{"id":329,"date":"2016-10-31T06:22:50","date_gmt":"2016-10-31T06:22:50","guid":{"rendered":"https:\/\/blogs.scu.edu\/erpsystems\/?p=329"},"modified":"2016-10-31T18:40:46","modified_gmt":"2016-10-31T18:40:46","slug":"how-much-finished-goods-to-carry-in-a-make-to-stock-production-strategy","status":"publish","type":"post","link":"https:\/\/blogs.scu.edu\/erpsystems\/2016\/10\/31\/how-much-finished-goods-to-carry-in-a-make-to-stock-production-strategy\/","title":{"rendered":"How much finished goods to carry in a Make-to-Stock production strategy?"},"content":{"rendered":"

 <\/p>\n

A Make-to-Stock company carries finished goods in its inventory in an anticipation for order. Most of such companies promises quick delivery, typically either same day or the nesxt day.<\/p>\n

But the problem of course, is guessing how much each of the finished goods to keep in each stock unit. Too high stock can tie up the company\u2019s cash and consume space, also the risk of obsolescence. Too low may incur in lost sales and unhappy customer.<\/p>\n

There are four primary factors that influence the amount of finished goods carried by a Make to Stock company.<\/p>\n

 <\/p>\n

    \n
  1. Reorder Point<\/strong>: \u00a0We must carry enough stock to cover the variability of our demand over the reorder point time. \u00a0 For example, assume that our lead time to reorder is three weeks, with average demand of 100 units per week. \u00a0 We have scheduled our production at 100 units per week. \u00a0 We would, therefore, need to carry a \u201csafety stock\u201d level of inventory sufficient to cover the historical variability of demand over this three-week period.<\/li>\n
  2. Production Lot Size:\u00a0<\/strong>\u00a0 If our planned production lot size exceeds the typical order quantity, some amount of finished goods will remain in stock between deliveries. Let\u2019s assume that our average shipping rate is 100 units per week, and our production lot size is 400 units. \u00a0 On average, we would have 300 units left over when our production lot arrives. \u00a0 These would last for approximately four weeks and obviously effect our level of finished goods inventory.\u00a0Therefore, The greater the lot sizes, the greater the resulting average inventory level.<\/li>\n
  3. Production Reliability (on-time completions):<\/strong> The poorer the reliability of on-time completions, the greater the level of finished goods inventory required to assure the targeted service level.<\/li>\n
  4. Variability of Demand:\u00a0<\/strong>The amount of inventory required to avoid a stock-out is considerably less if demand varies from 90 to 110 every week, vs, varying from 0 to 300 per week. \u00a0 There are many components that cause variability of customer demand. \u00a0 Some of those components are\u00a0within our control. Others are\u00a0controlled by customer marketplace.<\/li>\n<\/ol>\n

    Given this factors that affects the make-to-stock companies, it is easy to make goods that can\u2019t be sold, and not to make goods that could be sold.\u00a0\u00a0The net effect is to reduce potential throughput.<\/p>\n","protected":false},"excerpt":{"rendered":"

      A Make-to-Stock company carries finished goods in its inventory in an anticipation for order. Most of such companies promises quick delivery, typically either same day or the nesxt day. But the problem of course, is guessing how much each of the finished goods to keep in each stock unit. Too high stock can tie … Continue reading How much finished goods to carry in a Make-to-Stock production strategy?<\/span><\/a><\/p>\n","protected":false},"author":1711,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"qubely_global_settings":"","qubely_interactions":"","kk_blocks_editor_width":"","_kiokenblocks_attr":"","_kiokenblocks_dimensions":"","footnotes":""},"categories":[1],"tags":[],"class_list":["post-329","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"gutentor_comment":0,"qubely_featured_image_url":null,"qubely_author":{"display_name":"vinaykjay","author_link":"https:\/\/blogs.scu.edu\/erpsystems\/author\/vinaykjay\/"},"qubely_comment":0,"qubely_category":"Uncategorized<\/a>","qubely_excerpt":"  A Make-to-Stock company carries finished goods in its inventory in an anticipation for order. Most of such companies promises quick delivery, typically either same day or the nesxt day. But the problem of course, is guessing how much each of the finished goods to keep in each stock unit. Too high stock can tie…","post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/blogs.scu.edu\/erpsystems\/wp-json\/wp\/v2\/posts\/329","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.scu.edu\/erpsystems\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.scu.edu\/erpsystems\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.scu.edu\/erpsystems\/wp-json\/wp\/v2\/users\/1711"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.scu.edu\/erpsystems\/wp-json\/wp\/v2\/comments?post=329"}],"version-history":[{"count":1,"href":"https:\/\/blogs.scu.edu\/erpsystems\/wp-json\/wp\/v2\/posts\/329\/revisions"}],"predecessor-version":[{"id":330,"href":"https:\/\/blogs.scu.edu\/erpsystems\/wp-json\/wp\/v2\/posts\/329\/revisions\/330"}],"wp:attachment":[{"href":"https:\/\/blogs.scu.edu\/erpsystems\/wp-json\/wp\/v2\/media?parent=329"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.scu.edu\/erpsystems\/wp-json\/wp\/v2\/categories?post=329"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.scu.edu\/erpsystems\/wp-json\/wp\/v2\/tags?post=329"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}