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The Effect Of A Changing Market Mix In Seed Corn On Inventory Costs

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  • Dooley, Frank J.
  • Kurtz, Matthew M.

Abstract

Changing product characteristics are causing U.S. seed corn companies to reevaluate their inventory strategies. A simulation model based upon the Economic Order Quantity model is built in @Risk to reflect a shortened product life cycle and product proliferation. Inventory costs levels increase because of increased uncertainty of demand. Empirical results find that shortening the product life cycle and expanding the product line increases total inventory costs by 120.8%, increases the average inventory level (primarily due to added safety stock) by 56.2%, and increases the cost of carryover, stockout cost, and safety stock cost by 143, 165, and 119 %, respectively. To maintain higher levels of customer service with products displaying shorter life cycles, more safety stock must be held to guard against stockouts.

Suggested Citation

  • Dooley, Frank J. & Kurtz, Matthew M., 2001. "The Effect Of A Changing Market Mix In Seed Corn On Inventory Costs," 2001 Annual meeting, August 5-8, Chicago, IL 20741, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea01:20741
    DOI: 10.22004/ag.econ.20741
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    Cited by:

    1. Magnier, Alexandre & Kalaitzandonakes, Nicholas G. & Miller, Douglas J., 2010. "Product Life Cycles and Innovation in the US Seed Corn Industry," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 13(3), pages 1-20, September.

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    Keywords

    Crop Production/Industries;

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