Question

Select a firm and discuss some levers/strategies that managers could adopt to reduce lot size and cycle inventory in the supply chain without increasing costs.

Briefly discuss some of the factors influencing the required safety inventory level for the selected firm.

Answer 1

Firm :A retailer selling stationary items
Strategies that managers could adopt to reduce lot size and cycle inventory in the supply chain without increasing costs.

1) Aggregation: Aggregate the fixed costs across multiple products, supply points, or delivery points. Aggregating across products, retailers, or suppliers in a single order allows for a reduction in lot size for individual products because fixed ordering and transportation costs are now spread across multiple products, retailers, or suppliers
2) Lot sizing with aggregation strategies: Aggregating across products, retailers, or suppliers in a single order allows for a reduction in lot size for individual products because fixed ordering and transportation costs are now spread across multiple products, retailers, or suppliers.
3) Short term discounting: trade promotions
Safety stock (SS): stock that is held in excess of expected demand due to variable demand rate and/or variable lead time.

Factors influencing the required safety inventory level for the selected firm

•   The inventory must incorporate the vendor’s lead time on delivery
•   Customers’ demand
•   Apply the 50% rule of safety stock so that demand is meet for 5 business days
•   Determine reorder points