Discuss the approaches a firm can use to manage inventory to meet predictable variability of demand

What will be an ideal response?

Answer: When managing inventory to meet predictable variability, firms use a combination of the following approaches:
• Using common components across multiple products: In this approach, a firm designs common components used in multiple products, with each product having predictably variable demand that results in relatively constant overall demand. Use of common components across these products will result in the demand for the components being relatively constant.
• Build inventory of high demand or predictable demand products: When most of the products a firm produces have the same peak demand season, the previous approach is no longer feasible. A firm must then decide which inventory to build during the off season. The answer is to build products during the off season that have more predictable demand, because there is less to be learned about their demand by waiting. As more is known about demand closer to the selling season, production of more uncertain items should take place. This strategy helps the supply chain better synchronize supply and demand.