The Worst Reason to Hold Safety Stock

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To keep a competitive edge, it’s critical for food processors to minimize the need for safety stock. Unreliable balance reporting is the worst reason to maintain excessive inventory.

There can be many names for safety stock in the manufacturing world but at a basic level, safety stock is excess inventory maintained to reduce the risk of running out. Safety stock is critical for many operations since unexpected shortfalls in raw materials, packaging or finished goods can be catastrophic in terms of time and money. Stock failures result in line down time, wasted labor and materials, unfulfilled orders, lost sales, and sometimes lost customers.
At the same time, companies managing high balances of safety stock are most certainly giving up resources that could otherwise go to bottom line value. Excess stock consumes space, labor, and cash resources that are important for the business.

What is the right balance? To answer that question, food processors should consider whether they truly have a stock problem, or whether they have an information problem.

Is your safety stock compensating for uncertainties in supply and demand?

This is a stock problem – based on strategic business needs outside of your control. The more outside uncertainties can be minimized, the better. However, depending on the unique needs of each operation, modest levels of safety stock may be prudent. There are countless resources and methods for helping organizations manage stock levels based on these variables.

Is your safety stock compensating for uncertainties in your inventory balances?

This is an information problem. The reason this is the single worst reason to have safety stock is because it’s avoidable! Untrustworthy inventory balances are a sign your existing systems and processes are letting you down. With fast moving production, unpredictable primary supply sources, and often perishable products, managing stock levels can be especially challenging for food processors. Nevertheless, accurate real-time inventory visibility is achievable. ParityFactory creates a path by which companies can get there in 90 days. With the use of barcode tracking, live error notifications, and robust inventory balance reporting, you can have the reliable information you need to run your operation.

Are the resources you need to implement automated inventory management tied up in safety stock? For even modestly sized operations, we often find the answer is yes.

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