Safety Stock 
Safety Stock
James Pappas
Logistics Management and Operations, TLMT 353, Spring 15
American Public University
Professor Ernest Hughes
15 June 2015
Safety Stock
Safety stock is the parts buffer a business builds into the production line to ensure the through put is not interrupted. Running a successful business means ensuring customer satisfaction to the fullest extent possible. Time is a vital resource in business and not something that the consumer wants to waste. The ability to provide what the customer wants when he or she wants it is an essential element in logistical analysis. According to the business dictionary “Safety stock is the amount of inventory held as a buffer against mismatch between forecasted and actual consumption or demand between expected and actual delivery time, and unforeseen emergencies” (Business dictionary, n.d.). Safety stock is the required to compensate for unexpected demands, repair and recycle times, pipeline, procurements lead time, and delays. (Blanchard, 2004)
Determining the amount of safety stock required involves many factors. The type of product is important because if the item is perishable too much on hand stock may cause a loss of product due to spoiling. Technology of the product is important in analyzing the requirement, for example: today the consumers may all want the new “I-phone six”, however next month when the “I-phone seven” comes out; the six would be inferior and obsolete. Excess products of the “I-phone six” could be a significant loss of capital. Lead time of the required item is another consideration; the time delay from initial order to receipt of product is very important planning factor. Some parts take a considerable amount of time and need to be ordered in bulk, other parts can be ordered and received within a few days which equates to less of these parts are required on reserve, due to minimal risk. Reliability of the shippers and failure rate of the part can be
James Pappas
Logistics Management and Operations, TLMT 353, Spring 15
American Public University
Professor Ernest Hughes
15 June 2015
Safety Stock
Safety stock is the parts buffer a business builds into the production line to ensure the through put is not interrupted. Running a successful business means ensuring customer satisfaction to the fullest extent possible. Time is a vital resource in business and not something that the consumer wants to waste. The ability to provide what the customer wants when he or she wants it is an essential element in logistical analysis. According to the business dictionary “Safety stock is the amount of inventory held as a buffer against mismatch between forecasted and actual consumption or demand between expected and actual delivery time, and unforeseen emergencies” (Business dictionary, n.d.). Safety stock is the required to compensate for unexpected demands, repair and recycle times, pipeline, procurements lead time, and delays. (Blanchard, 2004)
Determining the amount of safety stock required involves many factors. The type of product is important because if the item is perishable too much on hand stock may cause a loss of product due to spoiling. Technology of the product is important in analyzing the requirement, for example: today the consumers may all want the new “I-phone six”, however next month when the “I-phone seven” comes out; the six would be inferior and obsolete. Excess products of the “I-phone six” could be a significant loss of capital. Lead time of the required item is another consideration; the time delay from initial order to receipt of product is very important planning factor. Some parts take a considerable amount of time and need to be ordered in bulk, other parts can be ordered and received within a few days which equates to less of these parts are required on reserve, due to minimal risk. Reliability of the shippers and failure rate of the part can be
References: Blanchard, B. (2004). Logistics Engineering and Management, 6th ed. New Jersey: Pearson, Prentice Hall. Business dictionary. (n.d.).What is safety stock? Website. Retrieved June 19, 2015. Harrison, C. (2002, July 29). Dell manufactures success with just-in-time. Retrieved June 20, 2015. http://articles.chicagotribune.com/2002-07-29/business/0207290012_1_dell-computer-corp-round-rock-indirect-channel