Guide
Safety stock and replenishment
Safety stock is the buffer that protects against forecast error. Better forecasts need less of it.
Key concepts
- Lead time: time from placing an order to having stock on the shelf.
- Review period: how often orders are placed.
- Safety stock: extra stock to cover uncertainty in demand and supply during lead time and review period.
- Order-up-to level: expected demand over lead time and review period, plus safety stock.
Safety stock grows with forecast uncertainty. Reducing uncertainty, especially on predictable peaks, lets stores keep availability high with less buffer, which for perishables means less waste.
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