1. Give an example of a recent purchase of an expensive article (hand-phone, camera or notebook computer). Explain your decision-making process, and what source of information did you use in making the decision to buy the article? Introduction: Before we made a purchase decision, there are eight steps of decision making process, they are Problem Recognition, Set-up Standard, Allocate Weights to Criteria, Information Search, Evaluation of Alternatives (Calculation), Select the Best Alternative, Purchase Decision, Post-purchase Evaluation.
Our preferences always affect the decision making process, for example, personality, perception, family pressure and social trend. That’s why there are so many different kinds of product in market for consumer to choose. Consumer can get the related information in 4 ways, they are Commercial Sources, Experiential Sources, Public Sources and Personal Sources. Consumer should choose the best way to get the correct information, because sometimes the source may mislead the consumer and lead to wrong decision making. The following is an example of me how to make choices and get a new mobile.
A. Problem Recognition The old mobile has using for few years since 2007, it is out of fashion and sometimes not works properly, it will switch off automatically over few hours, the outlook of the mobile is also very dirty, it is time to purchase a new mobile. B. Set-up Standard After planning to purchase a new mobile, the following step is to list out the specifications I desired. I am a heavy user of mobile, so I demand high specifications of the mobile. Brand I have used most of the brands of mobile, so I know the quality and after sales services of different brands very well.
Here is the priority of mobile brands I preferred: SAMSUNG > LG > Nokia > Google > SonyEricsson > Motorola > hTC > Apple Price Price is an important consideration factors in buying a mobile, this time I am willing to give out SG$1000 to purchase a perfect mobile. Outlook The outlook of the mobile represent the user’s style and taste, choose a mobile with cyber outlook is a must. Camera I love photo-graphing but I hate to carry many electronic products outside, so the camera of mobile must be in good quality and with flash, Xenon Flash is better. GPS
I like to travel around but I am not good at memorizing the map, GPS can help when I am getting loss. Screen For screen, I prefer at least 3 inch. It is difficult to see the words in the screen if the screen is small. Also, I am a heavy user of mobile, small screen is not good for my eyes for long time using. AMOLED screen is preferred, it can save energy and it is brighter than the normal TFT screen. Connection I like to use mobile to listen songs and check E-mail, so it is a must for the mobile contain WIFI, HSDPA and A2DP. Color Most of the mobiles are in black color, it is too common.
Actually, I love red, so I am looking for a red mobile with high specifications. Control It is convenient to use touch to control the mobile when you are browsing web-site, editing photos, but it is a bit clumsy in typing words. I wish a mobile can get dual control, touch and Keypad. Material The touch of steel is really better than plastic, and steel is not easy to destroy. C. Allocate Weights to Criteria After I listed out all the specifications I desired, I have to give priority to each of the specification according to my preference.
The preference is affected by my personality(control method), perception(the image of mobile, color, shape), family pressure(the money I can spend on mobile), social trend(color, outlook, brand) etc.. Here is my priority: Brand > Outlook > Color > Camera > Material > GPS > Screen > Connection > Control > Price D. Information Search After I got the priority of the criteria, I have to do an information search to find out which mobile in the market is suitable for me. The search can be done in the following sources (Prioritized): . Commercial Sources It includes advertisement, promotion booklet and salesperson. The information from commercial sources is the most reliable. Advertisement includes TV advertisement and magazine, newspaper advertisement. If I got any question about the mobiles, I would ask the salesperson for details, as the salesperson hold the firsthand information. The related booklets are attached on the last page. 2. Experiential Sources Use the mobile in the flagship-shop. First-hand experience will tell the mobile is suitable for you or not. . Public Sources It includes mass media and consumer-rating organization. I always browse the forum to see whether the product is good in comment before I buy the electronic goods. User’s comment is a good reference, but it is not 100% reliable. The related links are in the last page. 4. Personal Sources I will also ask my friends comment if they got the mobile that match my preferred specifications, but this situation is not always exist. The following page is the mobiles I selected after information search. Table1: Mobiles I selected | |[pic] | | | | | |SAMSUNG |I8910 HD | | | | |[pic] | | | | | |SAMSUNG |I8000 | | | | |[pic] | | | | | |LG |GC900 Viewty smart | | | | |[pic] | | | | | | | | | |LG |KM900 | | | | |[pic] | | | | | | | | |LG |BL40 | | | | |[pic] | | | | | |Nokia |N97 mini | | E. Evaluation of Alternatives (Calculation) After doing the information search, I got some selected mobiles in hand, now I have to value the mobile according to the specifications I preferred. Table 2: Evaluation of Alternatives |I8910 HD |I8000 |GC900 |KM900 |BL40 |N97 mini | |Color | | | | | | | |Camera |V | |V | | | | |Material | | | | | | | |GPS |V |V |V |V |V |V | |Screen |V |V |V |V |V |V | |Connection |V |V |V |V |V |V | |Control |V | | | | | | |Price |V |V |V |V |V |V | |Marks |7 |4 |6 | |G7 |660 |$ 7. 0 |$ 4620. 0 | |A1 |1100 |$ 3. 0 |$ 3300. | |H8 |21000 |$ 8. 1 |$ 170100 | |I9 |31900 |$ 7. 2 |$ 229680 | |E7 |755 |$ 6. 9 |$ 5209. 5 | |X2 |24000 |$ 7. 5 |$ 180000 | |A8 |814 |$ 4. 3 |$ 3500. | |C2 |5490 |$ 6. 2 |$ 34038 | |B4 |972 |$ 3. 8 |$ 3693. 6 | |M8 |7950 |$ 4. 4 |$ 34980 | |B1 |1518 |$ 2. 5 |$ 3795. 0 | |M9 |2000 |$ 2. 0 |$ 4000. | |C3 |7340 |$ 4. 5 |$ 33030 | |D4 |2625 |$ 1. 6 |$ 4200. 0 | |W2 |3220 |$ 8. 7 |$ 28014 | |X3 |955 |$ 4. 6 |$ 4393. 0 | |E5 |600 |$ 8. |$ 4800. 0 | |F6 |378 |$ 9. 0 |$ 3402. 0 | |W1 |865 |$ 5. 9 |$ 5103. 5 | |Y1 |26000 |$ 9. 2 |$ 239200 | |TOTAL |139152 | |$ 999058. 8 | # accurate to two decimal places Table 4: ABC Analysis Item |Total Stock (Unit) |Unit Price |Total Cost | |Y1 |26000 |13000 |2. 00 | |I9 |31900 |2500 |12. 75 | |X2 |24000 |3000 |8. 00 | |H8 |21000 |2300 |9. 13 | # accurate to two decimal places Every-organization will keep about 3 months stocks to meet consumer’s demand and prevent shortage, it is a holding reference.
