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The impact of price elasticity in the sales and operations planning

Steenbergen, R.M. van (2017) The impact of price elasticity in the sales and operations planning.

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Abstract:This research investigates the impact of price elasticity in the sales and operations model of Company X. The production volumes of product 1 influences the price in the market. The possibility exists to produce alternative products. The sales and operations planning model is adjusted with a piecewise linear approximation of the revenue curve of product 1. For this research, we assume that competitors to not response to the decisions of Company X. The adjusted model shows an annual decrease in the production volumes of product 1 of 4.1% and an increase of the volumes of product 2 of 11.8% compared to the current model. The expected annual benefit from the implementation of price elasticity is 68 thousand euros. However, in the worst-case scenario, a loss of 220 thousand euros can be made. We recommend Company X to further investigate the response of competitors and to enhance the sales and operations planning model with more intelligence to benefit from their market position.
Item Type:Essay (Bachelor)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:31 mathematics, 50 technical science in general, 83 economics
Programme:Industrial Engineering and Management BSc (56994)
Link to this item:http://purl.utwente.nl/essays/73089
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