What are the three factors a manager should consider in controlling stockouts?

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Expert Solution

The three factors which a manager should consider while controlling stock outs are:

1. Time needed for delivery of stock: The manager should take into account the time that is needed from placing of an order to delivery of the item. This time is called lead time. If lead time is 0, then no safety stock is necessary, however if there is some lead ime, the manager should calculate and maintain the a level of safety stock so that a stock out situation never occurs.

2. Rate of Inventory Usage: The manager should calculate the rate of inventory usage. This helps in determining the amount of safety stock that should be kept in order to avoid a stock out. Rate of inventory usage multipled by the lead time is the level of safrty stock a manager should keep in order to avoid stockouts.

3. Safety Stock : Safety stock is the level of stock which is to be maintained by the manager in order to avoid stock out. This is to be done to mitigate the risks arising due to uncertainity of supply and demand

ekkarill92 answered 1 year ago

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