Operations & Process Mgt Assignment Example | Topics and Well Written Essays - 1000 words

Operations & Process Mgt - Assignment Example Expected inventory level is the stock held by a business more than its obligation for the lead-time. Firms hold Expected inventory level to guard against â€Å"stock-out† (Shah, 2005:227). Average inventory is utilized to approximate the quantity of inventory that a company naturally has on hand more than a longer time period than just the last period. Since the balance of inventory is computed at then end of the last dealing day of a month, it can vary significantly from the average quantity over a longer period of time, depending upon whether there was an unexpected decline of stock or possibly a big supplier delivery at the ending of the month. â€Å"Average inventory† (702) is also helpful for assessment to revenues. While revenues are naturally accessible in the statement of profits and loss not only for the most recent month, but also for the â€Å"year-to-date† (Bragg, 2011:151), it is helpful to also compute the average stock for the â€Å"year-to-date† (151), and then match the inventory average balance to the revenues of year-to-date in order to see how much stock investment was required to support a specified sales level. The company considers the average costs connected with â€Å"placing, processing and receiving† (Sabri, Gupta & Beitler, 2007:34) a replacement order for any part amounting to  £40. It also estimates the standard cost of holding a particular unit of every component in inventory for an entire year at 6% of the unit cost of the item. An â€Å"alternative inventory policy† (Fu, 2014:46) that denotes the quantity of units of inventories, which should be held to decrease costs is proposed. We can reduce the total annual stockholding costs by recognizing average inventory and decreasing â€Å"safety stock† (Minner, 2000:35). By reducing overall lead time and lead time variability, estimating investment cost and having a clear awareness of real possible investments