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 179.85 241.70
Hot-Feature 149.64 174.67
Cold-Smart 2.58 31.33
Cold-Feature 9.76 48.60

e) / Product life-cycle
The Average Store
300.00

250.00

200.00

150.00

100.00
e) / Product life-cycle
50.00

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 5 241.6969697 inventory level 5 174.6666667
Inventory
cost per Inventory cost
week $100.00 $4,833.94 per week $40.00 $1,397.33
Avrg wkly Avrg wkly
sales 179.8474576 179.8474576 sales 149.6440678 149.6440678
Shipping
cost per Shipping cost
week $2,158.17 $431.63 per week $1,795.73 $359.15
Pick/pack
cost per Pick/plack cost
week $179.85 $18.88 per week $149.64 $15.86
Total cost Total cost per
per week $2,438.02 5284.458038 week 1985.372881 1772.343503
Savings 53.86% Savings -12.02%

Cold Smart Cold feature

Pull Push Pull Push
Onhand
inventory Onhand
level 2 31.33333333 inventory level 2 48.6
Inventory
cost per Inventory cost
week $40.00 $626.67 per week $16.00 $388.80
Avrg wkly Avrg wkly
sales 2.58 2.58 sales 9.759259259 9.759259259
Shipping
cost per Shipping cost
week $30.96 $6.19 per week $117.11 $23.42
Pick/pack
cost per Pick/pack cost
week $2.58 $1.16 per week $9.76 $1.88
Total cost Total cost per
per week 73.54 634.0166667 week 142.8703704 414.0981481

Savings 88.40% Savings 65.50%

 100%

% savings by Pull
% Savings 88%
Pull vs. push
80%

Cold-Smart 88.40%
60%

Cold-Feature 65.50%
40%
Hot-Smart 53.86%
20%

Hot-Feature -12.02%
0%

-20%
Cold-Smart Co

Inventory Shipping Picking/Pack

Push cost cost ing cost
22 Hot-Smart $4,834 431.633898 18.8847458

20 Hot-Feature 1397.333333 359.145763 15.8644068

15 Cold-Smart 626.6666667 6.192 1.158

11 Cold-Feature 388.8 23.4222222 1.87592593

Total $147,970 $17,029 $771

$165,770

Inventory Shipping Picking/Pack

Pull cost cost ing cost
22 Hot-Smart 100 2158.16949 179.847458
20 Hot-Feature 40 1795.72881 149.644068
15 Cold-Smart 40 30.96 2.58
11 Cold-Feature 16 117.111111 9.75925926
Total $3,776 $85,147 $7,096
$96,019
% saving 42.08%
100%
88%

80%
65%
60% 54%

40%

20%

0%

-12%
-20%
Cold-Smart Cold-Feature Hot-Smart Hot-Feature

Inventory Picking/Pac
cost Shipping cost king cost
Push $147,970 $17,029 $771

Pull $3,776 $85,147 $7,096

$180,000

$160,000

$140,000

$120,000

$100,000 Picking/Packing
cost
$80,000
Shipping cost
$60,000
Inventory cost
$40,000

$20,000

$0
Push Pull