Apply your understanding of forecasting to the idea of developing a reorder point for uncertain demand. What could be done to make a reorder point more accurate?
What will be an ideal response?
The reorder point is determined by the average demand during lead time plus the amount of safety stock needed. Safety stock is a function of the service level and the variance in both the demand and the lead time. Reducing variance in demand and lead time will reduce the amount of safety stock required and make a reorder point calculation less of a guess. In general, forecasts farther in the future are less accurate than forecasts in the immediate future. Ability to delay orders or ship more quickly would mitigate the impact of this variance. Forecasts for aggregated products are more accurate than forecasts for individual items, so some degree of standardization would result in better performance for a reorder point.
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An unrealistic budget is more likely to result when it
a. has been developed in a top down fashion. b. has been developed in a bottom up fashion. c. has been developed by all levels of management. d. is developed with performance appraisal usages in mind.
Which of the following statements is true of customer needs?
A) Satisfying customer needs is the first step in successful market segmentation. B) All potential customers have the same needs. C) Solving customer problems requires knowing the identity of target customers. D) A business with a strong market orientation rarely divides its served market into customer segments. E) The factors influencing the needs of both consumers and businesses are the same.