Question

1. Discuss the approaches a firm can use to manage inventory to meet predictable variability of demand.

Answer 1

Demand of inventory is sometimes highly unpredictable. But at the same time organization can manage inventory properly to meet the variability in demand using proper inventory management methods such as understanding the reorder points, ensuring the safety stocks.This helps in fulfilling the order during the uncertain demand spikes. Inorder to maintain the accurate safety stocks there should be a proper demand forecasting. The demand forecasting requires proper analysis of historical demand, understanding the seasonality, nature of product and inventory segregation using inventory management approaches such as ABC, FSN etc. Other important aspects to meet the demand of inventory is reducing the bull whip effect. This need proper co-ordination and collaboration from various levels of supplychain and marketing team. The demand estimation need proper input from sales team, retail and distribution channels and that has to be properly communciate with the production team. Strategic approach on inventory management reduces the inventory shortage through alliance with the suppliers and ensure the demand fulfillment. The predictable variability to an extend can be reduces through proper inventory management and strategic inventory planning.