Scientific Journals Zeszyty Naukowe

of the Maritime University of Szczecin Akademii Morskiej w Szczecinie

2021, 67 (139), 70–79
ISSN 1733-8670 (Printed) Received: 16.06.2021
ISSN 2392-0378 (Online) Accepted: 08.09.2021
DOI: 10.17402/478 Published: 30.09.2021

Impact of demand characteristics on the profitability

of a purchasing strategy

Dariusz Milewski
https://orcid.org/0000-0002-3483-7728

University of Szczecin, Faculty of Economics, Finance, and Management

Institute of Management, Department of Organization and Management
8 Cukrowa St., 71-004 Szczecin, Poland
e-mail: dariusz.milewski@usz.edu.pl

Keywords: demand characteristics, distribution of demand, economic efficiency of logistic processes, pur-
chasing strategies, selection of transport modes, simulation
JEL Classification: C15, L91, R41, R49
Abstract
The problem presented in this article concerns the impact of demand characteristics for consumer goods on the
profitability of purchasing strategy, including the choice of both the source of supply and transport technology
(deliveries in containers by sea, rail, air, and road transport). To assess the profitability of applying a specific
strategy, the author developed a model to conduct simulations using the Monte Carlo approach for two demand
distributions (Gaussian and Gamma), various sales fluctuations, and changes in demand during the delivery
time. Calculations were carried out considering the costs of transport, storage, capital costs related to maintain-
ing stocks, and costs of lost sales. The simulation results show that the greater the fluctuations and the lower the
predictability of the demand, the greater the profitability of deliveries using air transport and local deliveries.
However, concrete decisions depend on knowledge of the consequences of making these decisions and whether
appropriate cost accounting is used in enterprises. The results of the calculations also indicate that the strategy
of outsourcing production in low-cost countries will, in many cases, become unprofitable if production costs in
these countries increase even slightly.

Introduction Therefore, in the case of companies purchasing or

outsourcing production in countries with lower pro-
Choosing a specific purchasing strategy impacts duction costs, the consequences of choosing a spe-
economic efficiency in a broad sense. The source of cific strategy should be accounted for. This means
supply affects the costs of purchasing a given good not only production costs but the broadly understood
– goods for sale or materials for production. If the costs of logistics processes, including the costs of
choice of this source involves a change in the loca- lost sales. Making such a decision requires knowl-
tion of supplies, it also impacts the costs of logistics edge of so-called “opportunity costs” that are not
processes (transport, inventory, storage, transship- included in traditional accounting.
ment) and qualitative consequences. The distance, This publication presents the results of the
time of transport for goods, their storage, and the author’s research on the conditions in which it is prof-
conditions in which they are stored affect the qual- itable to apply a specific purchasing strategy. This
ity of products and the speed of deliveries, which strategy includes two basic decisions – the choice
may further affect the possibility of achieving the of a source of supply and the choice of a method of
required level of sales and profits. delivery (a mode of transport, transport technology,

