Wednesday, 22 May 2013

Inventory Types and Roles for Inventory in the Supply Chain

Inventory Types and Roles for Inventory in the Supply Chain
Inventory Type
Role
Benefits
Lot-size/ cycle stock Order in batches versus one at a time to achieve economies of scale in setups, purchases, transport and so on
  • Purchase discounts
  • Reduced setups
  • Lower freight, material handling & administration costs
Safety stock (Demand fluctuation) Insurance against unexpected high/low demand and high/low lead times
  • Reduced lost sales and backorders
  • Increased customer service
  • Lower freight
  • Reduced customer response costs
Contingency/ supply fluctuation

Anticipation
Insurance against interrupted supply (eg: strikes, natural disasters)
Level out production (that is, to meet seasonal sales, promotions, etc)
  • Reduced downtime and overtime
  • Reduce lost sales cost
  • Reduced overtime, subcontracting
  • Higher manufacturing capacity utilization
In-transit/ pipeline/


Hedge opportunity
Moving/ staging between/ within facilities.
Provide hedge against price increases.
  • Mobile warehousing
  • Lower material costs

Source: Supply Chain Strategy, 2002

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