Accuracy of initial forecast, Corporate Finance

Assignment Help:

The bulk of products is produced in South East Asia, and hence the lead time to Western retailers is long. The typical lead time from fabric manufacturers is 3 months (Gutgeld and Beyer, 1995). The speci?c mail order company that we study faces lead times of 6-14 weeks. Long lead times dictated by powerful suppliers and strong competition fromother retailers trying to secure enough production capacity force retailers to commit to initial order quantities long, usually several months, before the start of the selling season. We remark that there are a few well-known apparel/fashion retailers like Zara and Hennes & Mauritz that have deviating strategies based on local manufacturing. However, for the large majority of apparel retailers, who have a low-cost focus and often sell private label products, the situation is as we described.

So, formost products that an apparel retailer sells in any season, a demand forecast is needed well before the start of the season, when no historic demand data is available. An apparel retailer's success hinges to a large extent on the accuracy of those preseason forecasts on which the initial orders are based. These initial orders comprise the bulk of the total volume ordered (Fisher and Raman, 1999).

Additional in-season replenishment opportunities, if available, are essentially emergency replenishment opportunities and only serve to prevent shortages resulting frompossible initial underestimation of demand. We refer interested readers to Mostard and Teunter (2006) for a further discussion and analysis of inventory control issues. In this paper, the focus is on forecasting.


Related Discussions:- Accuracy of initial forecast

Npv, An investment under consideration has a payback of seven years and a c...

An investment under consideration has a payback of seven years and a cost of $320,000. If the required return is 12 percent, What is the worst-case NPV? Explain...

Differences between fundamental analysis, Question: (a) Distinguish b...

Question: (a) Distinguish between open-ended funds and closed-ended funds. (b) Briefly explain the differences between fundamental analysis and technical analysis. (c)

Show the different functions of a bill of lading, CAC Co Ltd is engaged in ...

CAC Co Ltd is engaged in the import and distribution of air conditioners from China. The business has been in existence since year 2000 and the exporter has been trading 50% on do

Calculate the true share price, GeKay stock is worth $100, or $80, or $60. ...

GeKay stock is worth $100, or $80, or $60. Investors believe that each case is equally likely so that the current share price is the average, namely $80.  Suppose Mr. Satanak, th

Time Value of Money, Assume that the average age of the worker is 25 years ...

Assume that the average age of the worker is 25 years old. Typically, retirement is at 65. The firm provides a $2000 monthly payment for 25 years for retirees (i.e., 300 monthly

Net book value, Flower stands whose beneficial life spans a period of eight...

Flower stands whose beneficial life spans a period of eight years was purchased on 1 August  2011 for $12,000.   It can be sold as scrap for $2,000.  The business has a financial y

Bond valuation, An investor buys a French government, 10-year bond, paying ...

An investor buys a French government, 10-year bond, paying annual coupon of 4.5%. Face value = 1000. The investor is unsure of his investment horizon and considers 5 horizons: 5, 6

The credit term "2/45 net 90" indicates, Ask questThe credit term "2/45 net...

Ask questThe credit term "2/45 net 90" indicatesion #Minimum 100 words accepted#

What do you understand by internal control, Question: The District Cash...

Question: The District Cash Offices represents the decentralisation of services provided by the Accountant - General Department, specially in the collection and accounting of r

Mergers and acquisitions had on a customers access to branc, What effect ha...

What effect have mergers and acquisitions had on a customers access to branches? A: A branch closing which has resulted from a merger need not necessarily mean a lost relations

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd