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    TH Line: Ordering Policies With Two Suppliers,')

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    aruunstalin
    The document discusses ordering extra inventory as a buffer to avoid losing customers due to lack of inventory. It explains that the manager wants to order an additional 40 units arbitrarily as a buffer to account for potential extra sales orders and avoid issues like long supplier lead times. The number 40 was chosen arbitrarily by the manager based on experience to ensure extra units don't eliminate profits if unsold.

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    TH Line: Ordering Policies With Two Suppliers,')

    Uploaded by

    aruunstalin
    6 views1 page
    The document discusses ordering extra inventory as a buffer to avoid losing customers due to lack of inventory. It explains that the manager wants to order an additional 40 units arbitrarily as a buffer to account for potential extra sales orders and avoid issues like long supplier lead times. The number 40 was chosen arbitrarily by the manager based on experience to ensure extra units don't eliminate profits if unsold.

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    operations management

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    I don

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    The document discusses ordering extra inventory as a buffer to avoid losing customers due to lack of inventory. It explains that the manager wants to order an additional 40 units arbitrarily as a buffer to account for potential extra sales orders and avoid issues like long supplier lead times. The number 40 was chosen arbitrarily by the manager based on experience to ensure extra units don't eliminate profits if unsold.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    6 views1 page

    TH Line: Ordering Policies With Two Suppliers,')

    Uploaded by

    aruunstalin
    The document discusses ordering extra inventory as a buffer to avoid losing customers due to lack of inventory. It explains that the manager wants to order an additional 40 units arbitrarily as a buffer to account for potential extra sales orders and avoid issues like long supplier lead times. The number 40 was chosen arbitrarily by the manager based on experience to ensure extra units don't eliminate profits if unsold.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    I dont want to lose my customers. So, I order a buffer amount of additional 40 arbitrarily.

    7th line under, Ordering policies with two suppliers, explains why the managementwants to order extra 40 .

    Let us consider the accounting periods to be Jan-Dec for 2016, 2017 and 2018.

    Let us consider the current period to be 2016- Jan-Dec. and now we are in Dec. We have found that our demand
    this year has been 1000- as mentioned in the case

    Now I have to decide the total orders for the next two periods 2017 and 2018. Based on my current demand I
    should actually decide to order 1000 units.

    The biggest problems

    forecasting the demand for the 2 periods and


    fluctuation in currency rates

    But in case of any extra sales orders I receive form my customers, say 20 additional units, I have to again order.
    But the problems are

    Long lead time form the offshore supplier


    Loss of sales due to lack of inventory
    Increase in currency rate

    So i would like to order some extra as a buffer. There is an advantage for me. Even if I order some extras and they
    dont sell well, the loss can be compensated by my profits due to greater profit margin per unit. ( 4th line under,
    ordering policies with two suppliers,)

    The number 40 has been arrived arbitrarily. In reality, Mangers sometimes do so based on experience, not just
    based on calculations. They order such that the units, if unsold, dont eat profits.

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