Sunday, December 2, 2018

Managing Inventory with a Materials Reserve

To avoid running out of materials, you want to hold a reserve of raw materials. You’ll have a physically separate space for these materials so as soon as you touch them, you’ll know you need to re-order. Your reserve is enough to last you until your new order comes in. How to calculate this size:
1.   How long until you’ll receive this item?
      1a.    How long from when you know you need to place an order until it gets placed? 
      1b.    How long until it is shipped from the supplier and received by you?
2.   What is the maximum amount of materials you expect to use in the time you calculated in #1?

By adding together the times in (1a) and (1b), you have the total time during which you'll be using your reserve. Depending on how many you use per day, create a reserve that will last until the replacement order arrives. 

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