Question

. Discuss the appropriate statistical technique that can explain the variation in the daily sales because of the daily inventory holding cost Post-COVID-19 post COVID 19. Justify your answer.

Answer 1

Holding cost are those associated with storing inventory that remains unsold. These cost are one component of total inventory cost, along with ordering and storage cost. A firm's holding cost include the price of the good damaged or spoiled as well as that of the storage space, labour and insurance.

Inventory challange- 1.companies that hold and sale inventory face a double challenge on the one hand in demand product must be available when customer are ready to buy.2. on the other hand, acquiring and managing stock to meet this objective can be very costly. Many firms give substantial and constant attention to finding ways to improve and optimise stock management. The goal is to do this while minimizing cost at the same time.

Calculating recorder point for example. Daily usage rate: 25 units per day. Order lead time: 14 days. Safety stock: 150 units( 6 day supply at the current daily usage rate) . With this factor the recorder point is: recorder point=(daily usage rate)×(lead time days)+ safety stock unit= lead time demand+ safety stock. 25×14+150=500 units

Safety stock estimates refer to several special inventory terms

1. Buffer- the buffer is safety stock added to guard against stock outage from statistical variation in daily usage. Fluctuations are due to normal statistical variability, seasonal cycles and other factors

2. Decoupling- this terms refers to inventory that allows different work centres or groups to operate independently.

3. Anticipation- this terms refer to safety stock that anticipates future demand or supply interruption.

4. Pipeline- this term refers to extra safety stock, recognizing that inventory goods can not move instantaneously.

With the arrival of vivid 19 e commerce has been expanding rapidly. The markets are unable to plan inventories because different states are announcing different shutdown. The in market operations are likely to be impacted on day to day bais in these specific geographies.Hence sometimes there is lack of inventory and sometimes there is no daily sales so inventory remained stored. Due to the rules imposed on grocery shops they may face loss or may earn big profit.