Safety stock
posted by admin in UncategorizedSafety stock is a term used to describe a level of stock that is maintained below the cycle stock to buffer against stock-outs.
Safety stock is defined as extra units of inventory carried as protection against possible stockouts. It is held when an organization cannot accurately predit demand and/or lead time for the product.
Reducing safety stock
Safety stock is usually used as a buffer to protect organizations from stock outs caused by inaccurate planning or poor schedule adherence by suppliers, as such it’s cost (in both material and management) is often seen as a drain on financial resources http://www.supplychainmechanic.com/?p=18 –Calculating safety stock which results in reduction initiatives. Various methods exist to reduce safety stock, these includes better use of technology, increased collaboration with suppliers, and more accurate forecasting The IOMA Handbook of Logistics and Inventory Management By Bob Donath, Institute of Management and Administration (Ioma), Institute of Management & Administration. In a lean supply environment lead times are reduced which can help minimize safety stock levels reducing the likelihood and impact of stock outs.MA Stitch in Time: Lean Retailing and the Transformation of Manufacturing
By Frederick H. Abernathy
Due to the cost of safety stock many organizations opt for a service level led safety stock calculation for example 95% service level which could result in stock outs but at a level which was satisfactory to the company. The lower the service level the lower the requirement for safety stock
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