The primary causes of inventory shrinkage are loss, damage, and theft. Though improved packaging methods can reduce inventory shrinkage, this will likely result in increased packaging costs.
It is not necessarily true that a loyal customer will be lost in the event of a stockout. Different buyers will respond to stockouts differently. In some instances, stockouts will only result in a delayed sale.
The EOQ model relies on eight different assumptions. Firstly, the rate of demand is continuous, constant, and known. The replenishment or lead time is also constant and known. Thirdly, the purchase price is constant and independent of the order quantity. Fourthly, it is assumed that demand is satisfied and stockouts are not permitted. There is also an assumption that there is not inventory in transit. Sixth is the assumption that there is no interaction between inventory items or there is only one item in inventory. There is assumed to be an infinite planning horizon. …show more content…
Low turnover can indicate a lack of efficiency in selling inventory. On the other hand, a high inventory can indicate that there is a low level of inventory.
Before adopting a lean philosophy, a company should consider that they will need to perform efficiently. By adopting a lean philosophy, a company is also reducing or eliminating safety or buffer stock. Dead stock carries the greatest cost since it is being held for over a 12-month period with no sales. During this time, it is taking up warehouse space while not generating profit.
The primary causes of inventory shrinkage are loss, damage, and theft. Though improved packaging methods can reduce inventory shrinkage, this will likely result in increased packaging