Should Safety-Stock Include Demand Forecast Error?
By Dave McPhetridge
Yes, I’m broaching a hot topic. This article is deliberately not exhaustive, leaving plenty of room for further discussion. My intent: to encourage constructive, informative conversation among my many LinkedIn supply-chain experts. I have done my best to ensure that I have supported all my assertions with facts, analysis and calculations.
Here is my theme: Forecast-to-actual demand variation has no place in determining safety stock (or buffer inventory of any form).
Regarding actual demand, safety stock applies only to common-cause variation. Please follow my line of reasoning, and I so appreciate your interest, attention and participation in a discussion!