Essay: Inventory Capacity and Whether Insurance

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[. . .] Both quantitative and qualitative measurements are at one's disposal when utilizing a demand analysis.

Sales forecasting using qualitative methods depend upon qualitative judgment methods based on the experience of highly skilled practitioners. They focus on a specific area. There experience translates into quantitative estimates of revenues for a respective business, product or service. The jury of executive opinion method is very popular in that it demands experienced executives and experts. It also demands structure: moderators hold discussion forums where diverse opinions are pooled in the hopes of predicting expected future sales and demand. Consensus is critical, as the projections on revenue and demand are estimates that everyone agrees upon.

There is next the Delphi Method which is based upon the views of a pool of experts but there is no personal interaction and the demand and forecast model is constructed through an iterative model. The objective here is to void group think which is more common place in the jury of executive opinion. Lastly is the time series projection methods where demand is based on historic data and trends. There are three, the first being the trend project method involves historical sales and revenue trends in the future that measure growth and customer conversion. This works well for stable businesses that have not experienced significant change in their financial profile and expect to continue on a similar track going forward. The exponential smoothing method modifies sales and revenue forecasts by examining irregularities or errors in observed historical demand data trends that do not typically occur. This method is useful for discounting the impact of exceptional events on the historical sales performance of a business. The moving average trend simply weighs the average of a reasonable historical data to forecast future demand that considers changes in the profile structure.

Chase, Richard B, Jacobs, Robert F. Operations and Supply Chain Management Textbook: Operations and Supply Chain Management; 13th edition

McFadden, Daniel Talvitie, Antti P. And Associates, Demand Model Estimation and Validation, Urban Travel Demand Forecasting Project Phase 1 Final Report Series, Vol. V, JUNE 1977


Under these circumstances, a company's size may determine that issue. If you are in a small warehouse or storage space, it may appear unnecessary to computerize an inventory database for management purposes. It increases certainty especially if one deals in goods of a small nature like books and CDs. It can be used simply to monitor cost of items and their profitability. Databases also allow you to index materials based on various details for search options. If it's a bookstore, an inventory management database can allow the owner to index the books carried by author, title, subject, and any other fields that are built into the database. When tracking sales, a database can be configured to track both costs and sales For those looking for a way to keep track of sales while logging profits. By knowing this information, one can reorder products automatically when stocks are low. This can be done at any time during operations. Particularly if you are operating a small office supply store and you are down to the last three packages of your best-selling pens, it may be overlook it unless you have an inventory management database to alert you of the low stock level. Though most large companies use software to track inventory, many small businesses forego such important systems. Using an inventory management database to keep track of your items can be essential to success regardless of size. If your business is profitable or you anticipate profits, one should invest in computerized inventory systems to ensure rapid assessments of stock inventories and sales.

Chase, Richard B, Jacobs, Robert F. Operations and Supply Chain Management Textbook: Operations and Supply Chain Management; 13th edition


The scheduling policy specifies the planned revision interval of the production schedule at the buyer's assembly plant. We define R. As the number of time periods between successive updates of the assembly schedule. The scheduling policy of the buyer is of interest to the supplier because it determines the frequency at which the buyer's production requirements might change. Frequent schedule revisions enable the buyer's plant to be more responsive to changes in its environment, but require more flexibility in the supply chain because the rates of material usage are changing. Infrequent schedule revisions foster stability in manufacturing planning and execution at the suppliers, but may be unresponsive to changes in demands at the buyer's plant.

The ability to revise one's schedule is essential to ensuring flexibility when managing one's supply change along while minimizing its impact on suppliers. This fact is most apparent when dealing with changes in demand. A schedule must have the ability to adapt to forecasting changes. Ideally, a schedule responds to changes in timing and volume of requirements immediately without deficiencies in quality, delivery dependability, or efficiency. However, cost and capacity limitations in various departments can preclude such capabilities, however, with regards to purchasing and scheduling policies in integration preclude stability. Particularly associated with component and material requirements as they matriculate through the supply chain.

In managing cost, these policies must be flexible in order to make schedule changes when necessary. This is important because the need for flexibility increases as volume changes to meet changes in production schedules caused by forecast revisions. The buyer usually is responsible for this change as buyer's revise their delivery schedules to meet demand. These changes are fast often occurring in hours or days. When dealing with specific products, components and products, the need for flexibility is even greater, especially when dealing with changes in lead times and supplier schedules.

Chase, Richard B, Jacobs, Robert F. Operations and Supply Chain Management Textbook: Operations and Supply Chain Management; 13th edition

Krajewski, Lee, The value of production schedule integration in supply chains, Decision Sciences, Monday, October 1, 2001

Vokurka, R.J., & O'Leary-Kelly, S.W. (2000). A review of empirical research on manufacturing flexibility. Journal of Operations Management, 18(4), 485501. [END OF PREVIEW]

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Inventory Capacity and Whether Insurance.  (2011, January 2).  Retrieved June 26, 2019, from

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"Inventory Capacity and Whether Insurance."  January 2, 2011.  Accessed June 26, 2019.