In order to understand the reactive inventory control system in more detail, the various assumptions and its meaning will be examined next.
First, the system is based on such a hypothesis, namely: all customers, market areas and product distributions have equal profit opportunities. In the strategy, use the ABC classification or variety classification to establish the required stock to meet the needs of customers, markets and products. However, a purely reaction system minimizes expected inventory transportation, so this reason is to be excluded, ie: such transport will tend to carrier a large amount of product.
Second, the reaction system assumes an unlimited decent source (ie, there is no significant limit on the manufacturing capacity or storage capacity). This assumption will greatly limit the system, meaning it can be produced on demand and stored the product in the production facility before the delivery center needs.
third, reactive inventory logic assumption, supply location has unlimited inventory availability. It is assumed that 2 and assumption 3 means that the associated replenishment time can be determined. Reactive inventory logic regulations, there is no delay or out of stock when dealing with the replenishment order.
fourth, the reactivity decision rule assumes that the time of the completion period is expected, and the length of the cycle is independent. This assumption means that each completion cycle is a random event, and the subsequent replenishment order generally does not have an extension cycle. Although the reactive logic assumes that the entire cycle time is not controlled, in fact, many managers can impact the length of the completion cycle by adding the strategy of replacement supply.
fifth, when the customer's demand mode is relatively stable and constant, the actual state of the reactive inventory logic is optimal, in theory, demand mode should be stable over the entire associated cycle. Because statistical response logic can operate correctly. Most reaction system decision rules assume demand model based on standard normal distribution, gamma distribution or Poisson distribution function. When the actual demand function is not similar to any of the above distribution functions, then the inventory statistics decision rules based on these assumptions will not operate correctly. For example, if there are several big accounts to make the actual sales mode as a "block", the actual security reserves need to be higher than the expected number of standard normal distributions. Contrary to smoothing demand, block demand has the characteristics of periodic mass order, emphasizing the capacity of inventory. Block demand requires additional security reserves to meet the required service objects. Since changes in changes, marketing programs and competition actions, most products need to be constantly changing, then what is to identify or should be appropriate and stable demand models, which may be quite difficult.
Sixth, the reactive inventory system determines that each distribution center on all live scenes, including supply sources, and the amount of time and quantity of replenishment order. Therefore, it is impossible to effectively coordinate inventory demand between multiple distribution centers. When reducing the useful information of the distribution channel costs in the middle of a few logistics resources, there is a serious defect, ie that the inventory information available is not utilized.
The last hypothesis of the reactive inventory system is that the length of the completion cycle should not be related to the demand. This assumption is inevitably requires accurate display of approximately variation values for the entire completion cycle demand. However, in many cases, the higher the demand level, the longer the completion cycle, because they also add to the needs of inventory resources and transport resources. This means that the demand period may not be consistent with the extended completion cycle because they are restricted due to outstanding goods or product availability.
The above discussion summarizes many assumptions and problems present in typical reactive inventory logic. These issues include excessive simplified demand modes, "unlimited" availability and ability, regardless of the profitability of subdivision and information about demand between multiple facilities. In operation, most inventory managers overcome all kinds of restrictions through the skilled manners commission manual. This manager commission manual often produces almost best inventory decisions because the decision-making combination it produces is neither a fixed decision-making rule, and is not affected by fixed inventory management guidelines.
Sustained or periodic inspection control process is an illustration of a typical reaction system. The following example illustrates a reactive inventory environment in which the distribution center and the two warehouses thereof.
Reactive inventory Environment
The above figure shows the current inventory level (i) of each warehouse, re-order point (ROP), ordered batch ( Q), as well as average daily demand (D). The results of the inspection of wholesaler inventory show that wholesaler A should be arranged from the distribution center to replenish the order 200 units. Since wholesaler B current inventory is on ROP, then he does not need to take replenishment actions. However, more comprehensive analysis shows that the actions taken by the wholesaler A will be out of stock, as it is close to the order point, and the distribution center will not pay enough inventory to complete the wholesaler B need.