Over 3 months holding months, it will cause the problems in the above. Item Y1’s holding month is 2, it is acceptable and it is good to keep few months stocks, nothing special. Item I9’s holding month is 12. 75, it is over 4 times than the holding reference. For any reasons, 1 year holding stock is totally not acceptable and the problems of expire and out-of-date should be arisen. There should be some problems of inventory decision and the operation management. A further detailed analysis should be followed as 1 year stock holding will cost a lot. Item X2 and H8’s holding months are 8 and 9. 13, it is longer than the reference, so it is not acceptable.
To prevent the product expire, it is better for the organization to held some special sales, for example, 30% discount or buy one get one free. Although it may cause loss as the selling price is lower than the production cost, the loss will be smaller than when the products are expired or out-of-date. To conclude, 3 items out of 4 in Class A are longer than the reference holding month, the operating system of the organization obviously fails to work. It is a must to find out the problems or even re-organize the operation system, change the staffs if needed. If not, the organization will be shuttled down soon as capital deficit. Table 6: Class B Item Holding Months Item |On Hand Stock (Unit) |3 Months Average Output (Unit) |Holding (month) | |M8 |7950 |2650 |3. 00 | |C2 |5490 |680 |8. 07 | |C3 |7340 |1468 |5. 00 | |W2 |3220 |3000 |1. 7 | # accurate to two decimal places Item M8’s holding month is 3, it is equal to the holding reference, and it is acceptable. Item C2’s holding month is 8. 07, it is too long, organization should find a method to sell all the product out quickly. The most effective method is reducing the price, advertisement also can help. If the products still cannot be sold, the organization may decompose it and use the materials to make new products. Or, the organization can donate all the stocks to the charity, it can higher the reputation of the organization. Item C3’s holding month is 5, it is 2 moths more than the reference holding month.
If there is a reason for the 5 months holding, such as Lunar Chinese New Year sales, expected shortage in the following months etc. , then 5 months holding period is acceptable, if not, we should find out the problems of long holding period and reduce the holding stock. Item W2’s holding month is 1. 07, it is normal. In conclude, the stock holding situation is acceptable,2 items’ holding period are within the holding reference, but it is not very healthy, the organization should seek to shorter the holding month. Conclusion Pareto Analysis is a very powerful tool to manage the inventory, it shows the holding month of different items clearly and the organization can take corresponding actions.
The average holding month for both Class A items and Class B items is 6 months, it is double amount of the holding month reference, 3 months. And in Class A, there is an item, I9’s holding month is over 12 months, it cannot be accepted. The organization should re-organize the operating system and change the managers or re-train them. Also, they should learn how to make inventory decisions. Basically, inventory decision includes “What items to hold in stock”, “What quantity to hold in stock” and Reorder Point. “What items to hold in stock” refers to the organization should choose the right items to hold in stock. For example, organization should hold more the best-selling products. Organization should hold the seasonal product in corresponding period.
If the organization expected there will be a shortage of product or increase in the production cost, then the organization can hold more stocks. It ensures the organization have products to sell. “What quantity to hold in stock” means organization should recognize what quantity of different products should be hold. It can be done by take average from previous sales volume. Reorder Point refers to when should you order the products. Normally, organizations are recommended to reorder when the product remains 1/2 in stock, because ordering and transporting the product takes time. Order the product too early will cause over stock and not enough space to stock the product.
So, an accurate reorder point is important for any organizations. References: 1. SAMSUNG, www. samsungmobile. com 2. LG, www. lgmobile. com 3. Nokia, www. nokia. com 4. Jay Heizer, Barry Render, Operation management (8th edition), Upper Saddle River, NJ : Pearson Prentice Hall, 2006 5. Sunil Chopra, Peter Meindl, Supply chain management : strategy, planning, and operation, Upper Saddle River, N. J. : Prentice Hall, 2001 6. Stevenson, William J. , Operations management, Singapore : McGraw Hill, 2005 7. Mobile01, http://www. mobile01. com/index. php Attachments 1. LG GC900 Viewty smart promotion booklet 2. LG KM900 Arena promotion booklet 3. LG BL40 newchocolate promotion booklet