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Safety Stock

Stock management is like a balance board; too little is dangerous, too much is costly." - Anonymous


Definition

Safety Stock is a type of extra stock held in situations where regular uncertainty in the supply of goods is likely to lead to risks.


Safety Stock is a stock type that is added to the Minimum Stock for items kept in Minimum Stock and cannot be considered separately.


Pandemic and war situations have demonstrated the importance of Safety Stock in practice.



Opportunities / Benefits

  • It reduces the risk of production disruption as it prevents stock-out.

  • Whiplash Effect caused by demand fluctuations reduces .

  • Since it reduces urgent purchases, it prevents purchase costs from increasing.

  • Since it creates larger purchase packages, it provides relatively more price economy.

  • Since it contributes to the continuation of production, it supports competition.

  • It indirectly supports brand reputation as it ensures that production is not interrupted.


Risks

  • Increases inventory holding costs.

  • It brings opportunity cost in finance.

  • It may increase losses in short-lived products.

  • It may lead to numbness and blindness in the Supply Chain.


 

Cover photo: https://www.anylogistix.com/features/safety-stock-in-supply-chain-management/

 

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