GLOBAL LOGISTICS AND SUPPLY CHAIN MANAGEMENT - Essay Example

Therefore, the total cost of the Model needs to be redefined. Carrying cost is constant; the model assumes that carrying costs are constant; however, this might vary depending on the quantity of inventory, economies of scale, increase in storage space, and renting of new warehouse. Independent orders; the increase of orders may increase the cost of saving by reducing the transportation and paperwork. This means that the original EOQ should be modified and developed to deal with the change. In essence, this means that the optimal strategy is computing one product Instantaneous delivery; the model assumes that the orders is delivered instantly; however, this can be modified to include the safe stock.

In other words, the model assumes that there was no delay in delivery of stock and the delivered stock is as demanded. The model is based on assumptions hence not accurate; for instance, it assumes that there is a steady demand of the product for immediate restocking. However, the model does not consider variables such as economic fluctuations, as well as, seasonability of some products. Moreover, it assumes that holding charges, ordering costs, and inventory units are constant. This is difficult hence needs a constant monitoring of the inventory levels.

In simple terms, the model is limited by the assumptions since the formula does not consider other factors and different products in the same order. Moreover, the model is based on complex mathematical calculations that require an individual to have a good understanding of algebra. This model disadvantages the small entrepreneurs who lack knowledge in calculating such figures. Notably, level production strategy is concerned with producing a plan that helps in maintaining a steady rate of employment and production.

Satisfying demand requires that production in a firm be increased and lowered to