Question

A healthcare provider must implement better inventory forecasts to meet market demand

Test methods to ensure that the production line will not stop. The warehouse manager is using the following

Information to review the safety stock of specific relevant parts:

Regarding the establishment of safety stocks, please explain and analyze the pros and cons.

thanks

Answer 1

Safety stock figure out exactly how much merchandise is required, helping in order in right quantity to keep orders flowing without incurring extra costs.

Safety stock is the best way of accounting for variability in demand and lead time uncertainty.

In summary, these are the main benefits of safety stock

1. It prevents you from running out of stock, especially on key critical items.
2. It protects you from unexpected circumstances, like disruptions in demand.
3. It gives the flexibility to order more products when there is demand forecast error and underestimates the popularity of a product.
4. It keeps customers happy and prevents lost conversions.

Disadvantages of maintaining high safety stocks:

1. It may lead to Obsolete Inventory
2. High Storage Costs
3. Potential Insurance Costs to protect high stocks
4. Less Working capital as the cost is stuck in Inventory.