In order to avoid the high costs of stock shortages and stock-outs, the following video explains how to calculate safety stock. The video shows inventory refilling times, daily consumption, safety stock thresholds and levels, and your company’s own time on the market in terms of delivery.
A graph is presented that shows clearly what the reorder point should be and what should be the amount of safety stock.
A working example is given when a company monitors a variety of inventory refilling times, its own daily consumption levels, the amount of safety stock that it has to protect during those consumption periods, and eventually, your company’s distribution times for finished goods to your consumer base.
