spp. by PCR in surface sediments collected from Chesapeake Bay tributaries (Maryland)

In 1997 blooms of Pfiesteria piscicida occurred in association with fish kills and human health problems in tributaries of the Chesapeake Bay (Maryland) and the scientific and media response resulted in large economic losses in seafood sales and tourism. These events prompted the Maryland Department of Natural Resources (MDNR) to begin monitoring for Pfiesteria spp. in water column samples. Real-time PCR assays targeted to the 18S rRNA gene were developed by our laboratories and utilized in conjunction with traditional microscopy and fish kill bioassays for detection of these organisms in estuarine water samples. This monitoring strategy aided in determining temporal and spatial distribution of motile forms of Pfiesteria spp. (i.e. zoospores), but did not assess resting stages of the dinoflagellates’ life cycle. To address this area, a 3-year study was designed using real-time PCR assays for analysis of surface sediment samples collected from several Chesapeake Bay tributaries. These samples were tested with the real-time PCR assays previously developed by our laboratories. The data reported herein suggest a strong positive association between presence of Pfiesteria spp. in the sediment and water column, based on long-term water column monitoring data. P. piscicida is detected more commonly in Maryland's estuarine waters than Pfiesteria shumwayae and sediment ‘cyst beds’ may exist for these organisms.

Economic impacts of Pink Hibiscus Mealybug in Florida and the United States

This paper estimates the expected annual impacts of the Pink Hibiscus Mealybug infestation on the economies of Florida and the rest of the United States. The approach involves a Markov chain analysis wherein both short run and long run expected damages from infestation are calculated. Use is made of the CLIMEX model that predicts the potential pest-establishment regions in the US. While predictions based upon the CLIMEX model extend the scope of damages beyond Florida, the damages are significantly dependent upon the rate of arrival and detection of species in those regions. Damages are significantly higher when a longer time horizon is considered. When nursery owners bear the full cost of quarantines in the form of loss of sales and treatment costs of infected plants, the cost-effectiveness of quarantines as a regulatory tool is diminished. The long run propensity of the system, in terms of the fraction of time spent in the possible ‘states’ of infestation and control, determines the extent of damages, and not the annual value of crops that could be potential hosts to the pest.

The Effect of Product Assortment Changes on Customer Retention

This research investigates the impact of a large-scale assortment reduction on customer retention, utilizing a model we develop to explore the effect on sales at both the store level and the category level simultaneously. We apply our model to a data set provided by an online grocer. The data contain detailed household purchase records for every category in the store. Our results indicate that the reduction in assortment reduces overall store sales, a result that contrasts with that of all of the recent studies on assortment reductions (Food Marketing Institute. 1993. Variety or duplication: A process to know where you stand. Prepared by Willard Bishop Consulting and Information resources, Inc., in cooperation with Frito Lay; Drèze, Xavier, Stephen J. Hoch, Mary E. Purk. 1994. Shelf management and space elasticity. J. Retailing 70(4) 301–326; Broniarczyk, Susan M., Wayne D. Hoyer, Leigh McAlister. 1998. Consumers' perceptions of the assortment offered in a grocery category: The impact of item reduction. J. Marketing Res. 35(May) 166–176; Boatwright, Peter, Joseph C. Nunes. 2001. Reducing assortment: An attribute-based approach. J. Marketing 65(July) 50–63; Boatwright, Peter, Joseph C. Nunes. 2004. Correction note for “Reducing assortment: An attribute-based approach.” J. Marketing. Forthcoming). We find the reduction had a negative effect on both shopping frequency and purchase quantity, and we find that the decline in shopping frequency resulted in a greater loss than did the reduction in purchase quantities. We also find that the impact of the assortment cut varies widely by category, with less-frequently purchased categories more adversely affected. The variation in the assortment reduction's impact across categories suggests that managers compare select categories in order to moderate the overall loss in sales.