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 sales On-hand

average inventory
Hot-Smart 120 150
Hot-Feature 80 110
Cold-Smart 40 50
Cold-Feature 15 40

e) / Product life-cycle
The Average Store
160

140

120

100

80

e) / Product life-cycle 60

40

20
Weekly sales average On-hand inventory
0
Hot-Smart Hot-Feature Cold-Smart Cold-Feature
An Avrg
store
Hot Smart Hot feature
Pull Push Pull Push
Onhand
inventory Onhand
level 5 150 inventory level 5 110
Inventory
cost per Inventory cost
week $100.00 $3,000.00 per week $40.00 $880.00
Avrg wkly Avrg wkly
sales 120 120 sales 80 80
Shipping
cost per Shipping cost
week $1,440.00 $288.00 per week $960.00 $192.00
Pick/pack
cost per Pick/plack cost
week $120.00 $12.90 per week $80.00 $8.90
Total cost Total cost per
per week $1,660.00 3300.9 week 1080 1080.9
Savings 49.71% Savings 0.08%

Cold Smart Cold feature

Pull Push Pull Push
Onhand
inventory Onhand
level 2 50 inventory level 2 40
Inventory
cost per Inventory cost
week $40.00 $1,000.00 per week $16.00 $320.00
Avrg wkly Avrg wkly
sales 40 40 sales 15 15
Shipping
cost per Shipping cost
week $480.00 $96.00 per week $180.00 $36.00
Pick/pack
cost per Pick/pack cost
week $40.00 $4.90 per week $15.00 $2.40
Total cost Total cost per
per week 560 1100.9 week 211 358.4

Savings 49.13% Savings 41.13%

 60%

% savings by Pull
% Savings
Pull vs. push 49.13%
50%

4
Cold-Smart 49.13%
40%

Cold-Feature 41.13%
30%

Hot-Smart 49.71%
20%

Hot-Feature 0.08%
10%

0%
Cold-Smart Col

Inventory Shipping Picking/

Push cost cost Packing cost
22 Hot-Smart $3,000 288 12.9

20 Hot-Feature 880 192 8.9

15 Cold-Smart 1000 96 4.9

11 Cold-Feature 320 36 2.4

Total $102,120 $12,012 $562

$114,694

Inventory Shipping Picking/

Pull cost cost Packing cost
22 Hot-Smart 100 1440 120
20 Hot-Feature 40 960 80
15 Cold-Smart 40 480 40
11 Cold-Feature 16 180 15
Total $3,776 $60,060 $5,005
$68,841
% saving 39.98%
60%

49.13% 49.71%
50%

41.13%
40%

30%

20%

10%

0.08%
0%
Cold-Smart Cold-Feature Hot-Smart Hot-Feature

Picking/
Inventory Packing
cost Shipping cost cost
Push $102,120 $12,012 $562

Pull $3,776 $60,060 $5,005

$140,000

$120,000

$100,000

$80,000
Picking/Packing cost

$60,000 Shipping cost

$40,000 Inventory cost

$20,000

$0
Push Pull