Combinations of demand options can

Combinations of demand options can also be used. For example, a manufacturer of lighting equipment had several products characterized as “slow movers with spikes,” where only 2 or 3 units were sold for several weeks, and then suddenly there was a huge order for 10,000 units the next week. The reason is that their product was purchased by commercial property managers who might be upgrading the lighting in a large office building. The result was a forecasting nightmare and having to resort to high cost supply options to meet the demand spikes. The breakthrough in solving this problem was to combine the pricing and backlog options. Contractors are now offered a 3 percent discount (the pricing option) on any order in excess of 10,000 units that are placed five or more weeks before they are needed (the backlog option). The advanced warning allows the manufacturer to smooth out its production processes, saving millions of dollars annually.