Many people who have been working for many years in supply chain or materials management area, still they do not know what’s the difference between safety stock and buffer stock. Especially in Chinese, most of the case is they are translated into same Chinese terminology “安全库存” by those professors from universities, which has been confusing many people with even more than one generation. This is ridiculous but that’s the fact.
When there is any de-commitment or disasters happen to customers, always people from outside of materials organization will challenge the materials planner / buyers, why have you not set up safety stock for this part # or finished goods? Why did you not load MPS with more safety stocks? Seems that they know materials management very well, which in their eyes, materials management is just as simple as safety stock – as long as you have set up safety stock, everything will fixed! Personally I have been seeing this kind of stupid people many many years and being challenged by this kind fools many times already. Again, this is ridiculous but somehow they should not be blamed too much because they were not educated with right books.
Just as its name implies, “safety stock” is for safety purpose, which although we have never seen real “safe” inventory to guarantee the avoidance of those unplanned accidents, like incoming quality issue, over-attrition, scrap, transportation jam-up etc. But anyway, the initial objective of safety stock was trying to find a way to secure the requirements of demand and terminate the impact from those accidents. For example, usually the machine attrition of part # A is 1%, in order to satisfy 10,000 pieces’ production, we need to buy 10,000 + 10,000 x 1% = 10,100 pieces and that 100 piece is safety stock. But the problem is, “usually” the machine attrition rate for this component is 1%, but how to handle the case like suddenly the machine attrition rate is 5% and we do not find out timely ?? No any safety stock is safe!
We had lots of discussion on chapter 4 for buffer stock, where we say buffer stock is decided by the demand fluctuation and actually even there we used “safety stock” + average demand x replenishment cycle time as “buffer stock” calculation. That so called “safety stock” is actually “buffer stock” but not real safety stock because its formula is still considering the demand fluctuation.
Believe many people will be completely confused by reading through here. Actually, you can simply understand the different like this –
- safety stock is purely set up by considering the unplanned accidents, like over attrition, quality disaster etc.;
- buffer stock is used to cope with the fluctuation of demand – if the demand is quite stable without much fluctuation, we do not need to set up any buffer stock, maybe just a safety stock.
- you can easily decide the safety stock by statistics like 2% of cycle stock which is decided by replenishment cycle time x average demand, but you must calculate the buffer stock based on demand fluctuation.
- usually, safety stock is useful to those inconsecutive demand while buffer stock is working under consecutive demand environment.
- safety stock always mean EXTRA requirement to normal demand, when you run MRP or even manually calculate the requirements for materials, system will always ask you to pull more than needed quantity, but buffer stock is within the normal demand.
- below chart 14-1 may help to understand
Chart 14-1 safety stock vs buffer stock vs cycle stock
程晓华 - "lean demand supply chain management"
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2009-06-02 13:05 程晓华 阅读(955)
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