Week 4 Forum.docx - Class Two different strategies that can...

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Class, Two different strategies that can be used to order inventory are the push system or the pull system. Each has their place in the supply chain, but firms need to analyze which would be best for the overall success of their business. A push based system relies heavily on accurate long-term forecasting. For a firm that has stable sales and see predictable trends can use this system. They can receive large quantities at one time. This will help them reduce the quantity of shipments, and will save on shipping costs. However, there are some drawbacks. If the demand were to change, the firm would either run outs or be left with a large inventory. In addition, they may have to store large quantities of stock in back rooms or other warehouses (Simchi-Levi, 2007). More storage costs more money. If the forecast is correct, the firm can save money and always be in stock. If the forecast is not correct (more likely), the company can lose money through the loss of sales or taking a loss on unsold inventory.
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