A firm has increased finished-goods inventories for several products to compensate for increased variability in...

To maintain sales and reduce variability in demand caused by large, infrequent orders, the firm should encourage high-volume customers to place blanket orders. Blanket orders are long-term agreements where customers commit to purchasing a certain amount over a specified period, with regular deliveries as needed. This approach smooths out demand variability, allows for better production planning, and reduces the need for holding high levels of finished-goods inventory. Reducing discounts for large orders might deter customers, extrinsic forecasting methods do not address the root cause, and increasing safety stock only temporarily mitigates the symptoms without solving the underlying issue.

References:

Silver, E. A., Pyke, D. F., & Thomas, D. J. (2016). Inventory and Production Management in Supply Chains. CRC Press.

Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation. Pearson.