This concept is the guardian of efficiency in the supply chain. Let's imagine you run a company that sells products in high demand. If you run out of stock, even for a short time, customers may turn to your competitors. And once they've gone, it's hard to get them to come back... Safety stock acts as a reserve that prevents these unfortunate stockouts. It's not just extra stock; it's a planned part of your supply management. The idea is simple: always keep a certain amount of product in reserve to deal with the unexpected. These contingencies could be delivery delays, a sudden increase in demand, or even quality problems with a recent delivery. Of course, this represents an investment. There are storage costs to consider, and the capital invested in stock cannot be used elsewhere. But the benefits, such as customer loyalty and the ability to seize new opportunities, can far outweigh these costs!
Calculating safety stock is a fundamental step for any company seeking to optimize its supply chain. Why is it important? Because it gives you a precise idea of how many items you need to keep in reserve to avoid stockouts. This ensures that you can serve your customers in any situation, whether it's an unexpected increase in demand or a delay in delivery. So, what data should you use for the calculation?
Why is this important? Simply because it puts you in a position of strength. You won't have to say no to a customer because you're out of stock. You can also react quickly to market opportunities without fear of running out of resources.
Enter the average restocking time in days, then the average daily sales in number of products, then the standard deviation of daily sales, and finally the desired confidence level. The calculator's formula gives you the number of products you'd need to keep in stock to reach the confidence percentage you've entered
You've already understood the importance of safety stock for your business. Now the challenge is to optimize it so that it works in your favor. Here are a few tips that can help!
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