The only way to reduce inventory levels without losing sales

Achieving the holy grail of inventory management – the magical balance of minimal inventory while meeting variable customer demand in the face of unreliable supply – is only possible with optimal safety stock levels.

Why do we need safety stock?

Safety stock is inventory required to mitigate the risk of stock-outs due to uncertainties in supply and demand – it is our insurance against running out of stock and protects our fill rate (and sales revenue):

  • Sales are hard to forecast as products may sell smoothly, seasonally, sporadically, slowly or the product may be new
  • Suppliers may deliver early, on time or late
  • Suppliers may deliver the quantity we ordered, too little or sometimes even too much

Setting safety stock for the right reasons

By monitoring how well we forecast a product and how reliable the supply is, we are able to dynamically adjust safety stock.
We decrease safety stock for products that are more likely to end up with excess, where:

  • We continually forecast more than we sell
  • Suppliers predominantly deliver early or more than we ordered

We increase safety stock for products with a risk of running out of stock, where:

  • We continually sell more than we forecast
  • Suppliers predominantly deliver late or less than we ordered
Other factors that influence safety stock
  • The length of the lead time
  • Supplier minimum ordering constraints
  • The frequency of ordering

Target fill rate + inventory risk = more predictable outcome

Driving your inventory investment by target fill rate settings that reflect your market offer and applying the “inventory risk”, results in an optimal safety stock level for every single product. In every location. Every day.

Not only are we protecting the fill rate, we are targeting the fill rate we want to achieve and computing safety stocks to deliver that fill rate. With optimally set safety stocks we take investment away from products that do not need it and invest more in products that do.

The result: lower levels of inventory with higher product availability and Sales

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More than 250 businesses world wide trust NETSTOCK to manage their inventory