How to manage safety stocks when demand variance is abnormally high on forecast planning

Question

Accepted Answer

Safety stocks should be increased to account for the high demand variance in forecast planning.

Analyze historical demand data to understand the extent of variance
Identify the factors causing the abnormal demand variance
Adjust safety stock levels based on the degree of variance and desired service level
Consider using statistical forecasting methods to better predict demand
Collaborate with suppliers to ensure timely replenishment of safety stock
Regularly review and update safety stock levels based on changing demand patterns

Accepted Answer

daily use for a product and multiply it by its average lead time, how long it takes, in days, to arrive once you place an order. Then subtract this number from your maximum daily use times your maximum lead time. The result is the safety stock number for that product.

How to manage safety stocks when demand variance is abnormally high on forecast planning

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