A guide to safety stock; an introduction…
Safety Stock; An introduction
From time to time you may find yourself running out of stock. However, this can obviously have a negative impact and may affect your overall customer satisfaction, business reputation, costs, and sales. So, its important to have a solid strategy in place go minimise the chances of this happening, especially if you have certain SKUs that are highly popular and sought after.
Homeware; Exploring the growing market…
A Guide on Safety Stock; An Introduction…
From time to time you may find yourself running out of stock. However, this can obviously have a negative impact and may affect your overall customer satisfaction, business reputation, costs, and sales. So, its important to have a solid strategy in place go minimise the chances of this happening, especially if you have certain SKUs that are highly popular and sought after.
Homeware; Exploring the growing market…
What is safety stock?
In a nutshell, safety stock refers to ‘back up’ units that you have in place should you see an unexpected rise in sales for a particular product. The purpose of having safety stock in place is to ensure that stockouts are avoided, as this can minimise and eliminate the chances of missing out on sale opportunities, or having a poor customer satisfaction level.
Homeware; Exploring the growing market…
Why is it important to have safety stock?
As mentioned, the main reason safety stock is important is because you don’t want to run out of stock. Lets say you post a video of your products on a social media platform such as TikTok, for example. Your video may go viral and the orders begin to roll in, but you weren’t expecting to receive as many orders as you have so you don’t have enough stock in place.
Your options become limited. You can place them on backorder, or cancel them completely, but neither are ideal and you will find this has a negative impact on your business. Sometimes customers don’t want to wait until it is back in stock, as a lot of the current consumerism habits are based on impulsivity.
Lets explore some more reasons as to why safety stock is important…
What is safety stock?
In a nutshell, safety stock refers to ‘back up’ units that you have in place should you see an unexpected rise in sales for a particular product. The purpose of having safety stock in place is to ensure that stockouts are avoided, as this can minimise and eliminate the chances of missing out on sale opportunities, or having a poor customer satisfaction level.
What is Kitting and Assembly?
Kitting and assembly is a fulfilment service that is offered by most 3PL companies. It is a process that involves compiling, or assembling different parts and components together to create one final product, bundle, or kit. It is worth noting that this then becomes one singular SKU rather than multiple.
Kitting and assembly gives you the chance to offer customised bundles, kits, and products, meaning that you can drive more sales through discounts, promotions, etc.
Why is it important to have safety stock?
Why is it important to have safety stock?
As mentioned, the main reason safety stock is important is because you don’t want to run out of stock. Lets say you post a video of your products on a social media platform such as TikTok, for example. Your video may go viral and the orders begin to roll in, but you weren’t expecting to receive as many orders as you have so you don’t have enough stock in place.
Your options become limited. You can place them on backorder, or cancel them completely, but neither are ideal and you will find this has a negative impact on your business. Sometimes customers don’t want to wait until it is back in stock, as a lot of the current consumerism habits are based on impulsivity.
Lets explore some more reasons as to why safety stock is important…
Homeware; Exploring the growing market…
How to calculate your safety stock…
Although there are different ways of calculating your safety stock, the most common method of calculation is as follows;
Safety stock = (maximum daily sales x maximum lead times in days) – (average daily sales x average lead times in days)
Obtaining the figures you need shouldn’t be too difficult if you have been collecting your sales data accurately, but of course if you haven’t then you may have some issues accurately calculating this.
For your maximum daily sales, look at how many sales you receive per day across a certain period of time, whether that’s a month, quarter, etc. Then simply extract the highest number.
For maximum lead times in days, look at your shipments for the same period as your maximum daily sales and take the shipment that took the longest to arrive at your facility or warehouse.
To calculate your average daily sales just simply add up the number of sales over the period and divide it by the number of days in the period. Follow the same process for calculating the average lead time.
Homeware; Exploring the growing market…
Safety Stock; Making informed decisions for re-order levels…
Re-order levels refer to the point at which you decide to re-order a certain SKU. Re-order levels vary and are completely dependent on the amount of sales you receive for each SKU, their demand, and how frequently you replenish the stock.
The amount of times you have to dip into safety stock will give you a good indication as to how often you need to re-order stock before you have to use the safety stock.
Homeware; Exploring the growing market…
Safety Stock; things to avoid…
Of course having the right level of safety stock is crucial, but there are still some things to avoid when it comes to your safety stock as you can sometimes end up doing more harm than good. So lets explore some things to avoid when it comes to safety stock…
How to calculate your safety stock levels…
Although there are different ways of calculating your safety stock, the most common method of calculation is as follows;
Safety stock = (maximum daily sales x maximum lead times in days) – (average daily sales x average lead times in days)
Obtaining the figures you need shouldn’t be too difficult if you have been collecting your sales data accurately, but of course if you haven’t then you may have some issues accurately calculating this.
For your maximum daily sales, look at how many sales you receive per day across a certain period of time, whether that’s a month, quarter, etc. Then simply extract the highest number.
For maximum lead times in days, look at your shipments for the same period as your maximum daily sales and take the shipment that took the longest to arrive at your facility or warehouse.
To calculate your average daily sales just simply add up the number of sales over the period and divide it by the number of days in the period. Follow the same process for calculating the average lead time.
What is Kitting and Assembly?
Kitting and assembly is a fulfilment service that is offered by most 3PL companies. It is a process that involves compiling, or assembling different parts and components together to create one final product, bundle, or kit. It is worth noting that this then becomes one singular SKU rather than multiple.
Kitting and assembly gives you the chance to offer customised bundles, kits, and products, meaning that you can drive more sales through discounts, promotions, etc.
Safety Stock; Making informed decisions for re-order levels…
Safety Stock; Making informed decisions for re-order levels…
Re-order levels refer to the point at which you decide to re-order a certain SKU. Re-order levels vary and are completely dependent on the amount of sales you receive for each SKU, their demand, and how frequently you replenish the stock.
The amount of times you have to dip into safety stock will give you a good indication as to how often you need to re-order stock before you have to use the safety stock.
Safety Stock; Things to avoid…
Of course having the right level of safety stock is crucial, but there are still some things to avoid when it comes to your safety stock as you can sometimes end up doing more harm than good. So lets explore some things to avoid when it comes to safety stock…
What is Kitting and Assembly?
Kitting and assembly is a fulfilment service that is offered by most 3PL companies. It is a process that involves compiling, or assembling different parts and components together to create one final product, bundle, or kit. It is worth noting that this then becomes one singular SKU rather than multiple.
Kitting and assembly gives you the chance to offer customised bundles, kits, and products, meaning that you can drive more sales through discounts, promotions, etc.
Let TSP handle your fulfilment…
Let TSP handle your fulfilment…
At TSP, we are an award winning 3PL company with over 20 years of industry experience, specialising in B2B and Amazon Fulfilment, as well as B2C Fulfilment.
We use industry leading technology to help you accurately track your inventory levels, allowing you to make informed decisions regarding your business. Explore our full range of services below…
Homeware; Exploring the growing market…
Let TSP handle your fulfilment…
At TSP, we are an award winning 3PL company with over 20 years of industry experience, specialising in B2B and Amazon Fulfilment, as well as B2C Fulfilment.
We use industry leading technology to help you accurately track your inventory levels, allowing you to make informed decisions regarding your business. Explore our full range of services below…
Our Range of Fulfilment Services
Our Range of Fulfilment Services
Collate your product details and connect your stores / market places
Link you into our preferred courier network
Take delivery of your stock, go live!
Collate your product details and connect your stores & marketplaces.
Link you into our preferred courier network.
Take delivery of your stock, go live!