IntroductionOn November 8, 2012 the Movado Company opened a store at the San Francisco Premium Outletsin Livermore, California to sell discontinued or overstocked models of its company-owned andlicensed watch brands. During the first week of the grand opening, sales exceeded companyexpectations by 200 percent. Nonetheless, the store ran out of boxes for its flagship Movadowatches, and many customers refused to accept Movado watches in boxes designed for otherbrands. Some customers agreed to stop by the store to pick up their box when a new shipmenteventually arrived, while others downgraded to less expensive brands, for which boxes wereavailable. However, many customers refused to buy watches without the correct box and leftwithout purchasing anything.The box shortage was exacerbated by Hurricane Sandy, which hit the East Coast includingParamus, New Jersey where the Movado Company is headquartered. Since several power outagescut all means of communication in the area, personnel at headquarters were unable to approve thestore's request for additional boxes, so the Livermore store did not receive its order for more boxesuntil two days after Christmas.Since this was a new store, management had not had any past data from which to forecast customerdemand. Now the unanticipated problems of the grand opening raised questions. Could the storeexpect sales to continue to grow at the same rate as at the beginning? Could the store meet its salestarget? What other disruptions might hinder growth for the store?Inventory ChallengesMovado Company has two major selling seasons including: (1) the spring season comprises schoolgraduations and several holidays; and (2) the winter season includes the Christmas and holidayseason (Movado Group Inc., 2022). The main drivers for this fluctuating, seasonal demand areholidays: Christmas, Father's Day, and graduations. Months without holidays - notably Januarythrough April - have lower sales.The Movado Company Store in Livermore opened at the beginning of Season 2, which is thebiggest selling season of the year. One problem immediately manifested itself: inadequate storagecapacity. The store measures 1600 square feet, of which 20 square feet are used to store Movadoboxes. Each box weighs approximately 1 pound and is about half the size of a shoe box. They aremade of faux leather, which can be damaged by exposure to moisture, so they must be stored in a dry area. However, the local fire code restricts the height in which the boxes may be stacked, sothe new store has only enough storage capacity for 200 boxes.When the store first opened it had 500 Movado boxes in stock. The assumption was that thesewould be sufficient for the entire season. Those that would not fit in the storage area had to be keptsitting around the sales floor, where they looked so untidy that they undermined the elegantambiance that customers expect from a luxury store. However, the problem of an over-supply ofboxes was quickly reversed. The store sold over 500 watches in December alone, so the 500 boxeswere quickly used up. Since sales remained brisk, the store lacked Movado boxes for much of theseason. To counter this, management offered to ship the correct box directly to buyers of Movadowatches at no charge, even though each shipment cost the store $15.The other problem was that management had no way to update their inventory in a timely manner.For example, management did not have a systematic method of tracking the variety and numberof watch boxes in their inventory. Therefore, orders were put in only when management realizedthat they were low on the boxes. In general, watch boxes can be order through corporateheadquarters whenever necessary. There is no cap on the maximum number of boxes that can beordered.Any solution to these dilemmas would require the development of an inventory model based onaccurate demand forecasting while also handling the difficulties posed by the limited storagecapacity at the Movado Company Store in Livermore.Discussion questions1. Given the limited historical data available, what other ways can the store predict futuresales? In other words, what qualitative approaches would you use to forecast future demandfor Movado watches?

Forecasting future demand is critical in any retail business, but it can be difficult when…

dry area. However, the local fire code restricts the height in which the boxes may be stacked, so the new store has only enough storage capacity for 200 boxes. When the store first opened it had 500 Movado boxes in stock. The assumption was that these would be sufficient for the entire season. Those that would not fit in the storage area had to be kept sitting around the sales floor, where they looked so untidy that they undermined the elegant ambiance that customers expect from a luxury store. However, the problem of an over-supply of boxes was quickly reversed. The store sold over 500 watches in December alone, so the 500 boxes were quickly used up. Since sales remained brisk, the store lacked Movado boxes for much of the season. To counter this, management offered to ship the correct box directly to buyers of Movado watches at no charge, even though each shipment cost the store $15. The other problem was that management had no way to update their inventory in a timely manner. For example, management did not have a systematic method of tracking the variety and number of watch boxes in their inventory. Therefore, orders were put in only when management realized that they were low on the boxes. In general, watch boxes can be order through corporate headquarters whenever necessary. There is no cap on the maximum number of boxes that can be ordered. Any solution to these dilemmas would require the development of an inventory model based on accurate demand forecasting while also handling the difficulties posed by the limited storage capacity at the Movado Company Store in Livermore. Discussion questions 1. Given the limited historical data available, what other ways can the store predict future sales? In other words, what qualitative approaches would you use to forecast future demand for Movado watches?

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...