Respond to the below classmate forum post taken from a Logistics a Management course and perspective of a fellow classmate. The objective is to acknowledge the correct portions and give positive constructive criticism regarding the answers of the fellow classmates response to these forum questions within the scenarios described below:
The classmate has to:
answer the following questions after reviewing the reading and lessons for Week 2.
1. How can firms cope with huge variability in customer demand?
2. What is the relationship between service and inventory levels?
3. What is the impact of lead time, and lead time variability, on inventory levels?
CLASSMATES FORUM POST TO CRITIQUE:
How can firms cope with huge variability in customer demand?
Coping with variability in customer demand can be managed by firms with two policies. The first policy that can be used is the continuous review policy. In the continuous review policy, inventory is reviewed on a continuous basis. In this review, firms follow an approach that tells them that whenever the inventory level declines to the reorder level, they should place an order for a specified amount of units. The reorder level can consist of the average inventory during lead time, and the safety stock. The average inventory during lead time helps the distributor know how much inventory it has when an order has been placed. It ensures that there is enough inventories left to cover the period during the lead time. The safety stock ensures there is enough inventory to protect against any fluctuations of average demand during the lead time of placing an order. The second policy is the periodic review policy. This policy states that the inventory levels should be reviewed periodically at regular intervals, and after each review, the right quantity shall be ordered. This policy will eliminate the focus on fixed cost, because after each review, an order is placed.
What is the relationship between service and inventory levels?
The relationship between service and inventory levels is that inventories are dependent upon maintaining specific levels of service. If a higher service level is needed, then there will be a higher inventory level. The impacts of service levels are also dependent upon inventory levels. When inventories are low, the impact of a unit inventory on service level will be high.
What is the impact of lead time, and lead time variability, on inventory levels?
The impact of lead time and the variability of lead time on inventory levels is that the distributor will know how much inventory it needs dependent upon what the actual lead time is. When there is a short lead time, the inventory should be low. When there is a long or large lead time, the inventory level should be high to accommodate the demand.
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