Question

A fast-food outlet sells about 10000 quarter-pound hamburgers in a given week. To meet that demand, the fast-food outlet needs 2500 pounds of ground beef delivered to its premises every Monday morning by 7 am sharp. (a) As the manager of the fast-food outlet, what problems would you anticipate if you acquired ground beef using spot exchange? (b) As the manager of a firm that sells ground beef, what problems would you anticipate if you were to supply meat to the fast-food outlet through spot exchange?

Answer 1

Using spot exchange for acquiring or supplying ground beef could lead to price volatility, inconsistent quality, unpredictable demand, and logistical challenges due to the lack of contracts ensuring consistent transactions and expectations.

Step-by-step explanation:

Part a: As the manager of the fast-food outlet, attempting to acquire ground beef using spot exchange could result in issues such as price volatility and inconsistent quality. Spot exchanges don't provide the certainty of pre-negotiated contracts, leading to fluctuating costs which could impact your budget. Moreover, without established relationships, you risk receiving ground beef that doesn't meet your standards for consistency and quality, which are essential for maintaining the predictability and calculability that customers expect in a fast-food environment.

Part b: As the manager of a firm selling ground beef, supplying the fast-food outlet through spot exchange might result in unpredictable demand and logistical challenges. Without a contract, the outlet could choose to purchase from another supplier at any time, leaving you with excess inventory or an unexpected need to ramp up production. Additionally, the requirement for timely delivery by Monday at 7 am adds pressure to maintain strict logistical efficiency, and any failure to meet the deadline could significantly impact your business relationship.