Q2. Discuss the reasons for having safety stocks. Q3. The purchasing agent for a
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Q2. Discuss the reasons for having safety stocks. Q3. The purchasing agent for a company that assembles and sells air-conditioning equipment in a Latin American country noted that the cost of compressors has increased significantly each time they have been reordered. The company uses an EOQ model to determine order size. What are the implications of this price escalation with respect to order size? What factors other than price must be taken into consideration? Q4. Discuss how a company can reduce the need for inventories.Explanation / Answer
Answer Q2.
Reasons for safety stock
Organizations may keep surplus stock in their distribution center to defend against fluctuating markets, stockroom oversights and provider issues.
Increased customer demand – In a perfect world, organizations would know precisely how much stock shoppers need and plan as needs be. Moving markets, changing requests and other client issues, notwithstanding, can throw off even the most painstakingly ascertained projections.
Businesses use safety stock to ensure they always have the products the customers want. Effective Inventory Management said safety inventory is a necessary cost of doing business to provide excellent customer service. Every time an order comes in, a warehouse must have merchandise to fill it quickly.
Security stock is particularly useful when client request is substantially higher than anticipated. Organizations wish to exploit superior to anything normal deals seasons and they require items accessible to do it.
Warehouse miscalculations – Distribution centers commit errors and endure difficulties. Security stock keeps blunders from getting to be immense business disservices.
In the event that organizations utilize obsolete evaluating apparatuses, similar to pen-and-paper agendas, they may have an off base physical stock check. Deals groups in some cases resolve to orders utilizing obsolete stockroom numbers. Having additional items close by is useful for organizations that don't have full stockroom perceivability in each office.
Wellbeing stock is additionally vital for times when stock ends up harmed. In the event that there is a noteworthy emergency, similar to a stockroom fire, additional stock kept in a different area from the primary items could enable organizations to get back on track.
Supplier or manufacturing hiccups – The organizations that supply an organization's stockroom may likewise experience the ill effects of calamities or different issues. A production network is subject to a considerable measure of moving pieces, security stock is essential when one of the connections isn't performing.
In the event that a provider can't convey materials, security stock stays with a's creation cycle moving along at a reliable speed. Store network every minute of every day said an association ought to decide how much security stock to keep in view of the lead time of providers. The more it takes for items to arrive, the more noteworthy the possibility for deviation.
Managing safety inventory
An organization will likely dependably need to keep some security stock in its distribution center. Better stock administration, in any case, keeps superfluous items from heaping up.
Enhanced procedures like versatile distribution center stock administration arrangements help dispose of issues like erred stock checks and provider miscommunication. Following the measure of on-commence wellbeing stock in a product framework gives noticeable that protections against wasteful levels. It's likewise vital to watch out for reinforcement stock to guarantee it gets utilized before it corrupts or drops out of interest.
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