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How to analyze Safety Stock Market

Protection stock is a term that is used to explain the amount of inventory or stock that is kept on hand in categorizes to reduce the possibility of a temporary shortfall of resources from taking position. Also known as buffer stock, this type of stock is helpful in dealing with sudden upswing in demand or just for making sure there are enough raw material and supply on hand to keep manufacture going while waiting for the next scheduled release of material from a dealer. There is no particular universally accepted method for calculating safety stock, with dissimilar companies considering factor that are relevant to their industry and corporate culture. Most method will involve consideration of such factor as average daily usage and the lag time between order appointment and delivery.

 Know Your Demand

establish the demand for the essential stock item.

Calculate the average each day usage for each item. A regular approach is to calculate the total usage of that item for a particular period, such as 1 calendar month.

By separating that total usage by the real days in that month, you will arrive at the common usage per day.

Predict changes in demand.

By considering factor such as past usage of the stock for the same period over the last 5 years and allowing for anticipated shift in consumer order for the up-coming period, it is possible to have a good quality idea if there will be a substantial change in the average daily usage of the stock items. [1]

When factor point out that an upswing in require will occur, use that information to adjust the projected middling daily usage. The projected average daily usage can be used to find out how many unit should be ordered and to create a workable schedule for recurring order.

Know When Your Stock Will Come in

1     Identify lag time between the placement of orders and the projected delivery date.

2     Work with vendors to determine the average amount of time required to process orders of a specific quantity, beginning with the order date and ending with the projected arrival date.

3     Know when your orders will arrive and adjust the quantity of the orders to make sure there are enough materials on hand to keep production going until each subsequent order is processed and is received.

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