SCM 386 – Simulation Report 2 Team Michigan
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Eastern Michigan University *
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386
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Industrial Engineering
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Jan 9, 2024
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SCM 386 – Simulation Report 2
Simulation Report 2
Team Michigan
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SCM 386 – Simulation Report 2
Hormone View and Circulation Monitor Pricing
For the second simulation, our company had new opportunities to sell and buy inventory from other teams. The first thing we did when the simulation opened was read the PDF that was provided to us and explore the simulation to get a better understanding of how we would be able to initiate and receive shipping agreements. We were aware that before agreeing to a shipping agreement we would need to review the terms as a team. If the terms were not acceptable then we would revise them and send a counterproposal back or reject the proposal outright. After gaining a comprehensive understanding, we decided to proceed with pricing our initial product, Hormone View (H+). Using our knowledge from the previous simulation game, we knew that our H+ products sold best in the $290-310 price range. We initially set a price of $300 (Table 3), then adjusted it slightly based on scoreboard data, available units (Table 1), retail sales (Table 2),
and competitor pricing (Table 1). For example, on day 299, we noticed our competitors were lowering their prices and we were losing customers, so we decided to adjust our prices to stay competitive.
For the unique product, our team was assigned a ‘Circulation Monitor’ again. In the previous simulation, we knew our ‘Circulation Monitor’ sold best in the $550-580 price range. We set the price at $550 but on day 218, we noticed that our products were selling rapidly so we increased our prices to $560. On day 299.001 we realized that we were still selling a high volume of monitors, so we increased the price to $580. We made this decision by using the information from the scoreboard, the units on hand (Table 4), retail sales (Table 5), and our competitor's pricing (Table 4). The price range of $550-580 was maintained due to its high revenue without causing customer loss, as shown in (Table 6). Our biggest competitors were Wisconsin, Texas, and Iowa. Through an intense battle for the top five spots on the scoreboard, we ended up in fourth place. We had a net cash position of $4,037,129.00, which was just shy of $200,792.00 for third place, and took out $0.00 for emergency loans.
Reorder Point
The process of determining the reorder point in our simulation was strategically considered, with a clear objective to maintain an adequate safety stock level. This was crucial to safeguard against any potential disruptions that might arise from new shipping agreements during the simulation period. Initially, we set the reorder point at 250 units, but upon further 2
SCM 386 – Simulation Report 2
analysis, we concluded that this figure was somewhat conservative. To optimize our inventory levels and maintain agility in our operations, we reduced the reorder point to 150 units (Table 7).
This adjustment provided us with a modest safety net, allowing us to capitalize on favorable deals without the risk of overstocking.
Our decision proved to be fruitful when our 'Circulation Monitor' product garnered significant demand in the Wisconsin market. The product's success led to an increased frequency
of requests from the region, prompting us to re-evaluate our inventory strategy once more. To ensure uninterrupted supply and customer satisfaction, we incrementally raised our reorder point.
This proactive measure was aimed at preventing stockouts, which could lead to not only missed opportunities but also potential penalties associated with delayed product deliveries (Table 8). By fine-tuning our reorder point, we were able to strike a balance.
Shipping Agreements and Payments To Source
To enhance our shipping agreements, we initially encountered a challenging learning curve. An inadvertent procurement of two batches, each comprising 100 units of the Hormone View (H+) inventory from Ohio, resulted in an $80,800 investment in products that, to our dismay, were not marketable (Table 9). This early miscalculation in the simulation was a significant setback. However, this experience significantly sharpened our strategic approach. With heightened vigilance, we meticulously scrutinized future purchases from competitors to ensure they would not adversely impact us during the simulation.
As the simulation progressed, we seized an opportunity to negotiate with Wisconsin, offering our ‘Circulation Monitor’ at a competitive price of $140 for each batch of 100 units (Table 10). This strategic pricing was met with enthusiasm, resulting in Wisconsin securing 11 batches throughout the simulation, amounting to a $154,000 expenditure on their part. The culmination of this venture was notably profitable for us, netting a commendable $54,000 in profit from the sale of our product. Additionally, we made $106,869 in royalty revenue from our facility in Wisconsin for the sale of our ‘Circulation Monitor’ (Table 11). This turn of events not only remedied our initial misstep but also underscored the importance of adaptability and strategic planning in business simulations.
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SCM 386 – Simulation Report 2
Table 1: Hormone View Units on Hand and Competitor Pricing
Table 2: Hormone View Retail Sales
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SCM 386 – Simulation Report 2
Table 3: Hormone View Retail Pricing
Table 4: Circulation Monitor Units on Hand and Competitor Pricing
Table 5: Circulation Monitor Retail Sales
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SCM 386 – Simulation Report 2
Table 6: Circulation Monitor Retail Pricing
Table 7: Circulation Monitor Reorder Point
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SCM 386 – Simulation Report 2
Table 8: Circulation Monitor On-Hand Inventory
Table 9: Ohio Shipping Agreement
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SCM 386 – Simulation Report 2
Table 10: Wisconsin Shipping Agreement
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SCM 386 – Simulation Report 2
Table 11: Royalty from Sale of Circulation Monitor
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