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- It relies on outdated processes and data.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.