In this eBook we show you how to calculate safety stock – from the most basic, easy-to-use examples, to more sophisticated, statistical formulas.
We also provide strategies to ensure you hit fulfilment targets whilst reducing your inventory costs.
Safety stock is used to manage supply and demand uncertainty, such as unexpected surges in sales or delays to lead times (supplier deliveries or production delays). Safety stock helps cover such eventualities and helps prevent stock-outs.
Inventory management teams are constantly looking to achieve high service levels (a measure of product availability) without tying-up too much capital in stock. An important piece of this puzzle is correctly calculating safety stock.
The simplest safety stock formulas are easy to calculate, but often inaccurate. This is because they assume that forecasted demand will be accurate and lead times will be consistent. On the other hand, more complex calculations can be very time-consuming to manage and open to human error.
Many companies are therefore turning to inventory optimisation tools, such as EazyStock.
EazyStock connects to your current stock system and uses advanced algorithms to automatically calculate safety stock quantities at SKU level.
EazyStock’s safety stock calculations consider dynamic demand forecasts, changes to lead times and your required order fullfilment targets.
The final safety stock quantities are then used to produce optimised reorder recommendations – speeding up purchasing tasks and reducing the risk of stock-outs.
Calculating appropriate inventory levels is challenging. If you carry too much stock, you tie up working capital. Too little, and you face potential stock-outs and unhappy customers.
When demand for inventory items is consistent and lead times are reliable, it’s fairly easy to calculate your safety stock. But, when demand and supply fluctuate, the job becomes much tougher.
In this eBook we investigate how to overcome these challenges.