Safety stock is essentially the buffer stock you keep in case of an unexpected rise in demand for an item. Essentially, you can use that stock while the new stock is delivered.
Benefits of Keeping Safety Stock
You Can Avoid Stockouts
As mentioned earlier, stockout is a huge risk that almost all retail businesses face, leading to loss of money and potential customers. Restocking can sometimes take days or maybe weeks, and it leaves a very bad image of the retailer. You never know when the demand for a product could rise, so in a way, you’re always prepared for such situations.
You can Overcome Any Forecasting Errors
Forecasting is crucial for your business and even though it’s mostly reliable, safety stock acts as a contingency plan. However, forecasting is hypothetical, and it can be different from the exact demand or sales. Therefore, having a backup plan in the shape of safety stock is always useful.
Reduces Administrative Effort
If you don’t have a safety stock, you’ll find yourself reordering new stock very frequently. It can sometimes be troubling when your vendor doesn’t cooperate, or any logistical issues arise. Plus, the added paperwork you have to do to record the purchase can be just as time-consuming. Instead, keeping a safety stock allows you to have enough inventory to not worry about restocking all the time.
Using Inventory Management Software for Safety Stock
Calculating safety stock isn’t easy as you have to consider many different factors. That’s why it’s best to have an inventory system that calculates it. Our inventory management software has built-in tools that automatically calculate the safety stocks according to past sales data.
More importantly, it’s linked to an order and delivery management system that automatically orders new stock when stock levels reach a certain point. Plus, you can use the system for any business, including a wholesale business, manufacturing business, or home furnishing business. So, contact us and find out how we can help you.
