Quantity and Timing Issues

Quantity and Timing Issues

 

The decisions of how much to acquire and when logically follow clarification of what is required.  The natural response is to say, “Buy as much as you need when you need it.”  Such a simple answer is not sufficient.  May factors complicate these decisions, which include:

 

  • (1)  Forecasts – Forecast are rarely perfect, but the give a gauge of future demand with consideration of lead times, prices, and other costs.
  • (2)  Costs – These consider not only acquisition costs, but also ordering costs, inventory carrying costs and stock out costs.
  • (3)  Availability – Materials may not be available in the desired quantities without paying a higher price or delivery charge
  • (4)  Price-Volume Relationship – Suppliers may offer reduced prices for buying larger quantities.
  • (5)  Shortages – Shortages may cause serious disruptions.

 

  • Quantity and Delivery – Quantity and delivery go hand in hand, Order less, delivery more frequently; order more, deliver less frequently.  Every supplier performance evaluation scheme includes quantity and delivery as standard criteria.

 

  • Time-Based Strategies – For the supply function time-based strategies should:
    • Successfully reduce the time it takes to perform activities in a process (reduce setup and cycle time)
    • Coordinate the flow of resources to eliminate waste in the system and ensure that materials and equipment arrive on time or just-in-time in economically sized batches.
    • Long lead time can impact decision about how much to buy.