The Worst Reason to Keep Safety Stock

June 1, 2020
3 min read

Most processors are holding onto safety stock for the wrong reasons

To keep a competitive edge, it’s critical for consumable goods processors to minimize their need for safety stock. There are a few understandable reasons for maintaining excessive inventory, however, unreliable balance reporting isn’t one of them.

There are many different names for safety stock in the manufacturing space but at the most basic level, safety stock is extra inventory that is kept on hand to reduce the risk of running out. Safety stock is crucial for many operations and industries as unexpected shortfalls in raw materials, packaging or finished goods can be disastrous in terms of time and money. Stock failures can result in line down time, wasted labor and materials, unfulfilled orders, lost sales potential, and occasionally angry or outright lost customers.
At the same time, operations managing high balances of safety stock are most certainly giving up resources that could otherwise go to padding the bottom line. Excess inventory wastes space, labor, and monetary resources that are important for the business.

How do you strike the right balance? To answer that question, processors should consider whether they have an inventory problem, or whether they have an information issue.

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

This is a inventory problem – based on strategic business needs beyond your control. The more outside uncertainties can be minimized, the better. However, depending on the particular needs of each operation, modest levels of safety stock may be necessary. There are a wide range or resources and methods for helping organizations manage their stock levels based on these changing variables.

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

This is an information issue. The reason this is the absolute worst reason to have safety stock is because it’s completely avoidable! Unreliable inventory balances are a sure sign your current inventory management strategies are failing you. With quick moving production, unpredictable primary suppliers, and raw materials with a limited shelf life, managing inventory levels can be an especially big challenge for consumable goods processors. Nevertheless, accurate real-time inventory visibility is possible. ParityWellness provides a path through which companies can get there in 90 days. With the use of barcoding and scanning, live error notifications, and powerful inventory balance reporting, you can get the information that you need to keep your business running, with just a few clicks.

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.

Ready to leave unreliable inventory number and the excess safety stock behind? Let us know, and we’ll show you how ParityWellness can help you achieve that goal!