70 Scientific Journals of the Maritime University of Szczecin 67 (139)

 Impact of demand characteristics on the profitability of a purchasing strategy

size of deliveries, and their frequency). The author and the quality of deliveries (time, punctuality).
used the simulation method with the use of their own Integration with suppliers in these chains allows for
simulation model. The calculations were made based a quick response to changing needs, better forecast-
on data of costs, the parameters of logistic processes, ing of demand, and lower costs (Flynn, Huo & Zhao,
and rates for the logistics services obtained from the 2010; Danese & Romano, 2011). Their flexibility is
logistics market in Poland and Europe. especially important in rapidly changing demand and
For years, the author of this paper has been con- short product life cycles (Qi, Zhao & Sheu, 2011).
ducting research on the problems of economic effi- Efficient and flexible supply chains are particularly
ciency in choosing sources of supply and transport important in markets where demand changes quickly
technology. These decisions are interrelated (for and is difficult to predict, such as the clothing indus-
example, production orders in the Far East may try. Phenomena such as “fast fashion” and the devel-
involve sea or rail transport, which is rarely used for opment of e-commerce are also major challenges for
deliveries in Europe). The conclusions that can be logistics.
drawn from their studies are that the strategy of out- In supply chains and processes, disruption risks
sourcing production in “low-cost” countries often (related to demand, supply, process, and environ-
has an economic justification (Milewska & Milew- ment) significantly impact supply chain and firm
ski, 2017; Milewski & Milewska, 2018b). performance (Parast & Nachiappan, 2021). The
For many years, opinions have been expressed results of the conducted research in Chinese man-
that we could expect the retreat from globalization ufacturing supply chains indicate that supply risk
and return to production from the Far East to Europe. and manufacturing risk management are vital for
One of the reasons for this was the increasing costs of business performance, and there is a high correlation
production in countries like China and the expected between business and manufacturing risk manage-
increase of rates for maritime transport of containers. ment performance (Kumar et al., 2018). However,
Currently, those forecasts are being realized. In fact, the negative consequences of these disruptions can
the increase in transport costs occurred during the be absorbed by applying demand planning practices
pandemic period. This raises the question of whether (Świerczek & Szozda, 2019). In textile and apparel
the retreat from the globalization strategy can now supply chains, in particular, production and distribu-
finally be realized. For some goods, however, even tion planning is important because of the seasonal
with several-fold increases in rates for shipping con- nature of demand, the global character of the tex-
tainers by sea, the purchasing strategy in “global” tile and apparel supply chain, the short life cycle of
countries is still profitable (Milewski & Milewska, apparel products, and the demand unpredictability of
2018a). trendy items (Safra et al., 2019).
The problem presented in this publication is For years, a retreat from “off-shoring” and the
a continuation and extension of this research. The return of production from low-cost countries to
author has taken into consideration an addition- Europe was forecasted due to the increasingly low-
al factor – different demand characteristics (dif- er effectiveness of this strategy (Moradlou & Back-
ferent demand probability distributions, different house, 2016), which is also influenced by the rising
fluctuations measured by the standard deviation of costs of logistics processes. These primarily include
demand). If the demand is volatile and its size is dif- inventory and warehousing costs and lost sales costs,
ficult to predict, the costs of maintaining inventories which may increase more than proportionally to the
may increase and the level of logistic customer ser- distance of shipment (Rajeev & Narendar, 2005;
vice may deteriorate. Boute et al., 2006; Han, Dresner & Windle, 2008;
The aim of the article and the simulations car- Yi, Ngai & Moon, 2011), which may be affected
ried out is to investigate what kind of goods (value by distortions of information about actual demand
and transport susceptibility) and characteristics of (“bullwhip effect” – Chen et al., 2000).
demand can affect the profitability of a purchasing So, one can ask why, in many cases, production
strategy. is still located in so-called “low-cost countries”?
In such a strategy, the distance and time of execu-
Literature review tion of orders is a factor that significantly hinders the
effective response to changing needs, even despite
The literature commonly expresses the view that good relationships with suppliers.
the performance of supply chains is conducive to The predictions that the increase in transport
their economic efficiency, measured both by costs costs (increase in energy and fuel prices), prices

