Matching Supply with Demand: An Introduction to Operations Management Gérard Cachon ChristianTerwiesch All slides in this file are copyrighted by Gerard Cachon and Christian Terwiesch. Any instructor that adopts Matching Supply with Demand: An Introduction to Operations Management as a required text for their course is free to use and modify these slides as desired. All others must obtain explicit written permission from the authors to use these slides.

O’Neill’s Hammer 3/2 wetsuit

Hammer 3/2 timeline and economics

Oneill data

Oneill data

Forecasts vs actual graph Forecasts and actual demand for surf wet-suits from the previous season

Empirical distribution function for the Hammer 3/2 using historical A/F ratios

A portion of the Standard Normal Distribution Function Table, F(z).

Empirical vs normal demand distribution Empirical distribution function (diamonds) and normal distribution function with mean 3192 and standard deviation 1181 (solid line)

Balancing the risk and benefit of ordering a unit

Hammer 3/2's expected loss sales table if the empirical distribution is the demand forecast

Performance measures relationship Expected demand, m Fill rate If Normal demand, s Expected sales Loss function table Expected lost sales Order quantity, Q, and, if Normal demand, z = (Q – m)/s Exp. left over inventory Expected profit In-stock probability Distribution function table Stockout probability Price, cost, salvage value

Service measures of performance

Pareto curve