Extra inventory held to cover uncertainty in demand or supply, so that a delay or a spike does not stop production or delivery. It costs money, so its size is a balance.
Title graphic: Safety stock (Concept)
Description
Safety stock is inventory kept on top of the expected need, to cover surprises such as a late delivery, a quality problem or a jump in demand. Without it, a small disturbance can stop a line or leave an order unfilled.
The cost is capital tied up in stock, storage space and the risk that parts become obsolete. The right size depends on how much demand and supply vary and on the service level the company wants to reach. A common planning formula uses the variation of demand during the replenishment time, but the result is only as good as the data behind it. Lean thinking treats stock as a way of hiding problems, so lean plants try to reduce the variation itself before they cut the stock.
When purchasing, warehouse, sales and finance each keep their own stock numbers, nobody can say how much inventory the business really has. In this Knowledge Nugget, Mirko Peters walks operations and finance teams through how Dynamics 365 Inventory Management…
Articles about Safety stock (1)
Safety Stock vs Buffer Stock: How Much Is Enough? · Mirko Peters Safety stock and buffer stock protect against variation. Learn the difference, the safety stock formula, a worked example and how to reduce what you hold.
Relationship map of Safety stock: linked topics
Related topics in brief
iFAKT GmbH· Related to · Organization Stuttgart-based consulting company and software specialist for Industry 4.0, founded in 2001, that helps manufacturers plan and optimize production and logistics processes; developer of the Polaris software.
Buffer management· Related to · Concept Deciding where to place buffers of stock or time in a production system and how big to make them, so that disturbances do not stop the bottleneck or the customer delivery.
Work in progress (WIP)· Related to · Concept Work in progress is material or product that has started its production route but is not yet finished; too much WIP ties up material and space and hides problems in the flow.
Enterprise resource planning (ERP)· Related to · Concept Business software that connects purchasing, inventory, orders and related transactions across an organization.
Pull system· Related to · Concept A way of controlling production in which work is started only when the next step signals demand, instead of being pushed forward by a forecast or schedule. Kanban is its best-known tool.
Polaris Optimizer· Related to · Product Module of iFAKT Polaris that automatically generates optimized production plans under constraints such as resources, shifts, zones, qualifications and capacities.
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