Safety stock concerns continue to plague omnichannel supply chains. Omnichannel brought an influx of customers to businesses and led to an increase of products and SKUs shipped in multiple modes, in a myriad of ways. The basic supply chain model has evolved, and in response, supply chain leaders have increased the level of safety stock within warehouses to account for market fluctuations. However, the application of data and a dedicated warehouse management system (WMS) can successfully reduce safety stock.
What Exactly Is Safety Stock?
Safety stock refers to excess inventory capped within a warehouse or other facility to avoid the problems associated with a product being out of stock, explains Supply Chain 24/7. In today’s world, if your business does not carry or have a given product in stock, the customer can find it on Amazon. It is that simple. Now, it is essential to also understand that all establishments do need to maintain a safety stock, but it should be kept to absolute minimum levels and should be based on customer expectations and data-driven results.
Challenges Associated With Excess Safety Stock
Safety stock might not seem like a big problem, but it does lead to difficulties within supply chain visibility and efficiency. Some challenges include:
- Safety stock lowers the efficiency of your inventory management strategy.
- It relies on outdated processes and data.
- It increases carrying costs for your organization.
- While it eliminates concern over stockouts, it fails to leverage advanced order fulfillment and shipping models.
How to Reduce Safety Stock With Data
It is possible to reduce safety stock through the application of data. For example, the use of data and connected inventory (including the use of voice-enabled systems) increases the accuracy within inventory reporting. Furthermore, advanced analytics can help warehouse managers see a bird’s eye view of their full needs, as well as predict what stock will be needed between now and a time in the future. Of course, the path to implementing new systems and reducing safety stock is not always clear. As explained by Supply Chain Management Review, leaders should utilize data and follow these tips to reduce safety stock:
- Gain better visibility into your inventory.
- Consider upgrading your WMS.
- Track all inventory by SKUs and bin location.
- Optimize slotting practices.
- Connect all systems.
- Base safety stock on actual economics.
- Take advantage of newer shipping options, including drop shipping.
Reduce Your Safety Stock With the Right WMS
Safety stock is a necessary evil in supply chain management. No one knows when manufacturers or market fluctuations will suddenly render your inventory obsolete or place new demand for items rarely restocked. With an influx of orders from online and brick-and-mortar locations, warehouse managers and distribution centers must maintain a proper safety stock. Unfortunately, failure to maintain control over safety stock will result in higher carrying costs and even increase the risk for poor customer service. Instead of trying to maintain safety stock based on what you think will happen, let your systems and resources do the work for you and ensure your safety stock does not become a burden.