Business: Inventory and Safety Stock

How does the cost of carrying inventory impact the traditional earning statement of the enterprise? Inventory is a significant cost center, the reduction off firms inventory commitment can by a few percentage can result In dramatic profit Improvement. 2. What Is the relationship between service level, uncertainty, safety stock and order quantity? How can trade-offs between the elements be made? Inventory policy: Guidelines about what to purchase, when to take action and in what quantity. Service level: Performance target specified by management. Defines inventory performance objectives.

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Measure in terms of order cycle and includes time, case fill rate, line fill rate, order fill rate and any combination of these. Safety Stock: Safety stock (also called buffer stock) Is a term used by logicalness to describe a level of extra stock that Is maintained to amalgamate risk of cookouts(shortfall in raw material or packaging) due to uncertainties In supply and demand. Adequate safety stock levels permit business operations to proceed according to their plans. [1] Safety stock is held when there is uncertainty in the demand level or lead time for he product; it serves as an insurance against cookouts.

Order Quantity: 3. Discuss the disproportionate risk of holding inventory by retailers, wholesalers and manufacturers. Why has it been a trend to push Inventory back up the channel of distribution? Wholesaler: Purchase large quantities from manufacturers and sell smaller quantities to retailers. The economic justification is the capability to provide retail customers with assorted merchandise from different manufacturers in specific quantities. Product line explanation is a challenge as well as seasons. Retailer: Buying and selling velocity. Assume risk in the marketing process.

Wide, not deep, have a high cost of store location. Manufacturer: Risk is long-term. Caries upon a firms position. Measures of inventory commitment Is time, duration, depth and width of commitments. The inventory commitment starts with raw materials, Include work In process and ends with finished goods. 4. What is the difference between the probability of stock out and the magnitude of causes inventory to be exhausted. While out-of-stocks can occur along the entire supply chain, the most visible kind are retail out-of-stocks in the fast moving consumer goods industry (e. . , sweets, diapers, fruits).

Cookouts are the opposite overstocks, where too much inventory is retained. 5. The fill rate represent the magnitude of a stockpot rather than the probability. The case fill rate is the percentage of units that can be filled when requested from available inventory. Demand uncertainty: Rate of sales during inventory replenishment. Performance cycle Uncertainty: Inventory replenishment time variations. 6. Inventory overall declining, inventory held by manufacturers are increasing. Why? 7. What are the differences between reactive and planning inventory logics. What are the advantages of each?

Reactive or pull inventory system as the name implies, responds to a channel members inventory needs by drawing the product through the distribution channel. Inventory planning method use a common information base to coordinate inventory requirements across multiple locations or stages in the supply chain. Planning activities may occur at the plant warehouse level to coordinate inventory allocation and delivery to multiple destination. Use APS systems. Distribution requirements planning: Sophisticated planning approach that considers ultimate distribution stages and their characteristics. . Illustrate how fine-line inventory classification can be used with product and market segments. What are the benefits by classifying inventory by product, market and product/market? The objective for product/market classification is to focus and refine inventory management efforts. Product/Market classification, also called fine-line or BBC classification groups products, markets or customers with similar characteristics to facilitate inventory management. The classification process recognizes that not all reduces and markets have the same characteristics or degree of importance. 9.

What advantages does DRP have over a fair share method of inventory deployment? DRP: DRP, Distribution Requirements Planning. Consists of multiple distribution stages and their unique characteristics. DRP coordinates inventory levels, schedules 10. What is the importance of collaboration in developing of supply chain inventory strategies? Replenishment programs are designed to streamline the flow of goods within the distribution channel. There are several specific techniques for collaborative blandishment, all of which build on the common denominator of rapidly replenishing inventory according to actual sales experience.

The intent is to reduce reliance in forecasting when and where inventory will need to be positioned to meet customer or end user demand and instead allow suppliers to respond to demand on a Just-in-time basis. Techniques: Wick response, continuous replenishment, vendor managed inventory and profile replenishment. 1 1 . Customer-based inventory management strategies allow the use of different availability levels for specific customers. Discuss the rationale for such a strategy.