affect future consumer shopping behaviors.
5% 20% 10% 15% management/Holding cost/ Handling Stockout
price/Loss of customers 2.
To some of you these results won't be surprising at all, as you are negotiating medicine shortages and stockouts
on a daily basis.
Manufacturer's (n) confront holding, setup, ordering and stockout
as well as purchasing and production costs.
The first approach emphasizes the desire to avoid any stockouts
, so as to maximize the sales from the program; the second emphasizes the firm's goal of minimizing its costs by smoothing production and letting inventories serve as a buffer.
For example, a short-term delivery delay that results in stockouts
and temporary loss of sales is arguably less severe than a long-term production shutdown that could occur from a natural disaster that destroys a production facility.
costs are the costs of lost opportunity, they occur when there is unsatisfied demand in some period.
The make-to-stock model in which a company manufactures a variety of products in sufficient quantities to meet anticipated customer demands seeks to minimize stockout
Bottom line--the GMA survey found that stockouts
result in $6 billion in losses annually--all because companies underestimate the demand forecast and can't supply the customer.
Service level is quantified using the probability that demand will not exceed supply during lead-time, and is calculated by subtracting a specified stockout
risk percentage from 100 percent (Stevenson 2002).
As noted in the diagram by the dashed line, a longer lead time than anticipated results in a stockout
situation, since the stock goes to zero prior to the order arrival and any demands, therefore, become back orders.
Examples of exogenous factors include deviations from theoretically optimal production schedules to accommodate special orders, or to reverse the effects of an inventory stockout