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Activity 1: What inventory models should be adopted by the following Australian companies operating in the Textile, Clothing, and Footwear Industry?

RM Williams –The fixed time-period and the fixed order Quantity models could be used here as the company deals with a variety of products which means that demand also varies.

Billabong –The single period inventory model may work for sport products. Other products may necessitate utilization of fixed order quantity model based on the speed with which a specific product sells.

Rivers –Application of the single period inventory model and fixed-time period models may be deemed appropriate heresince the company’s supply chain deals with specific fashion per store. For instance, the operations manager of a store that deals with women-wear may decide to order stock that is worth lots of cash at a go or buy stock at specific timeframes as per the speed with which a specific product line sells.

UGG – Fixed Order Quantity and the fixed time period models may work here since the company deals with a variety of products and some products may move faster than others.

Akubra- The Single period model is preferable in this case since the company deals with one line of products, hats made from fur. Fixed time period can also be applied here depending on the buying trends of the customers.

Activity 2: Effect of holding cost, set-up cost, ordering cost, and shortage cost on business performance of the companies mentioned above.

Holding cost may lead to high cost of operation as stock holds some cash while cash has to be invested in undertaking other tasks. Business performance may be enhanced since goods are readily available despite using lots of cash. Poor performance may be realized where the demand of a product is low since the stock is held for longer periods.

Set-up cost – where the cost of personnel and capital equipment appliedin preparing for the receipt of new items is high, then the financial position of a firm may deteriorate. Some firms that manufacture their products, such as Akubra, may experience higher levels of performance due to lower set-up cost.

Ordering costs- where a business makes several orders of small quantity, the cost is high and this may result in poor performance since those involved in checking the details of the orders, creating the associated documents, and reviewing the inventory may lose morale.

Shortage cost- Business performance is low due to loss of sales as customers request products that are not available within the business premises.