StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Quantitative Analysis for Management-Inventory Control - Essay Example

Cite this document
Summary
The paper "Quantitative Analysis for Management-Inventory Control" states that there are three techniques that are used to calculate safety stocks; whatever technique is used, it should be regularly monitored to ensure that it is working effectively and efficiently to satisfy the intended need…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER92.4% of users find it useful
Quantitative Analysis for Management-Inventory Control
Read Text Preview

Extract of sample "Quantitative Analysis for Management-Inventory Control"

There are three techniques used to calculate safety stocks;

  1. Statistical based,
  2. Fixed quantity, and
  3. Time period based. (Martin Murray)

Statistical-Based Safety Stock:

This method is based on the principle that the safety stock can be mathematically calculated to prevent a stock-out situation. Traditionally, the normal distribution or the bell-shaped curve is used to calculate the safety stock statistically, where the mid-point of the curve is the forecast, which represents the average value. When the curve moves away from the center, this represents the deviation from the average and the probability of a high deviation from the forecast is represented by a smaller and smaller percentage.

There are pros and cons to selecting a statistical-based safety stock. Although this method is based on mathematics predictions cannot always be accurate and there are always situations that occur that cannot be forecasted. (Inventory Management)

Fixed Safety Stock:

The companies can also decide to have a fixed value of their safety stock at all times. To determine a fixed level of safety stock a production/stock planner will be required instead of relying on mathematical calculations. The value thus determined by the planner will remain the same unless manually changed. The replenishment order for a material will be initiated as soon as the value of the stock reaches or falls below the fixed safety stock value and the quantity of the order is determined by the demand.

Period-Based Safety Stock:

This method is used to determine the stock level required over a fixed period. For example, if production requires 1000 units of material daily, this means that the safety stock for a week would be 7000 units. Therefore, the period-based safety stock is determined by forecasting the demand for the stock in the future. This forecast will be a combination of actual demand and a forecast based on statistical calculations.

There are two common conventional methods for calculating the safety stock quantity for a product:

  1. Percentage of Lead Time Demand
  2. Days Supply

Percentage of Lead Time Demand

In this method, we multiply the demand per day by the projected lead time resulting in a lead time demand. Safety stock is half this amount. This quantity represents an x-day reserve.

Days Supply

This method allows the buyer to specify how many days' supply of a product should be held in reserve for safety stock. (Inventory Control Man)

 

 

 

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(Quantitative Analysis for Management-Inventory Control Essay, n.d.)
Quantitative Analysis for Management-Inventory Control Essay. https://studentshare.org/business/1753828-quantitative-analysis-for-management-inventory-control
(Quantitative Analysis for Management-Inventory Control Essay)
Quantitative Analysis for Management-Inventory Control Essay. https://studentshare.org/business/1753828-quantitative-analysis-for-management-inventory-control.
“Quantitative Analysis for Management-Inventory Control Essay”. https://studentshare.org/business/1753828-quantitative-analysis-for-management-inventory-control.
  • Cited: 0 times

CHECK THESE SAMPLES OF Quantitative Analysis for Management-Inventory Control

The Differentiating Factor of Pizza Heaven Company

Two advantages of sole proprietorships are absolute control over decision making and the owner gets 100% of the profits.... The name of the business is Pizza Heaven.... In the United States there are over 50,000 pizzerias nationwide.... The differentiating factor that Pizza Heaven offers is the ability to cook pizza at a quarter of the time of regular pizza....
4 Pages (1000 words) Essay

Decision Analysis for the United States Army

Decision analysis for the United States Army Name: Institution: Instructor: Subject: Date: Case analysis for the U.... Army Decision analysis tools have been applied for inventory control, resource allocation, scheduling of funds, replacements amongst other problems.... hellip; The army has not been left behind in applying decision analysis tools for problem solving.... Weapons acquisition is among the problematic areas in the US department of defense that has decision analysis tools applied....
4 Pages (1000 words) Essay

Climate Change Responsibility Experienced by Thai Airway

The overall approach adopted towards the present research makes use of both qualitative and quantitative data collection.... This study can therefore not be described as either being qualitative research or quantitative research but a combination of the two.... In such a situation, it was only important that a type of research design that focuses on the strengths of both qualitative and quantitative research be selected (Bandla, 2008)....
9 Pages (2250 words) Assignment

Reduced Budget Plan U2IP

Managerial accounting is carried out for decision-making whereas cost accounting is used for the purpose of ascertaining cost and cost control.... Lean accounting enables value stream financial improvement and control to pursue perfection whereas... Cost accounting involves working out cost per unit whereas managerial accounting includes further comparative analysis of figures and statements.... Managerial accounting deals with qualitative as well as quantitative aspects whereas it deals with only quantitative aspects....
4 Pages (1000 words) Research Paper

The Separation between Management and Ownership

II Stockholder analysis:Q: Who is the average investor in this stock (Individual or pension fund, taxable or tax-exempt, small or large, domestic or foreign) Ans: The individuals in this stock are the average investors; they are both small and large groups who are not exempted of taxes....
8 Pages (2000 words) Essay

The Database Management System

The model base allows managers to perform quantitative analysis on both internal and external data.... Manufacturing MIS subsystems and outputs include monitoring and controlling the flow of materials, design and engineering, inventory control, process control and quality control.... The subsystems involved include marketing research, product development, product pricing, sales analysis and advertising.... The DCC perform sophisticated analysis and comparisons using advanced software....
2 Pages (500 words) Essay

Qualitative and Quantitative Research Methods

The essay "Research Methods" presents the two research methods that are commonly employed, qualitative and quantitative research methods.... hellip; The overall impact is that the endemic species have reduced in number being replaced by the more dominating introduced and probably invasive species....
7 Pages (1750 words) Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us