What are some risks associated with attempting to micromatch

What are some risks associated with attempting to micro-match supply and demand using rapid replenishment?

Solution

Micro-matching supply and demand using rapid replenishment refers to the process of assuming same demand pattern for a business or store on a daily basis. In this kind of replenishment process, businesses aim to save time and resources by ordering and maintaining same level of inventory on all of their business days. There are major risks associated with such kind of replenishment strategy. These are as discussed below:

1) Demand levels are often uncertain and businesses are always exposed to the risk of having unanticipated customers coming to them and buying majority of their products and in the process, causing problems for the regular customers of the business. When a store stocks out, it becomes a source of frustration and disappointment for the customers and a lost business opportunity for the company.

2) When customers have to visit another store to make their purchase in case of unavailability (or stock out) of the product/s in their regular store, there is a risk of them shifting permanently to other stores thus, causing a local ripple effect.

3) The service level of the store can be deeply affected for the next wave of demand as the business will have to order inventory at an ad-hoc or unplanned basis, there by, causing delay in transportation of goods from the supplier to the manufacturer/store/business. There are also chances that the supplier might not be able to fulfil the demand of the store as the order quantity level is not pre-planned or more than the pre-decided quantities.