Assuming you would like a blog titled “A Guide to Supply Schedules”:
A supply schedule is a plan that indicates the specific quantity of a good or service that a company plans to supply to the market during a given period of time. It is important for companies to have a robust supply schedule in place in order to meet customer demand and avoid stock-outs.
There are a few things to keep in mind when creating a supply schedule. First, you will need to forecast demand. This can be done using historical sales data, market trends, and other data sources. Once you have a good estimate of demand, you will need to determine your lead time. Lead time is the amount of time it takes to produce a good or service. Finally, you will need to safety stock. Safety stock is a buffer of inventory that is kept on hand in case of unexpected spikes in demand.
Once you have all of this information, you can create a supply schedule that
Determinants of supply
It is difficult to create a supply schedule because supply itself is constantly changing due to a number of factors. These elements, also referred to as supply determinants, have an impact on both the supply curve and the supply schedule you develop.
The most common determinants of supply include:
1. Price of the good
If the company you work for decides to raise a product’s price, the supply will also rise. This is so that businesses can produce more goods at a higher profit, especially if demand is on the rise.
2. Number of suppliers in the market
The supply will increase as more businesses produce the same thing. In contrast, suppliers will pull out of the market if the opportunity cost of producing a good rises too high, reducing the supply.
3. Taxes and subsidies
When balancing the general ledger or solving financial equations like return on investment (ROI), taxes are always a factor. Taxes may increase the cost of production, causing the supply to decrease, depending on the state and locality where your business is located. If taxes are cut, the supply increases.
A government-set sum of money is given as a subsidy to a business operating in a specific sector. This funding enables them to increase supply, maintain low prices, or compete with imports.
4. Weather
The weather primarily has an impact on those in the agricultural sector, but it can also have an impact on the supply and production of other goods. For instance, a drought might result in a decrease in almond supply and an increase in production costs.
5. Related goods
You can shift production to the product that you can make in large quantities if your company can produce closely related products. For instance, if your business produces both dish soap and laundry detergent, you can switch to producing more dish soap when the price rises, reducing the supply of laundry detergent.
6. Producer expectations and forecast
It may be necessary for you to create financial projections and expectations for the upcoming year or quarter. These forecasts play a large role in supply. Your business might increase production if these forecasts indicate that there will soon be a demand for a particular good. If the demand is falling, your company may decrease supply.
7. Factors of production
Factors of production are typically considered part of overhead costs. Supply may increase or decrease as a result of rising raw material costs, union strikes, higher wages, or changes in the price of utilities.
8. Improvements in technology
Demand is greatly influenced by technology, particularly when it comes to automation or new production techniques. For instance, if you work for a business with a top-notch research and development team, they may find innovative, more affordable ways to produce high-quality products. This would cause an increase in supply.
These are not the only determinants of supply. Knowing these factors can help you create a better, more dependable supply schedule, even if that means changing it on a monthly or quarterly basis.
What are supply schedules?
A supply schedule is a simple table that depicts how the cost of a good or service relates to the volume supplied. An illustration of a supply curve plots data points from a supply schedule. Accountants plot the quantity at a specific price on the horizontal (X) axis and the cost of the good or service on the vertical (Y) axis.
Why does the supply curve slope upward?
Despite the fact that there are numerous factors that affect the supply curve, there are three main ones that determine why it slopes upward:
1. Entry into the market
Due to new entrants into a specific market, a supply curve may slope upward. If you work in the finance or accounting department and have determined that it would be beneficial to enter a certain market, you may study a supply curve or develop a supply schedule. New competitors will enter the market as a result of the appealing price or profitability of the specific good, increasing the overall supply.
2. Cost of production
Any time a business increases its output or inventory, it has to increase the price of the product to make up for the higher production costs.
3. Profitability factors
Price increases when demand for a particular product rises. Companies will increase demand in order to increase their profit margin.
In a broader sense, the law of supply is the reason why the supply curve slopes upward. According to this economic principle, if all other variables stay the same, as a product’s price rises, its supply rises as well.
To illustrate this concept, consider an Italian restaurant. The restaurant will begin to produce more spaghetti than linguine if customers are willing to pay more for it because they can profit more from the rise in demand.
Reasons for shifts in the supply curve
Your business has an incentive to supply more product when prices rise because there is an increase in revenue and profit. However, since a price change modifies the supply curve, you must develop supply schedules at various price points. Therefore, several factors can cause the supply curve to shift:
1. A shift in supply to the right (increase in supply)
The supply curve frequently shifts to the right as a result of the supply determinants. This translates to more product being supplied at a given price resulting in an increase in supply.