Zeszyty Naukowe Akademii Morskiej w Szczecinie 67 (139) 71

 Dariusz Milewski

(situation on the transport market), or other prob- The model and assumptions
lems (threats arising during maritime transport) will for the calculation
make long-distance deliveries unprofitable (Revkin,
2008; Rohter, 2008) have not come true. However, To calculate the possible benefits of applying
during the Covid-19 pandemic, freight rates have a given purchasing strategy, the author has devel-
increased to over 400% in some cases (UNCTAD, oped a simulation model. The model recreates in
2021), while delivery times have increased and detail logistics and sales processes. The model then
the reliability of deliveries decreased. Up to this calculates the level of stocks on a given day and the
time, rates had been decreasing since 2016 (JCC, volume of sales that can be realized from this stock.
2021). The Monte Carlo method was used as the simula-
The pandemic forced companies to change the tion method. The model randomizes the demand
strategies of their supply chains and has impact- for particular days of the year with a given proba-
ed trade policies in the USA and Europe (Free bility depending on the type of demand distribu-
& Hecimovic, 2021). According to some authors, tion. Inventory and sales levels are average values
the pandemic, which caused an increase in stocks, obtained from the simulation.
resulted in a retreat from lean supply chains and The assumptions for the simulation are presented
Just-In-Time (JIT) deliveries (Brakman, Garretsen in Tables 1 and 2.
& Witteloostuijn, 2020). Although in some branch- The calculations were made for four delivery
es, like the fashion industry, demand volatility was variants:
observed even before the COVID-19 outbreak 1. Sea transport in 40 containers – deliveries every
(McMaster et al., 2020). 6 weeks, one delivery of 6 containers;
The size of an enterprise (and a supply chain) is 2. Rail transport – one delivery of 40 containers
also important – larger companies, thanks to econ- every 3 weeks;
omies of scale, can not only reduce costs but also 3. Air transport – every week;
be more flexible than smaller enterprises (Srivastava 4. Local deliveries – daily deliveries.
& Bansal, 2013; Sukati, Hamid & Baharun, 2013). The first three options concern procurement in
Therefore, the scale is a factor that favors both low- “low-cost” countries and the fourth supply from
ering production and logistics costs and increasing suppliers located closer (“local suppliers”), offering
the level of logistic customer service. The efficiency more expensive products.
of supply chains depends on close cooperation with To identify factors that may affect the profit-
suppliers. That is why big companies, although they ability of the application of a given strategy, it was
try to find sources of supply closer to their markets, assumed that simulations would be carried out for
have the biggest share of their sales in countries four groups of products – office supplies, cheap elec-
where production costs are lower. On the other hand, tronic products, expensive electronic products, and
they look for compromise solutions, like outsourc- clothing. These groups of products are characterized
ing in Turkey or North Africa. by a different value (sale and purchase price) per
However, only a small fraction of companies item, weight, and volume, which impacts the num-
have implemented global strategies (Rugman & Li, ber of products that can be transported in each load
2007; Kinkel & Maloca, 2009; Rugman, Li & Oh, unit or means of transport (pallet, container, truck,
2009). In companies that apply such strategies, the plane). The consequence being the differing levels
decision-makers do not always realize the actual of unit costs for logistics processes – transport and
effectiveness of these decisions (Platts & Song, storage.
2010, Schiele, Horn & Vos, 2011), as indicated in It was assumed that the costs of inventories
the 1990s (Murray, Kotabe & Wildt, 1995; Kotabe, both in the warehouse and “in transit” depend on
1998). One reason may be that the people who the adopted purchasing strategy – in the case of the
make the decisions about the source of purchas- “global” strategy, the costs are higher (20% of the
ing consider only the costs recorded in traditional value of a product) because the costs of damage,
accounting. theft, and so on, in longer distribution channels.
Even though this problem is widely described in The simulations were carried out for four demand
the literature, there are no specific estimates of the variants:
actual economic benefits of applying a specific pur- 1. Normal distribution (Gaussian distribution) of
chasing strategy. For this reason, the author of this daily demand – standard deviation of 5% of the
article undertook the task of estimating them. average daily demand;

72 Scientific Journals of the Maritime University of Szczecin 67 (139)

 Impact of demand characteristics on the profitability of a purchasing strategy

Table 1. Assumptions for calculations (own assumptions, based on market prices)

An assortment Office products Electronic (Lower Value) Electronic (Higher Value) Garment
Value of a commodity [$/pellet] 2073 8712 426 667 80 000
3
Volume [m /pcs.] 0.0031 0.0119 0.0006 0.0093
Weight [kg/pcs.] 0,80 1.00 0.20 0.77
Items per pellet 415 108 2133 200
Purchase price (“global”) [$/pcs.] 2.35 44.47 115.00 230.00
Purchase price (“local”) [$/pcs.] 4.50 71.97 176.00 348.00
Selling price [[$/pcs.] 5.00 80.86 200.00 400.00
Warehousing costs [$/pellet/day] 13.48 13.48 13.48 13.48
Warehousing costs [$/pellet] 1.35 1.35 1.35 1.35
Inventory costs (global deliveries) 20% 20% 20% 20%
Inventory costs (local deliveries) 10% 10% 10% 10%

