How to Calculate Safety stocks For highly seasonal products

HOW TO CALCULATE SAFETY STOCKS FOR HIGHLY SEASONAL PRODUCTS By Richard Herrin Proposes a new method for computing safety stock particularly for products which are highly seasonal … the proposed method not only reduces average holding of inventory but also helps to meet the target customer service level … most ERP systems use the standard method, which is recommended by APICS. The key objective of statistical forecasting in a demand driven supply network is to identify the probable range of expected demand so that supply can cover demand anywhere within the statistical range. Supply can cover the range either through having the capacity to replenish within lead times or by carrying excess inventory (safety stock). In an organization where marketing is tasked with growing the market, and supply is tasked with reducing working capital, the decision on the amount of safety stock to carry can become very contentious. Most of the arguments stem from disagreement on the methods used to determine the required safety stock. Total safety stock is the amount of material needed to compensate for supply and demand inefficiencies. This article will address only the demand component ...