In inventory management, especially material management, of course, the company must maintain stock so that it can always be used. It is very necessary to check and control stock, this is so that when the goods are needed it can be obtained from the affordable self storage party. And on the other hand, the stock of goods in the warehouse should not be too much. Because this can cause money to stop and the risk of goods being damaged or lost is very large. It would be nice so that goods continue to flow in a controllable amount, but there must be an appropriate method to control it. This is where reorder points and safety stock play an important role in a company.
This safety stock is almost the same as the reorder point, both of which are not much different from the meaning attached to the name. This safety stock means the safe amount of stock of goods, this safe amount is used just in case. If the lead time for purchases takes much longer than usual, even though the goods are needed right away. With this safety stock, it can be safe, if the vendor is late in shipping goods. Or it could be that the stock of goods at the vendor suddenly does not exist, so the manufacturing company has time to consume the goods. The question is how do we determine the reorder point of an item? Many ways can be used, and a company can choose what method it feels suitable to use.
Determination of safety stock, namely, this is the basis for reorder points. Because it is impossible, if you determine the reorder point, without finding the safety stock. You must be wondering, how do you determine the safety stock?
Safety stock is only for security purposes or just in case. So for the calculation basis, you can’t just look at the lead time and average usage per day, if you can, be more detailed. We will choose to see the history of the difference between the usage date and the arrival of the goods, after which it is only multiplied by the average daily usage. By looking at the history of the difference between the usage date and the actual arrival, it will make the numbers slimmer. Of course, it is very profitable for the company on a cash flow basis.