2. Normal distribution (Gaussian distribution) of In the case of sea transport, the cost of delivery
daily demand – standard deviation of 30% of the from a port to a receiver was accounted for, which is
average daily demand; almost as much as the cost of delivery by sea route.
3. Gamma distribution – standard deviation of 3% of
the average daily demand; Influence of the purchasing strategy on the
4. Variable average demand during the delivery level of logistic customer service
period.
The first three options relate to a situation where Using the model, the first simulations were car-
the average demand and demand over a given peri- ried out for the impact of a specific purchasing strat-
od (throughout the year) is constant and predictable. egy on the level of logistic customer service, mea-
However, there are difficulties in predicting what the sured by the availability of goods in stock.
demand will be on a given day. The simulation results are presented in Table 3
The fourth variant assumes that the demand may and Figure 1.
change in the period between placing an order and
Table 3. Results of the simulations – impact on the customer
a delivery. In the case of longer deliveries, especially service (availability of stocks) – average values (own calcu-
when sea transport is involved, there is a high risk of lations)
lowering the level of customer service.
Demand distribution
To ensure comparability, it was assumed that for
Strategy of a delivery Road
all product groups in the first strategy (sea trans- Maritime Rail Air (local
port) and for the first variant of demand (Gaussian suppliers)
distribution), the profitability for all product groups Gauss – Lower St. Dev. 99.82% 96.73% 99.42% 99.73%
amounts to approximately 11%. Such an assumption Gauss – Higher St. Dev. 98.73% 96.29% 99.15% 99.21%
made it possible to assess the degree of impact for
Gamma Distribution 97.07% 93.80% 98.70% 99.99%
individual strategies and the characteristics of the
Changes of demand
demand on this profitability. during lead time 98.15% 96.25% 95.08% 100.00%
The freight rates in individual modes of transport
are presented in Table 2. If the demand has a normal distribution and
demand fluctuations are small (Variant 1 – standard
Table 2. Costs of transport (own assumptions, based on mar- deviation = 5% of average sales), the level of cus-
ket prices) tomer service is very high in almost all modes of
Mode of delivery Costs [$] transport – over 99%, except for deliveries by rail
Maritime 2 000
at 96.73%. The high level of service in air and road
transport seems obvious and requires no comment.
Maritime (increase of freight rates) 4 000
The equally high quality of deliveries in maritime
Rail 15 000
transport may come as a surprise. However, this
Air 25 000
seems to confirm the results of the author’s research
Local suppliers 150 on the impact of the size of the delivery batch on

