The Importance of Safety Stock in a Manufacturing Environment

Improve your fill rate, and reduce lead-time on inventory on hand at all times. You need to maintain stock levels, so that it does not fall below a specific amount. An important aspect of inventory management is having the optimal amount of safety stock available at all times. The right balance is essential, because too much will cost the company money in carrying cost, potential breakage, or expiration of non-durable goods. The right balance will allow you to meet unexpected increases in sales demand or cover a shortage caused by labor or material shortcomings.

An important aspect of maintaining accurate inventory control is to calculate safety stock as accurately as possible, so you can optimize stock levels all the while mitigating the waste of money on an inventory glut. In order to make an informed decision on calculating the amount of safety stock, one must consider demand for the product, lead-time for raw materials, and shipping, even potential delays due to inclement weather. The more accurate the forecast, the less safety stock is required thus saving your company lost revenue due to holding costs or lack of goods to market thus increasing customer turnover.

Your Enterprise Resource Planning system will help you immensely to calculate inventory required and automatic ordering once the inventory dips below a certain value.