However, the partial expectations table often yields negative values for the safety factor k, which in turn leads to negative safety stock and hence a reorder level that is insufficient in size to cover normal levels of demand during the delivery lead time.
Also, what is the maximum level of stock?
The maximum stock level is a not-to-exceed amount used for inventory planning. This stock level is based on a calculation of the cost of storage, standard order quantities, and the risk of inventory becoming obsolete or spoiling with the passage of time.
What is safety stock in supply chain management?
Why safety stock is needed: Stock to protect against variation in Supply or demand (only in case demand is bigger that the forecast) Its purpose is to prevent disruptions in manufacturing or customer deliveries. Stock maintained to provide a required customer service level.
How does lead time affect safety stock?
Safety stock is designed to prevent stock outs when there is variability in your demand and supply. Changes in your mean lead time and demand affect your cycle stock but not your safety stock. By reducing the variability, you reduce your safety stock. Let us look at two cases to understand this.