What do we mean when we talk about buffering variation in de

What do we mean when we talk about buffering variation in demand? How does a warehouse fit into this discusion?

Solution

Buffering variations in demand is a strategy that is devised to minimize the stock out costs.

It saves a lot to company when devised careful strategy and close monitoring.

The biffering invloves keeping the buffer stock to meet the variations in market demand.

It can be handled by inventory buffer and capacity buffer.

Inventory buffer is the making availability of stock in higher quantities to meet unexpected changes in demand and minimise the stock out cost to save from the consequences of reputation losses and legal cases due to committed or delay in supply.

The capacity buffer is the arrangement of alternate sources like subcontractors and tieups with the other vendors to meet the emergency demands.

The ware house should be provided with the necessary infrastructure to accomodate the excess stock.