The make-to-stock process is a manufacturing strategy in which products are manufactured ahead of time and stored in inventory until they are sold. This process is typically used for products that have a high demand and a relatively stable demand pattern.
Link to customer lead time and inventory investment
Customer lead time is the time it takes to fulfill a customer order. Inventory investment is the cost of holding inventory.
The make-to-stock process can help to reduce customer lead time by ensuring that products are available to ship immediately. However, it also increases inventory investment, as companies need to hold more inventory to meet customer demand.
Example
A good example of a company that uses the make-to-stock process is Amazon. Amazon sells a wide variety of products, many of which are in high demand. Amazon stores these products in inventory so that they can ship them to customers quickly. However, Amazon also has a high inventory investment, as it needs to hold a lot of inventory to meet customer demand.
- Platform service business model and service failsafe
The platform service business model is a business model in which a company provides a platform that allows other businesses to provide services to their customers. For example, Uber is a platform service business that allows drivers to provide transportation services to riders.
A service failsafe is a plan that a company has in place to mitigate the risks associated with its services. For example, Uber has a service failsafe in place to deal with situations where a driver is unavailable or where a rider is unhappy with the service.
How the concepts can be utilized to provide proper service while mitigating any potential risks to performance
Companies that use the platform service business model can utilize the concept of service failsafe to provide proper service while mitigating any potential risks to performance.
For example, Uber could use the concept of service failsafe to develop a plan to deal with situations where a driver is unavailable. This plan could include having a backup driver available or providing a refund to the rider.
Uber could also use the concept of service failsafe to develop a plan to deal with situations where a rider is unhappy with the service. This plan could include providing a refund to the rider or offering them a discount on their next ride.
Example
A good example of a company that utilizes the concept of service failsafe is Netflix. Netflix is a platform service business that provides a streaming service to its customers. Netflix has a service failsafe in place to deal with situations where its service is interrupted. This plan includes providing a refund to customers for the time that the service is interrupted.
- Material requirements planning (MRP)
Material requirements planning (MRP) is a software-based planning system that helps companies to manage their inventory. MRP uses data on customer demand, production schedules, and inventory levels to calculate the amount of materials that need to be ordered and the time at which they need to be ordered.
Link to inventory holding costs
Inventory holding costs are the costs associated with holding inventory. These costs include the cost of capital, the cost of storage, and the cost of insurance.
MRP can help to reduce inventory holding costs by ensuring that companies only have the amount of inventory that they need to meet customer demand. MRP can also help to reduce inventory holding costs by helping companies to avoid stockouts.
How MRP affects each inventory holding cost
MRP affects each inventory holding cost in the following ways:
- Cost of capital: MRP helps to reduce the cost of capital by ensuring that companies only have the amount of inventory that they need. This reduces the amount of money that companies need to borrow to finance their inventory.
- Cost of storage: MRP helps to reduce the cost of storage by ensuring that companies only have the amount of inventory that they need. This reduces the amount of space that companies need to store their inventory.
- Cost of insurance: MRP helps to reduce the cost of insurance by ensuring that companies only have the amount of inventory that they need. This reduces the amount of insurance that companies need to purchase to protect their inventory.
How MRP analysis can mitigate supply chain risk
MRP analysis can mitigate supply chain risk in the following ways:
- Identifying potential disruptions: MRP analysis can help companies to identify potential disruptions in their supply chain. For example, MRP analysis can help companies to identify suppliers that are at risk of bankruptcy or that have a history of late deliveries.
- Developing contingency plans: MRP analysis can help companies to develop contingency plans to deal with potential disruptions in their supply chain. For example, companies can use MRP analysis to identify alternative suppliers or to develop safety stock levels.
Example
A good example of a company that uses MRP to mitigate supply chain risk is Apple. Apple uses MRP to manage its inventory of electronic components. Apple’s MRP system helps the company to identify potential disruptions in its supply chain and to develop contingency plans to deal with these disruptions.