Zeszyty Naukowe Akademii Morskiej w Szczecinie 67 (139) 73

 Dariusz Milewski

(to 98.73%) and even more than in other modes of

100%
transport.
99%
Even more service deterioration would occur if
98%
it were not “Normal” but Gamma distribution (Vari-
97%
ant 3), which is more unstable than Gaussian (down
96%
to 97.07% for maritime and 93.80% for rail). There
95%
was also a visible decrease in air transport.
94%
Lower levels of service also occurred in the case
93%
of changes in daily and total demand during the
92%
delivery period (Variant 4). Interestingly, the lowest
91%
level occurred not in sea and rail transport, but in air
90%
Maritime Rail Air Road (local transport.
suppliers) On the other hand, the local purchasing strategy
Gauss – Lower St. Dev.
represents the highest level of service, regardless of
Gamma Distribution
how volatile and predictable the demand is.
Changes of demand during lead time
Gauss – Higher St. Dev.
Influence of purchasing strategy
Figure 1. Results of simulations – impact on Logistics Cus- on profitability
tomer Service
The high levels of service offered in individ-
the level of Logistic Customer Service (Milewski, ual modes of transport (delivery strategies) do not
2019), that increasing the delivery batch and reduc- always have to result in the high profitability of giv-
ing the frequency of deliveries helps to reduce the en strategies.
risk of stock depletion. The results of the simulation for the impact of
However, when the fluctuations in demand are choosing a procurement strategy on the company’s
greater (Variant 2 – 30% of average sales), the lev- profitability are presented in Table 4 and Figures
el of service decreases in this mode of transport 2–5.
Table 4. Results of the simulations – impact on profitability (own calculations)
Demand distribution
Strategy of a delivery Maritime Road
Maritime Rail Air
(increase of freight rates) (local suppliers)
Office products
Gauss – Lower St. Dev. 11.45% 9.57% 8.53% –2.44% 7.09%
Gauss – Higher St. Dev. 9.44% 7.56% 8.17% –3.42% 6.33%
Gamma Distribution 7.22% 5.27% 6.08% –8.19% 5.63%
Changes of demand during lead time 4.08% 2.16% 4.84% 0.53% 6.38%
Electronic (Lower Value)
Gauss – Lower St. Dev. 11.49% 11.05% 13.92% 11.18% 10.49%
Gauss – Higher St. Dev. 10.29% 9.84% 13.74% 11.04% 10.22%
Gamma Distribution 12.07% 11.60% 13.90% 7.02% 10.00%
Changes of demand during lead time 7.74% 7.28% 12.28% 13.94% 10.17%
Electronic (Higher Value)
Gauss – Lower St. Dev. 11.58% 11.57% 15.47% 12.98% 11.90%
Gauss – Higher St. Dev. 10.57% 10.56% 15.36% 12.97% 11.77%
Gamma Distribution 10.60% 10.59% 15.30% 11.82% 10.89%
Changes of demand during lead time 9.07% 9.06% 14.34% 15.76% 11.69%
Garment
Gauss – Lower St. Dev. 11.16% 11.09% 14.82% 12.39% 12.87%
Gauss – Higher St. Dev. 10.11% 10.04% 14.71% 12.36% 12.70%
Gamma Distribution 11.02% 10.95% 14.83% 11.60% 12.65%
Changes of demand during lead time 6.85% 6.77% 12.74% 14.25% 12.65%

74 Scientific Journals of the Maritime University of Szczecin 67 (139)

 Impact of demand characteristics on the profitability of a purchasing strategy

15% 18%

16%

10% 14%

12%
5%
10%

8%
0%
6%

4%
-5%

2%

-10% 0%
Gauss - Gauss - Gamma Changes of Gauss - Gauss - Gamma Changes of
Lower St. Dev. Higher Distribution demand Lower St. Dev. Higher Distribution demand
St. Dev. during lead St. Dev. during lead
time time
Road (local suppliers) Air
Rail Rail
Maritime Road (local suppliers)
Maritime (increase of freight rates) Maritime
Air Maritime (increase of freight rates)

Figure 2. Results of simulations – impact on Profitability Figure 4. Results of simulations – impact on Profitability
(office products) (Electronic – higher value)

16% 16%

14% 14%

12% 12%

10% 10%

8% 8%

6% 6%

4% 4%

2% 2%

0% 0%
Gauss - Gauss - Gamma Changes of Gauss - Gauss - Gamma Changes of
Lower St. Dev. Higher Distribution demand Lower St. Dev. Higher Distribution demand
St. Dev. during lead St. Dev. during lead
time Air time
Air
Rail Rail
Road (local suppliers) Road (local suppliers)
Maritime Maritime
Maritime (increase of freight rates) Maritime (increase of freight rates)

Figure 3. Results of simulations – impact on Profitability Figure 5. Results of simulations – impact on Profitability
(Electronic – lower value) (Garment)

