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Stock Out and Inventory Policy

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1. What is the difference between the probability of a stock-out and the magnitude of a stock-out? Give example to support your response- (300 word response) with reference NO PLAGARISM---all work must be reference and ensure reference is correct

2. Why is the organization's Inventory policy important? 300 word response with reference- NO Plagarism

Required Textbook Reference: Bowersox, Donald J., David J. Closs, M. Bixby Cooper, Supply Chain Logistics Management. 3rd edition or 4th edition, McGraw-Hill Irwin

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Solution Summary

This response discusses difference between the probability of a stock-out and the magnitude of a stock-out with examples. Also,importance of organization's inventory policy is explained.

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Probability of a stock-out and the magnitude of a stock-out
The probability of stock out can be defined as the measure, which tells about the frequency of the occurrence of the situation of stock outs in an organization in a particular time period. The probability of stock out does not determine about particular stock and also do not give any indication about the severity of the stock out, which is required to be understood for managing the inventory effectively (Bowersox, et. al, 2013). It also lacks with the number of units, which are less in a particular shipment in the comparison of the quantity ordered by a party. For example, a company forecasts the demand in future will increase with a particular rate and the production capacity will be same then it enables to determine the level of stock out. But, it does not provide the number or size of the units, which will be required to meet the future demands due to uncertainty.
On the other hand, magnitude of stock out is quite different from the ...

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