The inventory plan under the fixed time period assumes that a orders would be placed at an interval with fixed time periods. Under the inventory plan where the order time period is fixed for the whole year the holding costs stand at $9,206, with the cost of safety stock at $6,608 for a 99 percent service level and the ordering cost amounting to 8,820. The total cost of the inventory plan stands at $24,633.
The review of the two inventory plan has revealed that while the ordering and the safety stock costs for the inventory remain similar, the handling costs associated with the inventory are different for the two options. The fixed period option depicts a handling cost which stands at $10,527, while the fixed period inventory plan depicts a handling cost of $9,205. Therefore the total inventory costs for the two options differ from $25,955 for fixed order and $24,633 for fixed time period. The more cost effective option is the fixed period inventory plan and theNAPAwinery should use this plan as an automated inventory forecasting tool.
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