OR|Stock

Optimum safety stocks

All manufacturing companies are faced with the challenge of covering the demands of their customers using the lowest possible warehouse stocks. Excessively high safety stocks lead to higher warehouse and inventory costs. This reduces the liquidity of the company. On the other hand, excessively low stocks can cause delivery delays or even production interruptions.

OR|Stock from ORCONOMY uses mathematical optimization methods to optimize your safety stocks. This gives you maximum availability at minimum inventory levels. Do not hesitate to contact us if we have aroused your interest.

Benefits

The optimization of safety stocks provides the following benefits:

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Reduction of inventory costs. OR|Stock determines the optimum safety stocks for each article. To do this, the solution analyses the difference between forecast requirements and actual requirements. The results are on the whole lower warehouse stocks and a considerable reduction of the bound capital.

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Increased delivery capacity. OR|Stock uses mathematical methods to optimize the size of the safety stocks while maintaining the delivery capacity required.

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Avoidance of special orders. By optimally defining the safety stocks for all articles in the warehouse, companies can avoid costly special orders. This stabilizes the freight scheduling process and makes life easier for schedulers, suppliers and customers.

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Ease of integration. OR|Stock integrates smoothly with existing ERP systems such as those from SAP.

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Increased transparency. The results and analyses provided by OR|Stock are easy to follow, document and reproduce. In company audits, for example, this standardization leads to an improved assessment.

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Creation of competitive advantages. The permanent reduction of the warehouse stock quantities reduces costs in the long term. At the same time, customers and partners profit from a higher delivery capacity. Both factors give the company advantages over its competitors.

Procedure

For each article in the warehouse, OR|Stock optimizes the safety parameters in three steps:

Procedure OR|Stock
  1. OR|Stock analyzes the quality of the demand forecasts. To do this, it compares the actual demand with the previous forecasts.
  2. On the basis of the quality of the forecasts, OR|Stock determines the optimum size of the safety stocks and the pre-transport. In this way, the required delivery capacity is achieved using minimal warehouse stocks.
  3. The scheduling behavior is analyzed using a simulator. The result is an overview of delivery capacity, costs and inventory development.
forecast error
The demand is often used to calculate the safety stocks in statistical methods or rules of thumb such as "safety stock = max. daily demand * replenishment lead time”. In contrast, OR|Stock uses the forecast error to determine the safety stocks. This puts the available knowledge of the demand (i.e. the forecast) to optimum use, allowing stocks to be reduced and the availability to be increased.