Saturday, February 6, 2010

Brian asks fun questions.

Brian asks:

Of course the most popular stuff sells out first.” But that’s a feeble explanation. After all, if X is ten times more popular than Y, then you’d expect stores to simply carry ten times as much X as Y. Why would X sell out faster in a blizzard if stores have already taken its greater popularity into account?

Modeled Behavior tackles the issue in terms of shelf space. The question arose when Brian noticed the pattern of gocery shortages when customers stocked up for the Eastern seaboard storm.

I tackle the problem from the distribution network. When one of two equivalent products in is high demand, it is distributed in larger lots without the middleman. The grocery chain codes for the demand differences with lot size adjustments. Equivalent products with less demand are handled by an intermediate warehouse which can keep larger lots, then deliver smaller lots of less demanded good in combination with other goods having the same low demand.

This lack of precision implies that supply and demand have linear adaption only within a small range. Larger lot sizes tend to be delivered less frequently, and assume large shelving space by the grocer. When sudden changes in demand occur, there is no nearby warehouse to draw extra supply.

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