Inventory planning, Reactive method - Integrated supply chain planning

Inventory planning

The availability of a distribution network, including suppliers, distribution centers and warehouses of different levels, logistics intermediaries, retail outlets and end-users, allows to achieve a competitive advantage by approaching the goods to the consumer, reducing the response time to changing demand in different regions , optimization of the assortment of goods, expansion of the range of services offered, etc. The distribution of reserves in the network is one of the most difficult tasks, which is justified by the presence of a multi-level system for placing stocks in the supply chain.

For the supply chain and technologically complex industries, the following features are typical:

1) the material stocks in them are formed at several hierarchical levels corresponding to a certain technological stage of production or the position of the stock in the supply chain;

2) between the stocks there is a relationship and interdependence, conditioned by the specific technology of production and (or) marketing.

One of the main issues of distribution planning is: in what volume and in what time periods should supplies be supplied to the distribution network.

If the goods arrived at the warehouse remain unclaimed, the trading network incurs losses. If the goods are not enough, the retailer may lose the client, who will leave to the competitor. Thus, it is advantageous for companies that the goods from the warehouse are fully realized. For this purpose, the replenishment planning is also under way. Determine the minimum level of safety reserves and make a sales forecast for a single store is quite simple. Difficulties begin when the retail chain practices centralized replenishment planning - for this you need to process a huge amount of information for each store, warehouse, commodity position.

Methods for solving the problem of placing stocks in the distribution network can be divided into two groups [4]: ​​reactive and planned.

Reactive method

The reactive stock allocation system in the distribution network promotes products through distribution channels in response to demand from other participants in these channels. Deliveries for the completion of orders begin when the stock becomes equal or decreases below the specified minimum level, or order point. Thus, each link of the distribution network independently decides when, how many and from whom to order the goods, and independently of others places its orders.

As a result of a series of such independent actions, an uncertainty of the order points is created throughout the distribution channel. Such a multilevel uncertainty creates the need to maintain a significant amount of insurance reserves to ensure normal economic activity.

This method has certain assumptions. The first condition on which the reactive stock control system rests is the limitlessness of resources, i.e. absence of any significant restrictions due to existing production or storage facilities. Hence it follows that the product can be produced when and how much you want and store it in factory warehouses until an order from the distribution center is received.

Secondly, the logic of reactive inventory management assumes unlimited availability of products from suppliers. In other words, there are no restrictions related to the existing capacities and the availability of stocks. This means full certainty of the timing of supplies in the replenishment of stocks and the complete impossibility of the occurrence of a deficit or the delay (breakdown) of the execution of the order.

Thirdly, it is assumed that the duration of each functional cycle is predictable and does not depend on other cycles. The logic of reactive inventory management provides that managers are not able to influence the duration of the functional cycle, but in fact they can accelerate supply by attracting additional sources or using alternative supply strategies.

Fourth, the reactive inventory management system works best in a stable and constant consumer demand. Ideally, for normal system operation, demand should remain stable throughout the planning period.

Fifthly, the reactive inventory management system determines the time and quantity parameters of replenishment (including supply sources) for each distribution center separately, independently of the others. For this reason, there is only a minimal possibility in this system to efficiently coordinate the requirements for the reserves of different distribution centers. At the same time, the advantages of information technology in inventory management are almost not used, although the costs of transmission and processing of information within the distribution channel are constantly decreasing.

From what has been said above, we can conclude that the problems of using this method consist in an oversimplified view of the structure and dynamics of demand, orientation to the "unlimited" the availability of products and production capacities, the lack of segmentation of markets and products by the criterion of profitability, the lack of coordination of data on the demand for stocks in the entire distribution network.

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