Inventory Management: Safety Stock Calculation and Control

Inventory Management: Safety Stock Calculation and Control

This MBA style course prepares and empowers you to calculate and control your Safety Stock. A crucial area of Inventory Management.

The eternal question: How to balance the risk of stock-outs with the quantity of safety stock inventory held?...

We cover 3 methods to calculate your Safety Stock - from super simple to advanced statistics:

Method 1: Number of Days of Safety - A fast and very basic method to get a quick decision

Method 2: HiHi-AvAv (my own name for a very established method ;)  Finding the difference between our high "Lead Time Demand" and the average to determine the level of cover we want from periods of high demand during a slow replenishment lead time.

Method 3 : Statistical Method - The most rigorous method. We model our "Lead Time Demand" as a "Normal Distribution", determine our desired "Service Level" (acceptable risk of a stockout) and use a little help from some excel formulas to calculate our required Safety Stock and Re-Order Point quantity. 

Course Sections:

1. Inventory Control Introduction

2. Safety Stock Background

3. Inventory Dynamics

4. Simple Safety Stock Calculations

5. Calculating Safety Stock using Statistics

6. Getting Your Data

7. Assumptions and Limitations of the Statistical Method

8. Fixed Lead Time, Variable Demand: Method 3 Continued

9. Variable Lead Time and Demand: Method 3 Continued

10. Choosing your Service Level - Your Tolerance for Risk

11. Probability of a Stockout Over Time - Calculating Risk

12. Optimizing Safety Stock Levels

13. Conclusion

14. Bonus and Appendix

This course is for dedicated operations manager, the ambitious procurement professionals, the striving logistics supervisors, hands-on production planners and the practical business optimization analysts.

• Remove the guesswork and add structure to your crucial safety stock decisions.

• Take control of your inventory management to have and "impact" and "improve" your business operations - manufacturing, services, industrial operations and production.

• Equip yourself to take a new leading role in your workplace - improving your processes, systems & business / organization.

• Quantify your risk, calculate your inventory requirements and articulate your method - removing the guesswork and fearful overstocking

  
  

Downloadable Summary PDF Documents  - throughout the course

Almost all businesses have inventory: retail stores, factories, hospitals, hotels, car repair, warehousing, logistics and more - this means we all have to decide how much to hold and when to place an order from the suppliers for more. Place the order too late and, with a little extra demand than usual, you might stockout! Carry too much inventory and you pay for it in holding and financing costs every day, quietly sucking the profit from your business and crippling your cashflow and investment opportunities.

Having enough stock available whilst minimising costs and risk is the fundamental balance that can determine your business's success. Getting a strong control and continuously improving your business operations is essential to remain competitive, improving profitability, improving customer experience and customer satisfaction, reducing costs and improving delivery.

Without a solid grasp of safety stock and methods of calculation; no operations manager, can competently or confidently manage their risk without excessive costs.

Be the one bringing clarity and structure to this most crucial decision!

Specific Topics Covered in the Course:

• Why we need Safety Stock

• Consequences of Stockouts

• Costs of Inventory

• Inventory Dynamics

• Quick Calculations of Safety Stock

• Rigorous Statistical Method to calculate Safety Stock

• How to Model your "Lead Time Demand"

• How to Determine your own desired "Service Level"

• What the Probability of having a Stockout in a given period of time

• How we can Reduce our Need for Safety Stock

• Alternatives to holding Safety Stock

Take control! Boost your career and your business!  Start learning today!

FULL COURSE CONTENTS:

Inventory Control Introduction

1. Benefits of Good Safety Stock Inventory Management

2. Bond’s Lobster Story

3. What is Safety Stock – Why do we Need Buffer Stock?

4. Much Obliged!

Safety Stock Background

5. Supply Chain Trade Offs – Risk and Consequences of Stock-outs

6. Supply Chain Trade Offs – Costs of Inventory

Inventory Dynamics

7. Basic Inventory Dynamics - Introduction

8. Basic Inventory Dynamics - Sawtooth

9. Re-Order Point and Alternatives

10. Purchasing Order Quantity Choices

11. How much Safety Stock? - Procurement's Problem Question

Simple Safety Stock Calculations

12. Safety Stock Calculations - Introduction

13. Method 1: Simple Inventory Control Formula: # Days of Safety

14. Method 1: Practice Question : # Days of Safety

15. Method 2: HiHi-AvAv - Protecting Against the Worst Case

16. Method 2: HiHi-AvAv - Explanation

17. Method 2: HiHi-AvAv - Practice 1 & Answer

18. Method 2: HiHi-AvAv - Practice 2

19. Method 2: HiHi-AvAv - Practice 2 – 2nd round

20. Method 2: HiHi-AvAv - Summary

Calculating Safety Stock: Method 3: Statistical Method

21. Service Level and Statistical Distributions

22. Introduction to the Statistical Method

23. Service Levels and Statistical Variation

24. Normal Distribution Modelling

25. Service Level Definition

26. Statistical Method - High Level Overview

27. Jumping Ahead – A quick look

28. Need to Refresh your Probability Knowledge?

29. Normal Distribution Introduction

30. Normal Distributions and Standard Deviations

31. Lead Time Demand as a Normal Distribution

32. Representing Service Level on the Bell Curve

33. Steps Overview

34. How Many Standard Deviations of Safety Stock

35. Intermediate Practice Question

36. Safety Stock in Retail - Example 2

37. Alternative Formula =norm.inv()

38. Working Backwards to find your Service Level

Getting Your Data

39. Getting your Data - Introduction

40. Finding the “Mean” and “Standard Deviation” from your Data

Assumptions and Limitations of the Statistical Method

41. Assumptions and Limitations of Method 3

Fixed Lead Time, Variable Demand: Method 3 Continued

42. Different Input Data- Introduction

43. Calculating Safety Stock: Fixed Lead Time, Variable Demand

44. Calculating Safety Stock: Fixed Lead Time, Variable Demand - Example

Variable Lead Time and Demand: Method 3 Continued

45. Variable Lead Time and Demand – Method and Example

46. Variable Lead Time and Demand – Question and Answer

47. Rounding Up or Down?… - Costs $60k!

48. Which Formula to Use? Summary

Choosing your Service Level - Your Tolerance for Risk

49. Choosing your Service Level - Introduction

50. Service Level Definition: Recap

51. What Factors should Influence how “Safe” we want to be??

52. Marginal Analysis - Choosing your Service Level

53. Marginal Analysis - Example

Probability of a Stockout Over Time - Calculating Risk

54. What’s the Probability of a Stockout? - Introduction

55. What’s the Probability of a Stockout? – Excel Tool

Optimizing Safety Stock Levels

56. When to Review and Optimize your Safety Stock

57. Reducing the Need for Purchasing Safety Stock

58. Demand Management to Reduce Safety Stock

59. Lead Time Management to Reduce Safety Stock

60. Alternatives to Safety Stock - Other Actions

Conclusion

61. Wrap Up

62. Conclusion

Bonus and Appendix

63. What’s Next– Further Reading

64. My Other Courses

65. How to Get Your Certificate

66. Hide Your Nuts!

My goodness did you read allllll that?!   Time to get to the videos!  :)

See you on the inside!

Laurence

Optimize your Supply Chain Safety Stock. Simple to Advanced Methods. Reduce Costs and Risk in your Business Operations

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What you will learn

• How to Calculate Safety Stock
• Super Simple to Super Detailed Methods
• Inventory Dynamics - how to Control your Inventory Levels over time to make Better Decisions

Rating: 4.57692

Level: All Levels

Duration: 2.5 hours

Instructor: Laurence Gartside