What Is the Location Impact of Inventory?

Subject: Logistics
Pages: 2
Words: 332
Reading time:
2 min

The number of routine activities increases with introduction of a new warehouse, inventory tasks and volume directly increase within the logistics system. When the customer demand remains constant, and the number of the warehouse are varied upwards within the logistics network then the cumulative effect on inventory will be an increase. However, the impact will not be a constant gradient magnitude but at a decelerated rate with each addition of the warehouse. This means with introduction of a new warehouse into the logistical network will deduct an amount from previous figure of inventory.

The impact of inventory will vary with how safety stock variable is factored within the logistics network. That is the reason the application of a square root rule will indicate the effect that would be felt when a warehouse is added or removed from the network system. During the application of this rule, there are assumptions mainly targeting the stability of demand within the logistics network that should be observed. Thus, the mathematic application the rule may encounter uncertainty. The uncertainty in the impact of inventory may bring in an element of trade off. Safety stock comes in ensuring that as the warehouse are restocked and stock is redistributed to destinations, stock does not run out, that is it acts as surety. This means it will increase with increase of warehouse locations. Safety stock has uncertainty closely linked to the timing during the replenishing. Contrary to decelerating rates of inventory trends with addition of new warehouses, safety stock may not decelerate over the time.

Thus, the gradient exhibited by safety stock vis-à-vis that of inventory will be steeper. While the gradient of both, inventory and safety stock are positive, transit inventory is negative. Transit inventory will occur in the case of delivery missions hence cannot be held on confidently. Inventory is a derivative of both transit inventory and safety stock that why its gradient exhibit decelerating trend.