Question

What is analogous to safety stock in services operations environment

Answer 1

While answering this, there are different ways to look at it. In the supply chain, the stock which is positioned in the given setting is the “decoupling stock” which decouples the system and allows the upstream segment to function by its own and is analogous to a safety stock. It is a buffer against any breakdown and reduces the need to synchronize the output. Thus, it is also called as intermediate stock. Another way, if we consider safety stock probabilistic models in inventory management. The amount of safety stock depend on the service level factor and many times it is analogous to normal distribution z – factors, evaluated by having combination of service level factor and standard error of lead time demand.