Assignment
In a paragraph or more explain why there is randomness in demand.
Discussion 5
What are some of the challenges associated with the inventory replenishment process? You have already worked with the replenishment but what are some of the challenges and the impact that these can create?
(Daman)
There are a number of challenges that are associated with the inventory replenishment process. There are issues in forecasting that can lead to these challenges. According to Murphy, seasonal changes can cause issues with the demand of certain products that a firm produces. If a firm, for example, produces cold weather gear and we have an exceptionally long summer and a short winter, it will change the demand for that firms cold weather gear. These unexpected events can cause a shortage in the safety stock of items and replenishing these items could definitely lead to issues in the inventory control process. Especially if the shortage extends to the warehouses and the production side of things.
Forecasting for this demand may not be taken into account and this can create surpluses or shortages depending on how a logistician conducts his or her forecasting. According to Axsater, varying lead-times can also produce challenges in the inventory replenishment process. For example if the production is held up for any reason such as a shortage in transporters to deliver items to the end consumers, that can cause a number of challenges in the inventory replenishment process. Primarily however, as logisticians we should be looking at what the reorder process and point looks like for our firm. If we don't have systems in place that automatically order things at the safety stock levels or based on any other methods, we may be setting up the firm or our customers for failure. This may lead to issues in retaining our customers for the future or even the reputation of the firm.
References:
Axsater, S. (2015). Inventory Control (Third ed.). Switzerland: Springer International Publication.
Murphy, P. R., & Knemeyer, A. M. (2018). Contemporary logistics. New York, NY: Pearson Education.
(Michael)
Demand fluctuation in the market creates an issue for the company in order to maintain inventory in proper manner. From the viewpoint of Wang, Liu & Wang (2017), unfortunately there is no particular measurement tool for the measures which can help them in predicting actual level of market demand. However, identification of common changes in the market provides an opportunity to the marketers to deal with inventory replenishment process. Proper monitoring of all business units and stock level is the key challenges in front of the inventory managers due to lack of visibility. As a result, stock levels can quickly build-up unnecessarily and or the stick level may not able to fulfill the demand of the market.
Availability of holistic sales forecasting data, calculation of correct supplier lead time, introduction of new products, centralised stock control etc. are also considered as the vital challenge for the company in case of inventory replenishment process. In this context, it can be stated that, due to seasonal it is not possible for the inventory managers to forecast sales volume. Apart from that, inventory techniques like EOQ, JIT etc. also considered as effective techniques but not accurate. In case of introducing new products in the market, it is very difficult for the company to estimate customer’s response. Therefore, inventory replenishment process suffers to great extent. Due to centralised stock system, elimination of unnecessary ordering is not possible. For that, inventory replenishment process faces challenges to maintain its effectiveness (Donaldson, 2015). In addition to that, lead time forecasting, order cycle analysis, time supply ordering etc. aspect of inventory management also enhances the challenges for inventory replenishment process.
Reference list:
Donaldson, W. A. (2015). Inventory replenishment policy for a linear trend in demand—an analytical solution. Journal of the operational research society, 28(3), 663-670.
Wang, S. J., Liu, S. F., & Wang, W. L. (2017). The simulated impact of RFID-enabled supply chain on pull-based inventory replenishment in TFT-LCD industry. International Journal of Production Economics, 112(2), 570-586.