Variability can be controlled with different kind of combinations. Example if machine receives its raw material from multiple sources the variability of this combined feed will be close to value CV = 1. Despite if sources are LV or HV machines, their summarized feed tend to be medium variable.
Now that we have decided our order quantity and safety stock we can figure out when to reorder. Inventory can be supplemented in many ways. For example:
So far we have decided our optimal order quantity and safety stock. Safety stock is one way to satisfy variable demand but could we lead inventory from the value of the demand? Safety stock is based on service level but now we will calculate stock amount from products sale and ordering price.
We have now solved the optimal order quantity. When is this order supposed to do? Can we end up in the situation that we have to sell zero stock? In this post we will figure out what is safety stock and why you should have it.