Impact of demand characteristics on the profitability of a purchasing strategy

The problem presented in this article concerns the impact of demand characteristics for consumer goods on the profitability of purchasing strategy, including the choice of both the source of supply and transport technology (deliveries in containers by sea, rail, air, and road transport). To assess the profitability of applying a specific strategy, the author developed a model to conduct simulations using the Monte Carlo approach for two demand distributions (Gaussian and Gamma), various sales fluctuations, and changes in demand during the delivery time. Calculations were carried out considering the costs of transport, storage, capital costs related to maintaining stocks, and costs of lost sales. The simulation results show that the greater the fluctuations and the lower the predictability of the demand, the greater the profitability of deliveries using air transport and local deliveries. However, concrete decisions depend on knowledge of the consequences of making these decisions and whether appropriate cost accounting is used in enterprises. The results of the calculations also indicate that the strategy of outsourcing production in low-cost countries will, in many cases, become unprofitable if production costs in these countries increase even slightly.