It was assumed that the costs of purchasing goods use of different modes of transport. However, the
from low-cost suppliers amount to (depending on impact of changing the mode of transport is relative-
the product) about 50% of the selling price, and from ly small. For example, if we assume that in the “local
local suppliers to 90%. purchasing” strategy, transport costs would be 20%
One transport option was included in the local lower, then for the first variant, Gaussian distribution
procurement strategy in the calculations. The adopt- and 5% of standard deviation, the profitability will
ed transport costs are based on the rates applied increase from 7.09% to 7.49%. Similar, and there-
in road transport, which has the biggest share in fore minor, changes were obtained for the remain-
Europe. Of course, the model can account for the ing distributions. The benefits of changing the mode

Zeszyty Naukowe Akademii Morskiej w Szczecinie 67 (139) 75

 Dariusz Milewski

of transport could be even smaller if worse quality including their dimensions, which is an important
parameters in rail or inland transport are considered. factor in transport and storage costs.
For this reason, the simulations did not consider as The results of the simulations carried out by the
many transport options as the “global strategy”. author show that the profitability of using a given
As expected, the greatest benefits in the cheap- source of supply and a mode of transport is influ-
est goods (office supplies) in the first three variants enced by many different factors. However, at least to
of demand occurred in maritime transport, which some extent, they confirm the classical laws of trans-
explains its popularity. However, if there is a risk port economics regarding “the modal split” –that air
of a change of demand during the time of delivery transport is best suited for the transport of high-value
(option four), a local source of supply turns out to goods for which demand is difficult to predict.
be the best strategy, which can be explained by the Although this simulation assumes that “local
high share of logistics costs in the price of low-value purchasing” is the most expensive option, the dif-
goods. ferences between the profitability of purchasing
One can observe the impact of the increase in strategies decrease with the value of goods and the
freight rates in maritime transport. However, it is not costs of delivery processes. Therefore, it is supposed
big – profitability drops from 11.45% to 9.57% in that the increase in production costs and the result-
the case of Gaussian distribution and small demand ing increase in the value of products and delivery
fluctuations. The reason is the low level of rates for costs should increase the profitability of shifting the
the transport of containers by sea in intercontinental sources of purchase closer to Europe. Further simu-
relations. Thus, even their several-fold increase may lations were carried out to confirm this.
not have a large impact on the profitability of the The results of these simulations for individual
purchasing strategy. The increase in freight that has products are presented in Figures 6–9. It turns out
taken place recently (resulting from the Covid-19 that even a small increase in production costs (5%)
pandemic) should not have a major impact on the in the countries in the Far East has a significant
purchasing strategy of companies. impact on the profitability of the purchasing strate-
The use of air transport to transport cheap office gy. The increase in profitability is more than propor-
supplies is unprofitable – in the first 3 variants of tional to the change in the cost of production. The
demand, there is a loss rather than a profit, which greater the problems with predictability, the lower
seems to confirm the views expressed in the literature the profitability, and losses may even occur (Figure
that air transport is most suitable for the transport of 6). In this case, in almost all variants of demand for
expensive goods. It is worth noting that fluctuations all types of products, it would be most advantageous
in daily demand have a greater impact on the prof- to move production from Asia to Europe.
itability of air use than in other modes of transport 10%
(a decrease from –2.44% to –8.19%). 8%
However, in the last variant of demand, when 6%
there is a risk of change in demand during deliv- 4%
ery, the profitability of using air transport increases 2%
sharply and is already positive (0.53%), although it 0%
is still lower than in other modes of transport. In this -2%
variant, it is most advantageous to produce locally. -4%
In the case of cheaper electronic products, for -6%
the first three variants of demand (Gaussian and -8%
Gamma), the best option is “global” using rail trans- -10%
port (profitability above 13%). However, when the -12%
demand may change during the delivery (the fourth Gauss - Gauss - Gamma Changes of
Lower St. Dev. Higher Distribution demand
option), it is best to deliver by air. Moreover, this is St. Dev. during lead
also the case with other products. time
Local supply
Importantly, the highest profitability of local sup- Rail
ply does not occur in the case of expensive electron- Maritime
ic goods but in the case of medium-value clothing. It Maritime (increase of freight rates)
can be commented on that the profitability of the pur- Air
chasing strategy is the result of various factors, such Figure 6. Results of simulations (“increase of production
as the physical parameters of the transported loads, costs”) – impact on Profitability (office products)