2. A shift in supply to the left (decrease in supply)
Similar to an increase in supply, a decrease in supply is frequently brought on by factors that affect supply. In this case, the supply curve moves to the left, increasing the price and decreasing the supply.
3. Vertical supply curve
A vertical supply curve demonstrates that the supply of a particular good is fixed regardless of price. Helium, for instance, has a limited supply, so the market will determine its price rather than increasing supply. This is also known as an inelastic supply curve. A small number of markets are the only ones where this phenomenon occurs.
4. Horizontal supply curve
If a supply curve is horizontal, it depicts a sharp shift in consumer demand with only minor price changes. Despite the impossibility of a perfectly elastic supply curve (horizontal supply curve), some examples could include commonplace goods like milk, bread, or eggs.
There are countless different supply curves because demand, price, and supply are all so volatile. Understanding these four different types of curves will enable you to explain a supply curve and a supply schedule to someone without a background in economics, finance, or accounting.
Changes in demand and its effects Supply affects demand and demand affects supply. A change in one always creates a change ins the other. As a result, demand can play a pivotal role in creating your supply curve or supply schedule. Because of the relationship between supply and demand, you should know how changes in demand can alter your supply schedule.
Here are a few common changes in demand:
1. Change in income levels
Your purchasing power may increase as income levels rise. This will enable customers to pay more for a product, potentially raising its price and thereby increasing demand. The same idea applies to a decrease in income levels. When they decline, there is a loss of purchasing power and a potential loss of both price and demand.
2. Change in preferences or tastes
Fads exist across all industries. Demand may increase or decrease as a result of consumers’ shifting preferences. For instance, while the demand for bell-bottom jeans may have been high in the 1970s, it was incredibly low by the 1990s.
3. Change in the age of the population
Demand and supply are both impacted by changes in population age. You might observe an increase in demand for wheelchairs or hearing aids if the elderly population grows. On the other hand, demand for bicycles or playground equipment might increase if the average age decreases.
How to create a supply schedule and a supply curve
You will need information on current supply and demand, as well as the prices your employer wants to charge or how much they can charge for a product, to create a supply schedule or a supply curve. You will frequently receive this from your employer, but you might also need to conduct a market analysis to find this information.
When you have the information, you can begin creating your supply schedule and supply curve. A step-by-step guide is provided below to assist you in developing the ideal supply schedule and supply curve.
1. Gather data
Finding data is the most challenging step in creating a supply schedule or supply curve. If your employer does not provide this information, the best course of action is to review the volume and price of sales from previous quarters or fiscal years. This will give your supply curve and supply schedule a supported foundation.
2. Input data into a spreadsheet
Enter the quantity and price point into a spreadsheet using the information provided to you or the information you found. This enables you to observe the price change in relation to the volume of goods sold. Your supply schedule and supply curve will be based on the information in this spreadsheet.
3. Plot the points on a graph
Plot the points in the first quadrant (positive y-axis and positive x-axis) where quantity is listed horizontally and price is listed vertically now that all the data has been formatted in a spreadsheet.
Here is an illustration of a pizza supply schedule and supply curve for further reference. You can see quantity and price changes based on supply and price point in this example supply schedule for pizza.
Quantity / Price
As you can see from this supply schedule, every time 25 pizzas are delivered to the market, the price of each pizza increases by $10.
This is a straightforward illustration of a more intricate table or structure, but it demonstrates how simple it is to use a suitable supply schedule.
If the supply curve slopes upward as you move from left to right, you can tell if the supply curve is accurate. The supply curve and supply schedule, when used together, are excellent tools for helping you illustrate a point or show forecasts for quarterly reports.
How to Use the Federal Supply Schedules to Meet Your Small Business Goals
FAQ
How do you create a supply schedule?
He believes there will be a greater demand for his potatoes and that customers will be willing to pay $25 for each lot of potatoes. Joe is willing to produce 125 potatoes at this price based on his supply schedule, but his farm prevents him from doing so.
What is an example of supply schedule?
A supply schedule is calculated by totaling all units offered by a specific company or the entire market at a specific price. Despite the fact that price is the most important factor, there are numerous other elements that affect supply, such as: Stock: The quantity of the product the seller has in stock
How do businesses determine the supply schedule?
Individual and market supply schedules are the two different types of supply schedules. Here, we go over how to derive individual and market demand schedules for a particular period of time.
What are the types of supply schedule?
Individual and market supply schedules are the two different types of supply schedules. Here, we go over how to derive individual and market demand schedules for a particular period of time.
