Individual Project in Supply Chain Management Assignment

Individual Project in Supply Chain Management - Assignment Example Since, these are ideal scenarios and cannot be totally realized in practice, the company would never be able to eliminate stock-outs completely. However, John and Michael should aim for efficient management of stock-outs to control inventory as well as prevent business loss. References Vasconcellos,Luis.H.R.,Sampaio, Mauro. (2009). The Stockouts Study: an Examination of the Extent and the Causes in the Sao Paulo Supermarket Sector, Brazaillian Administration Review, Curitiba,( vol. 6, n. 3, art. 6, pp. 263-279, July/Sept. 2009) 2. Costs, Demand & Trade- offs associated with Stock-outs The costs associated with stock-outs to Stone Horse Supply Company may be internal such as loss in production, loss in working hours, delays, excess labour cost etc. or external such as lost sales and profit, loss of goodwill and trust etc. While taking a decision regarding stock levels, John and Michael have to primarily consider a trade-off between two costs. One of them is the holding cost of the inv entory while the other is the opportunity cost of the lost sales (Vasconcellos, 2009). A proper balance needs to be maintained between the two for efficient operations. It is not required to completely eliminate the stock-outs. In fact, stock-outs below 5% are healthy and indicate a continuous increase in demand. References Vasconcellos,Luis.H.R.,Sampaio, Mauro. (2009). The Stockouts Study: an Examination of the Extent and the Causes in the Sao Paulo Supermarket Sector, Brazaillian Administration Review, Curitiba,( vol. 6, n. 3, art. 6, pp. 263-279, July/Sept. 2009) 3. Ways to measure Product Availability Product availability can be defined as the capability of a firm to fulfil customer demand with the existing inventory of goods. There are several ways available to the Stone Horse Supply Company