Cost of inventory holding obsolescence o feasibility

Cost of inventory (holding, obsolescence)
o Feasibility of universal option
o Supply sources of localization materials
o Engineering requirement of localization
o Value of risk pooling

 Short term: rationalize safety stock
o Inventory control system used: periodic review. Order-up-to system
o Key drivers of safety stock:
 Service target
 Variability: standard deviation of demand
 Lead time
 Review period
 Long term alternatives:
o Alternatives
 Air shipment
 European factory
 Universal model
 Product line restructuring
 Improve forecast method
 Shorten review period
 More inventory
o Drivers affected
 Reduce lead time
 Reduce variance
 Reduce review period
 Increase service
 Evaluate the alternatives:
o Alternatives
 Air shipment
 European factory
 Universal model
 Product line restructuring
 Improve forecast method
 Shorten review period
 More inventory
o Effectiveness
 Very expensive
 Volume not high enough
 Excessive cost
 Cannot afford
 Lose transport economies
 Deeper in the hole
6. More cost-benefits of DC-Localization:
 Stock of localization materials higher at DCs
 Lower value of transit inventory
 Potential freight reduction
