Redbox Inventory System, Essay Example

Movies are big business, and distributors of films have effectively applied the Internet to issue their wears both locally and globally. One such company is Redbox Automated Retail, LLC (2011). Its Website, Redbox.com, is evidence of a hybrid inventory management system. It incorporates both fixed order measure and fixed order period techniques. Each movie is rented for one day. The consumer is automatically charged for additional days of rental if movies are not returned by 9 PM the following day up to the price of $25 at which time the renter is said to have purchased the movie.

The Redbox enterprise as a concept predicates specific types of inventory issues. Stock out costs are mainly due to shortages in the movies people want at the kiosk (Stockout, n.d.). When a kiosk is out of a movie someone wants and the consumer decides not to rent a movie, opportunity cost in the form of a lost sale is added to the bottom line. Furthermore, the Redbox automated teller kiosk determines an amount of carrying cost. The kiosks themselves cost money as do their energy usage and space rental.

The Redbox enterprise concept also predicates specific order quantity issues. The automated kiosk concept relies upon ease of use for the consumer, but there is no way to implement safety stock in any individual kiosk because renters can return movies to any kiosk in the country. There is also an economic order quantity (EOQ) issue in that Redbox must maintain enough stock in each kiosk to guarantee usage, but maintain low enough stock to show demand. Nevertheless, the system seems to be working well for Redbox as reflected in their stock value of its parent company Coinstar, Inc.

References

Stockout costs. (n.d.). In BusinessDictionary.com. Retrieved from http://www.businessdictionary.com/definition/stockout-costs.html

Redbox Automated Retail, LLC. (2011). Redbox. Retrieved from http://www.redbox.com