Also called ‘safety stock’, it’s an extra amount of inventory that you should keep on hand, above the forecasted value, to cover any extra demand. This is tied in with the ‘Service level’ setting, and depends on how variable or predictable your sales are for each item.
The more variable your sales history, the higher the buffer stock will be. For example, if the service level is 0.95, the buffer stock will be the amount of extra stock you’ll need so that you have a 95% chance of not going out of stock.
It may be more efficient to lower the service level for items that your customers are happy to wait for (eg: rare or custom items). On the other hand, you can increase this level if it’s important to be able to serve your customers immediately, and it’s worthwhile to bear the cost of keeping more items on hand to cover this.
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