if demand is not uniform and constant, the stockout risks can be controlled by __________.
Adding safety stock is indeed one way to control stockout risks when demand is not uniform and constant. Safety stock refers to the extra inventory that a company keeps on hand to mitigate the risk of stockouts due to unexpected variations in demand or supply disruptions.
By maintaining an additional quantity of inventory as safety stock, businesses can ensure that they have enough products to meet customer demand even during periods of increased demand or supply chain disruptions. The level of safety stock to be added depends on factors such as demand variability, lead time, and desired service level.
The purpose of safety stock is to act as a cushion against uncertainties in demand and supply. When actual demand exceeds the forecasted demand or when there are delays in replenishment, the safety stock can be utilized to fulfill the orders and prevent stockouts. It provides a buffer to absorb fluctuations in customer demand and provides a level of insurance against unforeseen events.
However, it is important to strike a balance when determining the appropriate level of safety stock. Holding too much safety stock can tie up capital and increase holding costs, while holding too little can increase the risk of stockouts. Therefore, businesses need to carefully analyze demand patterns, lead times, and other factors to calculate the optimal level of safety stock.
In addition to adding safety stock, other strategies to control stockout risks when demand is not uniform and constant include implementing demand forecasting techniques, improving supply chain visibility and collaboration, implementing effective inventory management systems, and having contingency plans in place to quickly respond to fluctuations in demand or supply disruptions.
Overall, by considering these strategies and properly managing safety stock levels, businesses can effectively control stockout risks in situations where demand is not uniform and constant.