Ways to Reduce Safety Inventory

Ways to Reduce Safety Inventory
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Ways to Reduce Safety Inventory
Reduce Demand Uncertainty
Product demand forecasting is an investigation of a company’s demand for product or service to include current and projected demand by customers, the industry and product end use. Demand forecasting can be long-term, midrange or long-term depending on the firm’s objectives (Hugos, 2018). Reducing demand uncertainty helps a business minimize inventory stock outs, lower safety stock requirement, minimize product obsolescence costs, management of shipping, superior negotiation with suppliers, effective scheduling for production and increase of customer satisfaction (Hugos, 2018).
Reduce Order Lead Times
Reducing and accurate forecasting of order lead times provides less safety inventory required for coverage. Calculating the production schedule at high precision considering resource capacity is sufficient to begin shortening lead times by synchronizing multiple processes or splitting operations, companies eliminate unnecessary waiting time between procedures (D’Avino, Simone & Schiraldi, 2014). The most significant benefits of reducing lead times are streamlined operations, reduced carrying costs and improved productivity. Additionally, it helps in the fast replenishment of stock to avoid stock-outs, lost customers and lost sales.
Reduce Lead Time Variability
When ordering things such as parts for machines, lead time may vary from vendor to vendor which makes it difficult to forecast when items are delivered and make production coordination difficult (Hugos, 2018).

Lead time variability creates stock-outs and inventory surplus and can at times strain the budget. Reducing lead time variability through consolidation of company suppliers or ordering from one supplier to ensure that everything arrives at the same time. Moreover, it helps cut down on shipping cuts, enhances easier schedule builds and gets things done with less hold-up (D’Avino, Simone & Schiraldi, 2014).
Reduce Availability Uncertainty
Matching supply and demand in any industry ensures product and service availability when their demand arises. Failure to have enough inventory to meet the customers’ demands rises problems that affect certain aspects of a business such as lost sales, lost customers, adverse publicity and high costs to meet demand (D’Avino, Simone & Schiraldi, 2014). Availability of uncertainty can be reduced with manufacturers and retailers keeping up with production and supply to retailers. Retailers may also introduce incentive structures and introduce new targets and provide managers with detailed updated information about products that go out of stock (Hugos, 2018).
References
D’Avino, M., De Simone, V., & Schiraldi, M. M. (2014). Revised MRP for reducing inventory level and smoothing order releases: a case in manufacturing industry. Production Planning & Control, 25(10), 814-820.
Hugos, M. H. (2018). Essentials of supply chain management. John Wiley & Sons.
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