The items can also be classified as “demand-based” or “non-demand-based.” Demand-based items are stocked at the local level because they have demonstrated sufficient past demand history to warrant stocking under specified Postal Service demand frequency thresholds. At the wholesale level (centralized storage⁄distribution), high demand makes an item a good candidate for direct supplier delivery or JIT distribution. The economics of large quantity over time makes it feasible for the supplier to produce on a stable plan and to make regular shipments. The result stabilizes the supplier resource needs and cash flows. Requisitioning or demand frequency provides information on the continued stocking of an item. If a stocked item does not have the appropriate frequency, it becomes a candidate to be dropped from inventory.
Non-demand-based items are items stocked because of their importance to the client or because the items have been proven to be less costly to stock than not to stock. There are two types of non-demand-based items — insurance and critical. Insurance items are a component, a subassembly, or assembly that has a very low mortality rate, is infrequently used, and is stocked as insurance against a lengthy lead time or pipeline delay. Critical items are items that, if not available when needed, will impact the ability of the installation to perform its mission; they can also be items on hand for personnel health and safety. The installation determines which items are critical. The items must be cataloged (identified and classified as “non-demand”) so more management attention can be given to them.
