Calculating Safety Stock: Protecting Against Stock Outs

The following video explains how to calculate safety stock in order to avoid the high costs of inventory shortages and stock-outs. The video explains inventory replenishment times, daily consumption, safety stock thresholds and levels, and your company’s own time to market in terms of delivery.
A graph is provided that clearly shows what the reorder point should be and what the safety stock levels should be.

A working example is provided where a company tracks a number of inventory replenishment times, their own daily consumption levels, the safety stock amount they need to cover during these consumption periods and then finally, your company’s delivery times for finished goods to your customer base.

[ProSimples]

I used this approach of inventory management in my last project using my SP e cp and fortunately I got 100% in my final grade for it. Thank you very much.

[Driveyoursuccess]

Here are a few things. 1) Apply an minimum order quantity to your own customers and focus on locating additional customers. 2) Focus on vendor acquisition to offset the delay and issue of lot size. Multiple vendors helps to reduce these costs and dangers. 3) Ask the vendor to break the lot size. They will charge more, but you can avoid carrying costs. 4) Sit down with procurement & sales to explain the costs of carrying safety stock. You need multiple sales to make it work.

[VIJAYAKUMAR-zmuz]

THANK YOU JOHNSON . I UNDERSTAND VERY QUICKLY AND EASILY

[lookforbriansjazz]

Is Replenishment Time the same as Vendor Lead Time?

[soethuraaung]

Very Valuable theory. I want find like that. Thank you so much.

[akowalski]

Thank you for your great video!! I watched this video for my operations management class and I really appreciate how well you explained these concepts and equations.

[remiokeshola]

Great Stuff. I've used this in one of my blogs and acknowledged you in it as well.

[lexdsly]

Really helped me get my stock room down up in inventory turns, down in inventory. Thanks so much very helpful!!!

[KaushikChoudhury]

I am talking about EOQ to customer . I feel to meet the last statement in your comment is very challenging task for organizations. One side there is service delievery and on other side financial impact of carrying high inventory.

[explorerali]

The sales you took represents total sales of the store while i wants to calculate the buffer stock for all the products seperately as i have the data for the sales for each of them

[sayangchen]

Thanks very much for made this video. even after 7 years. the knowledge still good for me to understand and management inventory level in a better view.

[mesalonmty]

excellent video Ian, thanks a lot for sharing! 
greetings from Monterrey, Mexico.

[ismailnassar]

Thanks For excellent explanation. But I think the 1016 should not be called Safety stock. It is the ROP QTY. and you embeded the safety in it.

[fareltan]

Thanks for this infomative lecture video, really appreciate for your clear explanantion, thanks so much!!!

[jamesbock]

Thank you for explaining it clearly! I Appreciate it!

[layoflakersnation]

You fucking rule. I have a test next week that I am absolutely stressing over, but your videos are helping.

[msz]

I think you are mixing up the safety stock and the reorder point. Safety stock is supposed to be the extra buffer you have in order to help to meet the fluctuations in demand

[unmeshchandak]

Thanks for the information.Really great and easy way to do it.
I have query, this min-max i suppose should be at finished good, how should we calculate the min-max levels for each process? ( within)
also with the info from video Min level was calculated, can you share your insights on Max levels?

[samratsam]

Wow nice... U r a gud taacher sir... Hats off uh sir

[funandbun]

is the safety stock voloume is included in eoq