Explain why in any given season, the one-period decision model may result in a poor choice for a stocking level?
What will be an ideal response?
The one-period inventory models are appropriate when decision makers handle seasonal goods that must be sold at a reduced price after the selling season. The model is based on expected values, i.e., the probability of experiencing demand at a certain level, perhaps based on historical data. If the data are highly variable, then there is a chance that demand may be unusually high or low, particularly in a "fashion" setting. A design that catches the public's fancy may experience high demand that exceeds the stocking level and the retailer will stock out and fail to realize all the sales that might have been possible. Conversely, a dog of a design may leave the retailer with excess inventory on the shelves. If this stocking game is played season after season, profit will be maximized, but any one season may have a different outcome.
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