Safety stock is the optimal level of inventory you wish to keep to ensure sufficient delivery times to your customers. Your inventory for a product or material should normally not drop below the safety stock level.
Safety stock helps maintain optimal inventory levels by indicating when to replenish stock. This feature is crucial for avoiding stockouts and ensuring you always have sufficient inventory to meet demand fluctuations. Safety stock involves setting specific thresholds that trigger the creation of purchase or manufacturing orders, thus safeguarding against unexpected surges in demand or supply delays.
The safety stock is considered when calculating the calculated stock quantity for your items on the stock screen (read more). If the calculated stock quantity is negative, you should create a new manufacturing order (MO) or purchase order (PO) for the item.
Note: In a Make-to-Order business model, the product safety stock levels are typically 0, but in Make-to-Stock models, we suggest using safety stock levels to manage optimal stock levels. In both cases, you could use safety stock levels for materials. Read more about Make-to-Order and Make-to-Stock.
Lead times need to be taken into account when deciding when to make or purchase more items. Safety stock levels account for lead times. Basically, a good Safety stock level ensures that your in-stock quantity never hits zero.
Learn more about determining the best level for safety stock
In Katana, POs and MOs are not created automatically. The Calculated stock column shows the difference from the optimal level for each item in the Stock screen. Inventory levels below optimal are highlighted in red, indicating that you should create a new purchase order or manufacturing order.
Having too high a safety stock can come at a cost. If you keep too much stock, there may be additional costs related to renting additional warehouse space, paying salaries to those handling the stock, the risk of stock expiring or becoming outdated and more. Excess inventory can also tie up your cash. Every manufacturer needs to find a good balance between having enough stock and not too much so that it breaks the bank.
You can set a safety stock for each product and material directly on the Stock screen.
Read more about how to set a safety stock level for products or materials.
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