Safety stock: a popular solution to avoid stock shortages

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The first solution that can be put into practice is the safety stock . This corresponds to the additional level held by a warehouse to cope with changes in demand. In order to control the variations in available stock according to demand, the safety stock can be associated with the minimum stock. This is the quantity of products essential to meet demand. It must logically be greater than the safety stock.

The calculation of cambodia phone data the safety stock is done from mathematical formulas taking into account different variables. It is considered that the formula to know the necessary Safety Stock corresponds to the Standard Deviation of Demand X Safety Coefficient X square root of the Replenishment Time. The safety stock can then be calculated. Software allows this calculation to be carried out easily. This safety stock will be based on the history of sales and demand forecasts. Different variables will also have to be taken into account.

This is the case with fluctuations in demand. If the demand for the product is unpredictable, it is also difficult to control. The effervescence of the markets leads to the volatility of demand. Likewise with the appearance of new products and competition. Also added is seasonality which has a direct impact on sales and therefore the level of stocks.

To calculate the variation in demand, it is necessary to determine the difference between the maximum turnover and the average turnover during a specific period. This will avoid seasonal fluctuations.

Another variable to take into account is the Lead time of the different suppliers. This corresponds to the average time used by the supplier to deliver the ordered products to a warehouse. The deadline is, as a general rule, decided in advance. However, it will always be useful to add an additional delay to cover the safety stock.