An interesting case study of inventory. You can see that it still is an issue of great importance to businesses.
Accurate knowledge of demand flow is very important in predicting the amount of inventory to carry, if the product is selling fairly frequently.
The authors found that a few big customers were placing unusual big orders and that was driving outages. We’ve known this for 30 or more years; I observed it at a disk drive company I was product manager for in Silicon Valley. Manage the big orders and you manage inventory.
But that does not reduce the value of inventory models and predictions of service level.
via Are You Keeping the Right Amount of Inventory?
A nice piece of research on another approach to reducing the economic impact of imbalances between supply and demand in retail. The approach is a two-phase ordering policy. The ‘steady’ phase places EOQ-like regular orders to cover some base level of demand. The ‘balancing’ phase (my terms) orders extra in some periods, perhaps in a more expedited fashion, to handle the peaks and valleys of actual demand. It amounts to decomposing the demand stream into a steady part and a peak-and valley part, and matching the supply technique to the portion of demand in each ‘frequency’.
The expectation is that problems of promotions, outlet overstocks and shortages, and massive inventory-building on the part of consumers will be addressed at lower cost. The simulations seem to tell the students that the effect on cost will be positive!
It’s a unique approach, executed for a real business, and therefore rates a careful look. I hope it shows up in a published paper with a heuristic for deciding how to partition the demand forecast.
Article from Supply Chain Management Review
Here’s the article in SCMR where the news was posted.
Supply chain professionals are often confronted with the challenge of managing highly volatile customer shipments resulting from the bullwhip effect. This volatility leads to supply chain-wide inefficiencies, high operational complexity, low service levels and substantial costs.
Source: Does Lean Leveling Reduce Shipment Variability? – Article from Supply Chain Management Review
Thanks to the Shipping Tribune for this article. It shows how ships are really just portable inventory. There’s a long history of oil tankers being used as storage depots.
The steel monsters making billions from oil crash
Source: The steel monsters making billions from oil crash | The Shipping Tribune