Discopress Case Study Solution
Introduction
After examining the situation faced by Farnsworth Filmed Entertainment (FFE) and their partnership with Discopress in the manufacturing and distribution of DVD titles. FFE, a minimajor in the motion picture industry, specializes in licensing, marketing, and distributing film assets from other entities.
The company has adopted a portfolio-based approach to asset management, focusing on a wide range of titles, including slower-selling ones from their catalog. However, FFE is grappling with the challenge of managing inventory carrying costs and seeking a solution to optimize its DVD production.
Problem Statement
Farnsworth Filmed Entertainment (FFE) needs to find a solution to manage its inventory carrying costs and optimize its DVD production. Specifically, they need to determine which titles should be manufactured on demand (MOD) to minimize costs while maximizing profitability.
Quantitative Analysis
Costs as Per MOD (Manufacture on Demand Media)
Profits according to MOD operations for different categories of products. Each category is characterized by the number of titles, average annual sales, and years until expiration. The MOD Costs and MOD Revenues are also provided, along with the resulting profits. Additionally, the data includes information on the days to hold inventory, cost per order, cost of holding an order, the total cost of holding, and cost to FFE.
Analyzing the data, we can observe that the profits vary across the categories. Category A, with four titles and an average annual sales of 396 units, shows a profit of $2,170.08. As we move through the categories, the profits fluctuate depending on factors such as the number of titles, average annual sales, and years until expiration.
For instance, Category I, with 80 titles and an average annual sales of 6 units, yields a profit of $5,260.80. This category requires a longer holding period of 9.13 days and incurs higher costs per order and the cost of holding an order. As a result, the total cost of holding for Category I amounts to $66.87, contributing to the overall expenses. The data highlights the relationship between MOD Costs, MOD Revenues, and resulting profits. It provides insights into the profitability of each category and allows for a comparison of the financial performance across different product types.
Costs as Per MPT (Mass Produced Tiles)
Now move towards the profits of MPT operations for different categories of products. Each category is characterized by the number of titles, average annual sales, years until expiration, number of orders, cost of orders, MPT Revenues, and resulting profits. The data also includes information on the days to hold inventory, cost per order, cost of holding an order, the total cost of holding, and cost to FFE.
Analyzing the data, we can observe that the profits obtained through MPT operations vary across the different product categories. Similar to the MOD operations, factors such as the number of titles, average annual sales, and years until expiration impact the profitability of each category.
For example, Category A, with four titles and an average annual sales of 396 units, yields a profit of $1,049.44 through MPT operations. This category requires a shorter holding period of 1.17 days compared to MOD operations. The cost per order and cost of holding an order is lower, resulting in a total cost of holding of $67.05. As we move through the categories, the profits fluctuate based on the aforementioned factors. Category I, with 80 titles and an average annual sale of 6 units, generates a profit of $2,374.40.
This category involves a longer holding period of 380.21 days, higher costs per order, and a total cost of holding amounting to $1,699.20. The data allows for a comparison between the profitability of each category under MPT operations. It provides insights into the relationship between the number of orders, cost of orders, MPT Revenues, and resulting profits. By analyzing the financial performance of each category, businesses can make informed decisions regarding their production strategies and optimize their profits.
Costs as Per MPT (by Using EOQ Method)
The profits according to MPT operations by using EOQ methods. This analysis allows us to draw insights regarding the sales potential, optimal order quantities, and financial performance of different product categories. Looking at the representative product data, we observe variations across categories in terms of the number of titles, average annual sales, and years until expiration.
Categories range from having as few as four titles with an average annual sales figure of 396 units and a one-year expiration period to as many as 80 titles with an average annual sales of 6 units and an expiration period of 8 years. Furthermore, the data reveals the total annual sales and the economic order quantity (EOQ) for each category, providing an understanding of the overall market demand and the optimal order quantities to minimize inventory costs.............
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