1.0 Problem in Inventory Management
If stock outs happen in warehouse, the problem may exist in Tesco inventory control. The inventory, for example, fresh vegetable’s shelf time is extremely shorter than other regular product. Fresh vegetables can attract customer to purchase with the basis of high quality physical appearances and short best-used date because these two factors can transfer information that foods are fresh and without any artificial addictives (Derek L. Waller, 2003). So, the minimum inventory of fresh food is being tried to keep by supermarkets as possible.
When there is inefficiency in inventory control, the wastage cost will increase and same goes to the risk of perishing. The more fresh food are storied in the warehouse, the less possible to sell them out before the best display day. Besides, the rate of contemporary out of stock will decrease. The amounts of reorder point tend to be increased by retailers due the failure of inventory control. It means that in order to maintain sales during delivery lead time, more goods are used.
The probability of stock outs will increase when market demand exceeds what is forecasted. If there is not enough storage available in warehouse, goods are easy to be sold out during a short time. For example, supposed Tesco decreased the reorder point from 7 to 4 and safety inventory maintain 3. The delivery lead time is 3 days. If the actual sales number is 2 per day, both these two levels of stock can afford on average during delivery period.
A wrong ordering requirement occurred due to an inaccurate forecast which the stock outs problem will be possibly arising. All the inventory order is estimated on the basis of forecasting future market demand because of impossible to capture future real selling data. They usually think that forecasting pessimistically is lower than what occurs actually. They try to reduce inventory order quantity...
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