Cost rates

Inventory cost rate (smart phone)

Product value = $500

Liquidation value = $0.00
Life-cycle = 26 weeks
Capital return rate = 8% of product value

Inventory cost /week/unit = Annual capital cost/52 + (product value - liquidation value) / Product life-cycle
$20.00

Inventory cost rate (feature phone)

Product value = $200

Liquidation value = 0
Life-cycle = 26 weeks
Capital return rate = 8% of product value

Inventory cost /week/unit = Annual capital cost/52 + (product value - liquidation value) / Product life-cycle
$8.00

FedEx freight cost (overnight) = $12

Overnight/standard 2D = 2.5
Volume discount = 50%
Standard freight rate = $2.40

First pick $1
followup picks $0.10
 Data for an average store

Weekly Average On-hand inventory

Hot-Smart 136.20 145.64
Hot-Feature 84.54 96.30
Cold-Smart 2.02 24.63
Cold-Feature 6.27 17.44

e) / Product life-cycle
The Average Store
160.00

140.00

120.00

100.00

80.00

60.00
e) / Product life-cycle 40.00

20.00

0.00
Hot-Smart Hot-Feature Cold-Smart Cold-Feature
Weekly Average On-hand inventory
-Feature
An Avrg
store
Hot Smart Hot feature
Pull Push Pull Push
Onhand
inventory Onhand
level 5 145.6363636 inventory level 5 96.3030303
Inventory
cost per Inventory cost
week $100.00 $2,912.73 per week $40.00 $770.42
Avrg wkly Avrg wkly
sales 136.2033898 136.2033898 sales 84.54237288 84.54237288
Shipping
cost per Shipping cost
week $1,634.44 $326.89 per week $1,014.51 $202.90
Pick/pack
cost per Pick/plack cost
week $136.20 $14.52 per week $84.54 $9.35
Total cost Total cost per
per week $1,870.64 3254.135747 week 1139.050847 982.6801746
Savings 42.51% Savings -15.91%

Cold Smart Cold feature

Pull Push Pull Push
Onhand
inventory Onhand
level 2 24.63157895 inventory level 2 17.44
Inventory
cost per Inventory cost
week $40.00 $492.63 per week $16.00 $139.52
Avrg wkly Avrg wkly
sales 2.023255814 2.023255814 sales 6.266666667 6.266666667
Shipping
cost per Shipping cost
week $24.28 $4.86 per week $75.20 $15.04
Pick/pack
cost per Pick/pack cost
week $2.02 $1.10 per week $6.27 $1.53
Total cost Total cost per
per week 66.30232558 498.5897185 week 97.46666667 156.0866667

Savings 86.70% Savings 37.56%

 100%

% savings by Pull
% Savings 87%
Pull vs. push 80%

Cold-Smart 86.70% 60%

40%
Cold-Feature 37.56%

Hot-Smart 42.51% 20%

0%
Hot-Feature -15.91%

-20%

-40%
Cold-Smart Co

Inventory Shipping Picking/Pack

Push cost cost ing cost
22 Hot-Smart $2,913 326.888136 14.520339

20 Hot-Feature 770.4242424 202.901695 9.35423729

15 Cold-Smart 492.6315789 4.85581395 1.10232558

11 Cold-Feature 139.52 15.04 1.52666667

Total $88,413 $11,488 $540

$100,440

Inventory Shipping Picking/Pack

Pull cost cost ing cost
22 Hot-Smart 100 1634.44068 136.20339
20 Hot-Feature 40 1014.50847 84.5423729
15 Cold-Smart 40 24.2790698 2.02325581
11 Cold-Feature 16 75.2 6.26666667
Total $3,776 $57,439 $4,787
$66,002
% saving 34.29%
100%
87%
80%

60%

43%
40% 38%

20%

0%

-20% -16%

-40%
Cold-Smart Cold-Feature Hot-Smart Hot-Feature

Inventory Picking/Pac
cost Shipping cost king cost
Push $88,413 $11,488 $540

Pull $3,776 $57,439 $4,787

$120,000

$100,000

$80,000

Picking/Packing
$60,000 cost

Shipping cost
$40,000
Inventory cost

$20,000

$0
Push Pull