Transportation cost Transportation cost

HIGH, Speed-slow High, Speed-fast

Unit Inefficient To keep small cycle

Inventory inventory and use fast
Value- transportation needed.
HIGH

Unit To keep large cycle Inefficient

Inventory inventory and use
Value-Low slow transportation
 Rough
Raw potatoes processed Frozen French
frozen fries
potatoes

Inventory value increases

Fried French
fries

Flexibility decreases
 Unit inv. value
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Upstream Downstream
 Unit inv. value
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Upstream Downstream
I
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Surge flow inventory Fad products
e
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t Wave flow inventory
Seasonal fashion
o
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h Core business
Base flow inventory
o products
l
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n Low risk profile
g
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Surge flow inventory Fad products
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r Seasonal fashion
Wave flow inventory
y
h Core business
Base flow inventory
o products
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Type Characteristics Policy
Base flow Predictable high flow Minimum stocks. Direct deliveries
rates from suppliers
Wave flow Slow moving, high Min. stockholding. Building them
criticality, perishables, only in peaks. Direct delivery
peaks are predictable. wherever possible.
Surge flow-1 High criticality, Low Hold high level of stock thereby
value, long lead time, allowing safety stock for delivery
small physical size lead time and demand fluctuations
Surge flow-2 Low criticality, high Minimize stockholdings, build
value, bulky, Peaks are them during peaks,
relatively predictable.