How to use safety stock inventory
Safety stock can be tricky, as businesses must determine how much extra stock they can hold without raising inventory expenses. Regarding perishable inventory, stock levels are even more of an issue as companies must account for expiration dates and spoiled goods. Therefore, small businesses must understand how to use safety stock inventory to ensure a balanced system.
Inventory processes should always be kept up to date and all employees routinely trained on inventory best practices, including restocking processes and reordering procedures. Routine inventory checks can help:
- Identify and manage deadstock,
- Identify the stock that won’t sell and is considered wastage, and
- Identify inventory levels to see if any safety stock is needed.
Companies should opt to hold inventory in one central location rather than multiple locations to make it easier to replenish products when needed. Business owners and managers should regularly review their inventory levels, lead times, and demand averages to ensure the correct amount of cycle and safety stock.
Businesses must determine how much each product they should hold in reserve to reduce inventory safety stock carrying charges. The proper safety stock calculations can help improve inventory management.