10/15/2011

Shortage in Supply

Each year car companies release new products and improved models in order to increase the quantity demanded in their product. I was talking with a Ford representative and found it interesting that they were experiencing several shortages in their products. This is due to various causes. First is they are having a hard time getting key electronic equipment from suppliers in ravaged Japan. The second reason is that they failed to make an accurate sales forecast for their new product. According to the article “Ford Raises Sales Forecasts for EcoBoost F-150s”, found in the Wall Street journal, Ford did not properly plan for such demand and are left with a low supply of parts to build the trucks with the new EcoBoost engine. Ford now has a new sales forecast for 2012 and feel they will meet demand next year. So what does this mean for the customer? Typically a shortage in supply of any product will increase prices. In this case I think it means smaller factory rebates and discounts and customers may just have to wait until next year to buy that new truck they want.

4 comments:

Xavier said...

The shortage in supply would likely end up in a price increase to the consumer, but I think it will depend on whether the competition to Ford is experiencing the same shortages of supply. If the substitute goods for Ford (made by GM and Chrysler) also end up with a higher price due to shortages, then the demand for Ford will increase as well. In that case I wouldn't expect the sales to plummet much for Ford.

Dr. Tufte said...

Interesting.

I think one of the best indicators of economic expansion is a consistent underforecast of demand. I think it is a very positive sign for the country as a whole that Ford is in this position (although it can't be any fun for Ford).

Spencer Eaton said...

I think that this is a great example of the market suppliers reacting to the demand of consumers. Due to the constant changes of gas prices the consumers demanded a truck with better gas mileage, when the market suppliers saw the demand of the consumers have the suppliers created a product to fit that demand and the sales are outstanding. I would expect other manufacturers to follow what Ford has done to try to gain a portion of the market sales for trucks.

Dr. Tufte said...

-1 on Spencer Eaton for a run-on sentence.