Supply Chain · Inventory · Component
The reorder rules
Reorder point and safety stock per item, derived from measured variability and a chosen service level rather than from intuition.
The deliverable
What it is
Safety stock exists to absorb variability in demand and in lead time. Sized without reference to either, it is a number someone once felt comfortable with.
The service level is a choice with a price. Moving from ninety-five to ninety-nine per cent availability costs considerably more than the four points suggest.
One level in
What it is made of
Each element is a constituent part of the component. Follow one to see the attributes it carries.
The service level
The availability the item is being managed to.
3 attributes: Service level · Reason · Stockout cost
LearnThe safety stock
The buffer held, derived from variability and service level.
3 attributes: Safety stock · Demand variability · Lead-time variability
LearnThe reorder point
The level at which a replenishment order is placed.
3 attributes: Reorder point · Order quantity · Lead time used
Learn
Lead-time variability is the input most often left out of safety stock, and it is frequently the larger of the two.