Ideal Inventory Level, Why is Safety Stock Important?

Managing your inventory may not be the most exciting part to do for your business. However, it is a crucial part of it. It determines how things are running in your warehouse that would reflect the growth of your business. Actually, it determines everything, it is the backbone of your business. It is important to maintain an ideal inventory level and know the importance of safety stock.

How To Maintain An Ideal Inventory Stock

The ideal inventory level varies from the nature of the business, but it is safe to say that it should be optimal; meaning no over or under stocking. But what if demands on your product suddenly rise than what you can provide to your customers? And then due to some circumstances, for instance, a problem with the shipping of the stocks happens? Causing everything to be late. Most likely, it will result in losing your customers to your competitors. However, to avoid such things or as a way to be ready for anything like that while keeping the inventory at an optimum level, you need to have backup plan called safety stock.

What Is Safety Stock?

Safety stock or buffer stock is the amount or level of extra stock that you keep in order to cover up any problems that your main inventory stock might encounter; such as a sudden increase in demands, a problem with the shipment, a problem with the availability of the product from suppliers, and many more. Think of it as an emergency stock that you can use to maintain your business flow and make your customers happy and satisfied.

To further understand the importance of safety stock, here are the main reasons why you need it:

  • Protects you from unexpected changes in supplies. With it, you can provide the demands of your customers even if your supplier suddenly had to close for a week, or if there is a disruption with the shipping or production of the products. For instance; accidents or natural disasters.
  • Serves as your back up when demands for your product exceeds your forecast. With it, you don’t have to sacrifice losing customers while you replenishing stocks to meet demands.
  • Keeps everything on your business to run smoothly and as usual. Whatever disruptions you’ll face with manufacturing, deliveries, etc., with safety stocks in place– you can keep your supply chain running smoothly.
  • It helps you keep customer service and satisfaction level high. Imagine customers went to your store but only to find out that you run out of stock of a specific product that they need. Those customers will definitely look for other options and worst case, they won’t be coming back to you. Especially if they found out that your competitor always has this and that. With safety stock, you can prevent scenarios like that to happen in the first place, thus keeping your customers with you, your reputation to be high as possible, and ensures that they always come back.

Overall, having a safety stock can give you peace of mind, especially during tough and crucial times. Some believe that having a safety stock can be counter-intuitive to the idea of turning business into profit. However, upsetting customers by constantly running out of stock may result in losing everything. Safety stock is a solid investment if combined with proper inventory management.

Related Topics : TIPS FOR CHOOSING PACKAGING FOR YOUR PRODUCT

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