ABSTRACT
Inventory is needed to provide the service if lean supply is not practical. Where items are required faster than the supply lead time, the likely demand quantity is unknown and safety stock is needed. Three external factors shape the amount of safety stock held by an organisation that include the variability of demand, the reliability of supply, and the dependability of transport. The order quantity far exceeds all other demands for this product, and risking stockholding in anticipation of a next order would be a serious burden. The amount of safety stock will depend on the risk of running out, and therefore the variability of demand and supply. The basic premise for safety stock is that the differences between the forecast and the actual demand are random. Goods are classed as obsolete as a result of a long period with no demand.
