Inventory Policy Review
Sets reorder points from lead-time variability rather than from average demand, which is what causes stockouts.
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Running it, start to finish
- Classify items by value and criticality before setting any policy.
- Measure variability in both demand and lead time.
- Set service levels by item rather than applying one everywhere.
What you get back
The output this produces, every time.
- Sizes safety stock from variability rather than from average demand.
- Compares lead time reliability against speed, which is rarely evaluated.
- Differentiates service levels by item rather than protecting everything equally.
Getting better results
Where this usually goes wrong, and how to avoid it.
- Measure lead time variability. It frequently drives more safety stock than demand does and is the less examined of the two.
- Prefer reliable over fast. A consistent slower supplier often costs less in held stock than a fast unpredictable one.
- Deal with obsolete stock now. Delaying the write-down to avoid crystallising a loss makes the eventual loss larger.
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Written for The AI University. Every prompt in this library is original work — authored, tested and revised here, not collected from elsewhere. 365 of them, free with an account.