Report on Supply Chain Management

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The response addresses the queries posted in 1976 words with references.

In this paper, owners, Michael and John of Horse Stone Company want to become efficient in business opportunities, support customer satisfaction and growth of business by avoiding the stock outs. The paper will discuss the in-depth explanation of stock-outs and approaches to resolve the growth opportunities of their business. It will also contain the purpose of using stock-outs in controlling the inventory level.

The Stone Horse Supply Company is established by Michael and John who want to expand their business, because they are going to face utmost opportunity in the market to fulfill the demand of consumers, and earn profits by avoiding the stock out the problem in the company.

Inventory control is a system, which the company uses to maintain the record of holding and discarding the stock. The inventory system helps the company to manage the systematic process of manufacturing, storing and selling goods. It supports the company to maintain the operating costs, meeting the demands of consumers timely with long term sustainability. The inventory controlling becomes critical when the company wants to satisfy their customers and maintain a long term relationship with them (Nikolai, Bazely & Jones, 2009).

The company can maintain its inventory with the help of two methods. One is perpetual inventory system, and the other is the periodic system. The basic purpose of the perpetual system is that it helps to plan and maintain the inventory by evading the stock out situation. This system maintains the record of stocks whether they are related to purchase or the production department. The system contains annual records of inventory, which is calculated by seeing the difference between the physical count and inventory count, estimating the wastage or stock outs. The estimated amount helps the manager to plan the for the inventory system (Nikolai, Bazely & Jones, 2009).

The periodic inventory system fulfills the purpose of controlling inventory, by figuring out the stock- in- hand and stock sold at the end of year. This system helps to maintain the low cost inventories. It helps to estimate the stock outs by calculating the cost of goods sold subtracting from goods available at the store (Nikolai, Bazely & Jones, 2009).

In the above discussion, we explained how the stock-outs situation occurs when the company faces a shortage of goods, and the demand of customers increases. The below section of this paper will discuss costs associated with using stock-outs, which includes carrying costs, safety costs etc. We will also study demands of stock-outs, which is affected by lead time and reorder level.

The company faces the stock out situation, when there is a shortage of inventories and demand of goods is higher. This situation arises, due to the delay in delivery of goods from the supplier side, which crop up the losses of the company. The company loses benefits from opportunity costs, when they are unable to fulfill demands of consumers. The stock out reduces the long term relationship with customers and force them to purchase products from other retailers or avoid such demand. This reduces the sale of goods as well as profits (Rachlin, ...