Editors Note: The following was originally published in Supply Chain Digest August 8, 2012. In response to the ongoing high interest in inventory management mythologies, we are republishing the article including a few minor editorial updates.
In today’s uncertain economy, product stability has become a causality of extreme market fluctuation and consumer caution. What was a trendy fast mover 3 months ago may be dead now. New products are launched, old ones are removed and demand for products change with the seasons. Shippers are therefore challenged to maintain an on-hand inventory of active products to satisfy fluctuating sales demand but, at the same time, not too much so as to keep total inventory from rising too high. The key question is “how much safety stock is needed”?
In his book, “Inventory Management for Small and Medium-sized Businesses”, published in 2009, Mr. Jyrki Salmivuori, of Salmivuori Consulting (www.salmivuori.fi) points out...