153 HW 2 - IEOR 153 HW 2 Eddie Lo 19483002 1. Textbook...

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IEOR 153 HW 2 Eddie Lo 19483002 1. Textbook Questions 13, 15, 16 13) There are several penalties of facing a highly variable demand. By the EOQ equation, the higher the variability in demand, the higher the safety stock levels need to be and the higher the holding costs will be. Furthermore, a high variability in demand makes forecasting difficult as there needs to be constant reviews of how much inventory to order to plan for future events. Advantages to highly variable demand include fewer competitors (as the competitors will be unable to accurately forecast demand and meet service level needs). 15) Demand for a product in two stores would be positively correlated if demand from one market is greater than average and demand from the other market is also greater than average. So, if both stores offer similar products and services, then demand is positively correlated. Demand would be negatively correlated if one store hoards sales from the other store via better location or promotion. 16) At the beginning of the Walkman’s lifecycle, since it was one of the first portable music players of its kind, market testing and market surveys under market research method would be most appropriate. In the
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This note was uploaded on 05/08/2011 for the course IEOR 153 taught by Professor Staff during the Spring '08 term at University of California, Berkeley.

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153 HW 2 - IEOR 153 HW 2 Eddie Lo 19483002 1. Textbook...

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