Per Bowersox study question 2 of Chapter 7, discuss the disproportionate risk of holding inventory by 1)

retailers, 2) wholesalers, and 3) manufacturers. (This is a three-part discussion).  

In reply to two of your classmates' posts, what did you learn from their discussion?  What questions do
you have for them regarding their posts?

The disproportionate risk of the retailer is that they must assume a greater risk due to the depth and
duration of their inventory holdings. The retailer’s risk is spread across the units they hold in inventory.
If the inventory on hand does not sell, then the capital is tied up in the inventory; therefore, if the
inventory does not sell, the retailer loses the amount of the inventory cost. The retailer would instead
hold merchandise on consignment. Stock on Consignment the retailer receives the inventory but only
pays the wholesaler for the product when it is sold. Thus, lowering the risk for the retailer. The retailer
aims to reduce the risk by pushing inventory back from the channel, placing more risk on the wholesaler
and manufacturers. This has resulted in the retailer’s need for fast mixed-product shipments from the
wholesalers and the manufacturers. Specialty retailers will typically have less risk because they handle a
smaller assortment. However, they have a greater risk due to the depth and duration of the inventory
holding.

If the retailer does not have the inventory, they could have an unsatisfied customer and a loss of sales.
Therefore planning the retailer’s inventory is critical. The Manufacture must arrange the needed amount
of inventory for the retailer to purchase. The manufacturing process is subject to the manufacturer
having the necessary raw materials for the manufacturing process of the products. If they are short, a
component can cause the production process to be delayed, add cost to the final product, and cause
shortages. Likewise, in the event of overstock increase the cost and reduce the profitability of a product.
These costs result from added warehousing space, working capital, insurance, taxes, and obsolescence.

The decisions of inventory risk are related to time duration, depth, and breadth of commitment.
(Bowersox,2019) The manufacturers have the most significant amount of time for the chance. This is
because the manufacturer’s risk begins with the purchase of the raw materials and component part,
including work-in-process, and ends with the purchase of the finished product. Some retailers require
the manufacturer to stock their shelves and wait for payment until the consumer purchases the product.
This is the retailer’s consignment inventory and shifts all inventory risk involved with that product to the
manufacturer. The wholesaler and the manufacturer’s inventory commitment is deep, in-depth, and
long.

The wholesaler purchases large quantities for the manufacturers and sells smaller amounts to the
retailers. ( Bowersox,2019) The wholesaler provides the retailer with an assortment of products from
different manufacturers in smaller quantities. For seasonal products, the wholesaler has an increased
depth and duration of the risk.

The disproportionate risk to the Retailer, The Manufacture, and the wholesaler in terms of holding
inventory. According to Collinsdictionary.com, Disproportionate Risk is something surprising or
unreasonable In amount or size. According to the Cambridge English dictionary, Disproportionate is
defined as meaning – too large or too small compared to something else or not deserving of its
importance. Britannica dictionary definition of disproportionate – Having or showing a difference that is
not fair, reasonable, or expected: too large or too small with something.

The amount of inventory risk to the retailer, wholesaler, and the manufacturer is
disproportionate. The amount of risk each takes on inventory can be measured in time duration, depth,
and breadth of commitment.

Manufacturer- risk Is long-term – the duration of the risk. The inventory commitment begins
with the raw materials. It lasts until the finished product is stored in an inventory warehouse until the
retailer purchases it. It becomes the risk of the Purchaser, usually a wholesaler or retailer. However, the
consumer can buy some items from manufacturers, where the inventory risk would end with the
manufacturer. In a consignment, the inventory will be placed with the retailer, but the manufacturer
retains the risk until the retailer sells the list to the consumer. The manufacturer holds the stake if the
inventory until it is purchased by the wholesaler, retailer, or consumer.

Wholesaler – The wholesaler purchases their inventory from the different manufacturers in
large quantities and sells the inventory to the retailers in smaller amounts. Often with seasonal
products, the wholesaler must inventory seasonal items far before the time to sell products to the
retailer. This increases the depth and duration of the risk for the wholesaler. Retailers continue to shift
inventory responsibility back to the manufacturers and wholesalers. The risk of the wholesalers is
measured if depth and duration. The duration is the amount of time during which the wholesaler holds
the risk of the inventory.

Retailer- inventory management is about the velocity of buying and selling a large variety of
products assuming a large amount of risk in the marketing process. The inventory can be viewed as
broad but not deep. The retailer takes a position of Risk on a large variety of products. Their risk position
is spread across all inventories in stock, not on any one product. Retailers are faced with the breadth of
Inventory. The retailer reduces the risk by pushing the risk of inventory responsibility back up the
inventory and basks up the supply chain to the wholesalers and manufacturers. However, this causes
the retailer to demand fast delivery of shipments of mixed products. Specialty retailers typically have
less width in the amount of inventory because of handling a smaller assortment of products. This also
causes an increase in the depth and duration of the list being held.
Why has a trend to push inventory back up the distribution channel?
The trend to push the inventory back up the distribution channels of the supply chain is because many
retailers carry more stock than needed to support the retailers’ business. Due to the pandemic 2019
caused by covid 19 virus, when retailers experienced many cases of stockout, the retailers began
carrying more inventory of different products creating a safety amount of inventory.