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Data & the Supply Chain: Rethink your safety stocks
Rethink your safety stocks!
Whether it’s the PS5, microchips, metals, or plastics, 2021 has already been a year of product failures and disruption. But even if the health crisis has mainly caused these issues, their severity and duration have certainly revealed the inherent weaknesses in the current system.
Before the crisis, these flaws were already present, and businesses were well aware of them. In fact, the average number of days of stock coverage for manufacturers and retailers between 2004 and 2019 has increased by 32%.
Delays and shortages are therefore expected to increase in number and intensity over the next few years. So, how should we rethink our safety stocks? How can we optimize raw material and component inventories? And how can new technology help?
Find out how to:
- Rethink your calculation: Which calculation method to use for your safety stock
- Improve the reliability of your forecasts with the latest techniques at the edge of technology
- Build a strong supply chain: How a probabilistic approach can help you face multiple challenges
Level up your supply chain with AI
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FAQ
Find everything you need to know right here.
What is a safety stocks? How is it calculated?
Safety stock is a buffer quantity kept on hand to absorb unexpected events, such as higher-than-expected demand or supplier delays. It acts as a cushion to prevent stockouts.
To calculate it, you typically consider demand variability and lead time variability (for example, using the standard deviation of demand over the lead time) as well as the desired service level. A common formula is:
Safety stock = service factor × standard deviation of demand during lead time.
This reserve helps maintain product availability despite uncertainty.