76 Scientific Journals of the Maritime University of Szczecin 67 (139)

 Impact of demand characteristics on the profitability of a purchasing strategy

12% 14%

12%
10%

10%
8%

8%
6%
6%

4%
4%

2%
2%

0% 0%
Gauss - Gauss - Gamma Changes of Gauss - Gauss - Gamma Changes of
Lower St. Dev. Higher Distribution demand Lower St. Dev. Higher Distribution demand
St. Dev. during lead St. Dev. during lead
time Air time
Air
Rail Rail
Local supply Local supply
Maritime Maritime
Maritime (increase of freight rates) Maritime (increase of freight rates)

Figure 7. Results of simulations (“increase of production Figure 9. Results of simulations (“increase of production
costs”) – impact on Profitability (Electronic – lower value) costs”) – impact on Profitability (Garment)

14%
Summary and conclusions
12%

10%
When choosing a purchasing strategy, various
factors should be accounted for: production and dis-
8% tribution costs, the value of goods, the parameters of
6%
goods transported (weight, volume, packaging), and
the characteristics of the demand. According to the
4% research conducted and presented by the author, the
2%
type of probability distribution of demand (Gaussian
or Gamma) and its variability and predictability are
0% very important factors in the effectiveness of choos-
Gauss - Gauss - Gamma Changes of
Lower St. Dev. Higher Distribution demand ing a strategy.
St. Dev. during lead The calculations confirmed the assumptions that
time
Air the profitability of purchasing strategies in low-cost
Rail countries drops significantly (more than proportion-
Local supply ally) with a decrease in the predictability of demand
Maritime for a given good and its value and in transport sus-
Maritime (increase of freight rates)
ceptibility resulting from the parameters of the goods
Figure 8. Results of simulations (“increase of production transported.
costs”) – impact on Profitability (Electronic – higher value) In response to the above conclusions, the author
proposes to conduct further research on the charac-
In fact, the benefits of “local production” would teristics of the demand for various product groups
be even greater. The model calculates the costs of and the economic calculation of the costs of logis-
lost sales, resulting from the fact that there is no tics processes. This is because traditional accounting
product in stock that is on sale. A longer sales plan- does not account for “opportunity costs” – the costs
ning horizon is associated with the risk of errone- of capital tied up in inventories and the costs of lost
ous forecasts regarding the volume of demand for sales, which may be the reason for using a purchas-
a given good and customer preferences, resulting, ing strategy in low-cost countries.
for example, from a change in fashion. It is easier However, this strategy does not have economic
to react to these changes when production is located justification in many cases, even when considering
closer to the market. the costs included in the model built by the author.

Zeszyty Naukowe Akademii Morskiej w Szczecinie 67 (139) 77

 Dariusz Milewski

The costs of logistics processes often constitute 5. Flynn, B.B., Huo, B. & Zhao, X., (2010) The impact of
supply chain integration on performance: a contingency and
a small share of the total costs, and the differences configuration approach. Journal of Operations Management
in production costs in different parts of the world are 28, pp. 58–71.
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Additionally, large companies can negotiate ter COVID-19: the end of the road for neoliberal globalisa-
tion? Accounting, Auditing & Accountability Journal 34, 1,
much lower rates for logistics services, make fre- pp. 58–84, doi: 10.1108/AAAJ-06-2020-4634.
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8. JCC (2021) Stawki na transport z Chin. [Online] Available
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Cite as: Milewski, D. (2021) Impact of demand characteristics on the profitability of a purchasing strategy.
Scientific Journals of the Maritime University of Szczecin, Zeszyty Naukowe Akademii Morskiej w Szczecinie
67 (139), 70–79.

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