Discussion Questions

Discussion Questions
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Question 9
It is noted that the longer the L1, the more time is taken by the system to allocate inventory for the need of the retailers to be accomplished through a cross-dock facility.
If the L1 is longer, the system takes advantage of the concept of risk pooling (Simchi-Levi, Kaminsky & Simchi-Levi, 2008). And also the inventory total amount becomes smaller as the cross-dock facility gets closer to a retail outlet.
Question 10
The two options are not very clear when selecting a supplier. This is because when safety stock is required, it depends on two factors, lead-time variance as well as the average. Therefore, as a retailer, my decision would depend on the impact of the two factors. And also my decision would major on the requirements of my customers as a retailer. The customers dictate the type of supplier to use since they determine how urgent they need the products.
Question 11
When using a mature product, it is important to expect the stability of demand and prices in the short term. However, as the horizon time becomes longer and the introduction of new products in the market increases, the price and demand of the particular product decrease and this may cause excessive inventories to be written off. Therefore, inventory holding costs that are related to obsolescence can be termed as fixed when looked into in the short-term, not long-term (Simchi-Levi, Kaminsky & Simchi-Levi, 2008). The other example of fixed costs in the short-term is storage costs; however, it varies in the long-term.

For instance, as a result of large inventories, a company may be forced to rent several warehouses in terms of a fixed lease term. In case there are improvements made, and turnover rates also increased at this time, the possibility may be that fewer warehouses may be rented with renewed contracts. This argument can also be applicable when dealing with storage racks, material handling equipment, and insurance personnel among others.
Reference
Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2008). Designing and managing the supply chain: Concepts, strategies, and cases (3rd ed.). United-States: McGraw-Hill.