The Role of Safety Inventory in a Supply Chain

Understand the role of safety inventory in a supply chain. 

Identify factors that influence the required level of safety inventory. 

Use available managerial levers to lower safety inventory without hurting product availability. 

In this chapter, we discuss how safety inventory can help a supply chain improve product availability in the presence of supply and demand variability. We discuss various measures of product availability and how managers can set safety inventory levels to provide the desired product availability. We also explore what managers can do to reduce the amount of safety inventory required while maintaining or even improving product availability. 

FIGURE 12-1 Inventory Profile with Safety Inventory 

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Understand the role of safety inventory in a supply chain. Safety inventory helps a supply chain provide customers with a high level of product availability in spite of supply and demand uncertainty. It is carried just in case demand exceeds the amount forecasted or supply arrives later than expected. 

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