Jesus O. Guerrero
Article Review
Sunday February 15, 2015 11:55 PM
Safety Stock Article Review
In reading this article it said that by optimizing safety stock can be calculated and give a
magical balance of the minimal inventory while trying to meet the variable demands of the
customers. They call it the Holy Grail of inventory management, but really forecasting is the real
Holy Grail. Many companies do look for their own demand fluctuations but that is not enough to
have a true predication of their future variability.
Like with most companies they will sometimes miss the mark and they will either make
too much of product or less so that can mean loss of demand to their customers or they are sitting
on too much inventory and they will need to find ways to rid of that extra inventories. There is
really not a 100 percent guarantee to control the optimal inventories levels for their operations.
Many companies will have to find a deeper calculations in order to make sure they are hitting the
goals of inventories. One method that they use is called calculating safety stock.
This is a statistical model of Standard Deviations of the Normal Distribution of numbers
in order to determine the probability. This tool has proven to have a positive and effective in
determining it’s variety of environments. There is a factor with errors if there are not factor into
the part of the original statistical model. I believe that this is not a 100 percent going to give them
a true an accurate probability in determining what is best for the company. You really have to
have a statistical theory and understanding of this formula.
Jesus O. Guerrero
Article Review
Sunday February 15, 2015 11:55 PM
The article talks more with terminology and calculations and it gives a list of the
terminology that is used for the safety stock mode. Most of the terminology was basic and was
not hard to understand if a person needed to use the model. There was a chart with service level
and service factor which are percentages for the desired service level and the other was a factor
that is used to multiply the standard deviations it gives specifics calculations of the quantities to
meet at the service level.
My opinion is that I think you company needs a great programmer to find some way in
