Cost vs Profit, not always conflict

Usually when increasing cost we expect that this will decrease profit. 

But the function bewteen cost and profit may not be that simple. If we look at the cost from the point of view of investment, it is easier to see that investment will likely stimulate profit growing. The growth rate of profit may be larger than that of your investment. So the cost increase, the profit may increase even more.

-Bing Liu

Integer ratio policy

The integer ratio policy suggests that the warehouse inventory Qw should be an integer multiple of the retailer inventory Qr, Qw = nQr. The intuition behind this is that would achieve minimal inventory holding cost. But I'm curious about a mathematical proof.

- Bing Liu

stupid question about service levels

In class, we talked about two types of services. 

1. probability of not stocking out
2. probaility of demand met from stock

Conceptually, what is the difference between this two types? If no demand being involved, does it make sense to talk about stock-out or not? Is there any possibility that the demand is met from other source?

- Bing Liu

Coordinated policy

Today in the last class meeting of this course, we talked about the coordination of retailer and warehouse inventories in order to achieve overall optimality. That reminds me of a talk a short while ago about the coordination between suppliers and customers.  But that paper concludes that the overall optimal strategy benefits the supplier but may hurt the customer.  The supplier should compensate the extra cost incurred at the customer to encourage coordination.

I believe there is the same problem to multi-echlon inventory managments although this might be under the unified financial administration of the same company. The warehouse management should take actions to encourage the retailer to coordinate for a win-win strategy.

-Bing Liu

Great Article on Starting Businesses in Logistics

I ran across this article in BusinessWeek, and thought it would be good to share with everyone:
http://www.businessweek.com/smallbiz/content/oct2008/sb20081024_482729.htm

It offers an interesting view on logistics businesses, which will be the career path of many in our class.

Does everyone agree that the business is "built around personal relationships and trust"?

-Andrew Freeman

Vote on Blogging and Inventory Management

Now that the semester is almost over, I think that it is an appropriate time for our class to assess the value of this blogging assignment.

Personally, I think that the blogs did not achieve Dr. Keskin's desired results set forth at the beginning of the assingment. There are probably many reasons for the outcome; however, I would suggest that future classes only maintain one blog as opposed to eight different blogs.

Does anyone else agree? What about a conflicting opinion?

-Andrew Freeman

Thoughts on "Human" Inventory

Citi Bank announced this morning that they would be cutting approxiamately 50,000 jobs. This is just one example of a company cutting jobs as a result of the stagnating economy.

I believe that we can look at this situation and apply some of inventory management principles (however, this opinion might be far from the truth).

For instance, these companies are drastically reducing their levels of human capital, which means they will have to do more with less. They are basically trying to run a leaner organization, which could possibly be related to a company reducing the amount of inventory they carry by employing lean concepts.

On the other hand, there is also an increasing supply of unemployed workers in the marketplace. These unemployed individuals are probably willing to work for a smaller salary in light of these uncertain economic times. If we consider the workforce as a cost, then companies can now take advantage of acquiring their workforce at a reduced rate.

Does anyone have any thoughts or opinions on this subject???

-Andrew Freeman