Demand is never constant in the real world, but I’ll show you how to deal with that in just one second. If demand for this inventory is constant, then we would run out of inventory in exactly 10 weeks. In the scenario on the screen, this company starts with 10 weeks of inventory and as the weeks go by, the inventory is slowly depleted. For now, we’ll pretend that we use up inventory at the same rate every week so we can predict exactly when we run out. I’ll get into those sources of variation in a moment. Safety stock is how much inventory you want to keep as a buffer to deal with sources of variation. I’ll start with the scenario where we run inventory levels down to zero before new inventory arrives from our supplier.
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