Safety stock (also called buffer stock) is a term used by logisticians to describe a level of extra stock that is maintained

to mitigate risk of stockouts (shortfall in raw material or packaging) due to uncertainties in supply and demand. Adequate safety stock levels permit business operations to proceed according to their plans.[1] Safety stock is held when there is uncertainty in the demand level or lead time for the product; it serves as an insurance against stockouts. With a new product, safety stock can be utilized as a strategic tool until the company can judge how accurate their forecast is after the first few years, especially when used with amaterial requirements planning worksheet. The less accurate the forecast, the more safety stock is required. With a material requirements planning (MRP) worksheet a company can judge how much they will need to produce to meet their forecasted sales demand without relying on safety stock. However, a common strategy is to try and reduce the level of safety stock to help keep inventory costs low once the product demand becomes more predictable. This can be extremely important for companies with a smaller financial cushion or those trying to run on lean manufacturing, which is aimed towards eliminating waste throughout the production process. The amount of safety stock an organization chooses to keep on hand can dramatically affect their business. Too much safety stock can result in high holding costs of inventory. In addition, products which are stored for too long a time can spoil, expire, or break during the warehousing process. Too little safety stock can result in lost sales and, thus, a higher rate of customer turnover. As a result, finding the right balance between too much and too little safety stock is essential

FSN Analysis FSN analysis materials can be classified based on their movement from inventory for a specified period. Items are classified based on consumption and average stay in the inventory. Higher the stay of item in the inventory, the slower would be the movement of the material F Fast Moving S- Slow Moving N- Non moving Sometimes the terms FNS is also being used, where F Fast Moving N- Normal Moving S- Slow Moving There following steps in doing the FSN analysis

Calculation of average stay and the consumption rate of the material in warehouse FSN Classification of materials based on average stay in the inventory FSN Classification of the material based on consumption rate Finally classifying based on above FSN analysis. Process Lets take 10 materials for analysis. Following is the analysis of SKU01. Period of analysis is 15 days Calculation of consumption rate and average stay of the material in the inventory Average stay of the material = Cumulative No of Inventory Holding Days/( Total quantity received + Opening Balance) =1161/115 =10.09 Days Consumption Rate = Total Issue Qty/Total Period Duration =46/15 =3.06 Nos/Day