Assignable Variation

CIOP is an end-to-end supply chain training and certification program designed and developed by supply chain practitioners and consultants. The syllabus was developed in consultation with the industry, which led to Inventory Management Body of Knowledge (IMBoK v3.0). Most of the class discussions you will hear cannot be found in any textbook rather these are all the original contribution from the developers of CIOP. For example, think about the types of inventories such as raw material, work-in-process and finished goods. Out of these three, WIP is the most difficult to sell in the market and that is one of the reasons, WIP should be controlled well. The company has a built-in capability and capacity to sell finished goods, which is their business. The second easy to sell are the raw materials as you know the suppliers, who may either buy-back or at least guide you. But in case of WIP, this is custom manufactured to suit your manufacturing processes and may not well fit any other organisation, hence you may have to sell it as a scrap.

What is inventory control? Inventory Control is the act or process of ensuring that raw materials and finished goods are available in sufficient quantities at specified times and locations for usage. A distribution of 

random results resulting from a single identify factor with clearly identified characteristics is not feasible. Such a situation is intrinsically controllable. This control is inherent to the manufacturing system..

When there is an assignment of random variations, there must be a statistical process control to ensure that the process does not exceed the capacity of the natural variations that it is subject to. The statistical process control will be used to monitor the variability of inventory to assess the effects of price changes, consumer preferences, and other such factors. For example, if a manufacturer sells a hundred units of a product per week, at times the product may be Assigned to a particular location without a consistent increase in its quantity over a period of three months. The cause of this variance, other than the inherently controllable natural variation, will be the price of the product, demand for the product, and other economic factors.

To overcome problems arising out of uncontrollable random variations, the assignment of the variation of inventory should be controlled by a statistical process control. In situations where no such process is possible, an assigned cause-and-effect relationship should be determined by using the information that the statistical process offers. The cause of this inventory variation can be effectively controlled by using theoretical or fundamental economic concepts. These concepts provide the means by which a manufacturer can specify the appropriate assignment of the random variations of inventory. It is often necessary, in order to overcome certain statistical processes, the use of economic concepts in the form of concepts that are mathematically analyzed.

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