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KNOWLEDGE LIBRARY

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27Jun

Warehouse Occupancy Percentage

Optimal storage utilization helps enforce healthy inventory management. In our early work with Honda their...

02Jun

Efficient Procurement Inventory

Efficient procurement inventory (EPI) is often required to realize steep discounts when a special opportunity...

02Jun

Inventory Carrying Rate

The inventory carrying rate (ICR) is the percent of the unit inventory value used to...

26Jun

Inventory Activity Profiling & Data Mining

Suppose you were sick and went to the doctor for a diagnosis and prescription.  When...

27Jun

Inventory Performance Measures

Inventory performance measures include financial, productivity , quality, and response time indicators for evaluating the efficiency and...

Safety Stock Inventory

The literal definition of safety stock inventory (SSI) is the inventory on-hand when a replenishment arrives (Point 7 in Figure 2.21). The average safety stock is the average on-hand inventory at the end of several replenishment cycles. Safety stock is required to support promised levels of inventory availability when the demand during a leadtime or the length of a leadtime is variable.  For example, if a replenishment is delayed or if the demand during a leadtime is much greater than normal, safety stock is in place to fulfill demand until the replenishment arrives or to satisfy some portion of the excess demand.  There would be no need for safety stock if we knew exactly what customers wanted, when they wanted it, and exactly when replenishments arrive.  To the extent there is uncertainty in any of those three variables, safety stock is required to provide anything better than 50% inventory availability.

Safety stock is required to support promised levels of inventory availability when the demand during a leadtime or the length of a leadtime are variable.  For example, if a replenishment is delayed or if the demand during a leadtime is much greater than normal, safety stock is in place to fulfill demand until the replenishment arrives or to satisfy some portion of the excess demand.  There would be no need for safety stock if we knew exactly what quantity the customers wanted, when they wanted it, and exactly when a replenishment would arrive.  To the extent there is uncertainty in any of those three variables, we will need safety stock to provide anything better than a 50% inventory availability.

 

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