From the course: Supply Chain Foundations

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Inventory decisions

Inventory decisions

From the course: Supply Chain Foundations

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Inventory decisions

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- Your planning team, they come to you with a forecast for next year. They say annual demand will be 10,400 units, 200 units per week. You find two suppliers. Both sell the same item, but the per unit prices offered are very different. Who do you buy from? Seems like an easy decision, right? But there are a few issues to consider. First lead time. The time it takes from the moment you place the order until the time the order arrives. The low-cost supplier has a lead time of four weeks. The high-cost supplier has a lead time of one week. Why the difference? Well, maybe the low-cost supplier is farther away, which might result in high shipping costs, but maybe the low-cost supplier doesn't have any inventory available right now. They only make the inventory after you place your order. So, they need a few weeks to make the item. On the other hand, the high-cost supplier is closer in distance, and they have the…

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