Calculating Safety Stocks: Analysis of Demand Vs Consumption Models

A key goal of any company is to maintain safety stocks that balance the need to meet desired service levels with avoiding excess or obsolete inventory. To this end, safety stock calculations are employed. However, one calculation does not fit all scenarios. In this study I present two different methodologies and apply them to real life examples, examining a demand-based calculation and a consumption-based calculation with a comprehensive review of the outputs. Crucially, we examine the outputs in the context of the SKU behavior to better understand when to employ which ...