MSME Quality Hub

Having more stock outs? Losing business due to lack of availability?

If you have enough safety stock you can solve the problem. .

Follow the steps below:

Create a base line stock requirement by just multiplying the average demand over the last months with the lead time to get the material from supplier or production.

Safety Stock = Average demand x Lead Time

Create the safety stock and have a track for few months or weeks based on your business.

Verify the dips and spikes of stock from the base level. Adjust the stock requirement frequently to make it live and suitable to current needs.

Do you have more spikes in demand often? Create a maximum stock level considering your major spikes to avoid stock out.

Do you have more inventory excess in hand often? create a minimum stock level considering the low sale.

There is no one rule fit for all business. It is you who has to decide considering the business challenges, supply uncertainty and cash flow.

Consider Implementing a safety stock or buffer stock to mitigate the risk of stock outs. This involves maintaining a certain level of inventory as a contingency for unexpected spikes in demand or delays in replenishment.

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