Please answer the following questions after reviewing the reading and
lessons for Week 2.
1. How can firms cope with huge variability in customer demand?
2. What is the relationship between service and inventory levels?
3. What is the impact of lead time, and lead time variability, on inventory
levels?
1.
One way a firm can cope with huge variability in customer demand is by risk pooling.
According to our textbook, risk pooling “suggests that demand variability is reduced if
one aggregates demand across locations” (
Simchi-Levi, p. 48).
The high demand of one
location can be offset by the low demand of another location.
Another way is by
shortening lead times.
Having shorter lead times
can increase sales, decreased
production, distribution costs, and higher profits.
Shorter lead times will also increase
customer satisfaction.
Keeping safety stock can also help a firm cope.
Safety stock can
help and act as a buffer between the actual and forecasted demands.
Another option
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- Fall '16
- Supply And Demand, inventory levels, shorter lead times
