The safety stock formula to cure a sore knee

Take 2 tablets a day, my aunt Mary told me.  She is a doctor.  Although I did not know that until last month.  In fact, it was not until recently when I damaged my knee that I realised that everyone in my family was actually a trained medical expert.  No sooner had they seen me limping that they each insisted I use their miracle cream or take one of their rheumatoid tablets.  Even my 15-year old niece was giving me advice to cure my pain.  She had seen her grand-mother do these knee exercises, so surely it would work for me too.

I was touched because I knew that they were all trying to help me get better.  Most of all, they all believed in the specific treatment they were recommending because it had worked for them in the past.  I guess the only difference between them and the real doctor, was that they never actually examined my knee to find out what was wrong with it!  Which leads me to this month’s dilemma: which safety stock formula is the right one for your business?

If you read the relevant white papers, you will be baffled by how many different formulae exist to calculate safety stock levels.  Some look quite similar with just a square root added or removed.  Others feature more unusual factors and components.  And if you ask the expert behind any particular method, he will tell you with much enthusiasm that his is the best one to cure your sore knee – sorry, I mean to calculate your safety stock.

One of our clients recently decided to test out 6 formulae.  Half of those were eliminated straight away because they could not understand them.  They eventually chose a hybrid of two of the methods.  We had encouraged them to think about the reasons why they needed safety stock.  Was it about the lack of forecast accuracy?  Was it to compensate for poor production performance?  Was it to cover for an unreliable supplier? 

To find the formula that works for you, my advice is to keep it simple.  Make sure that you understand it and that its components match your need for buffering.  Otherwise, you will never trust its results and you will struggle to defend it if colleagues start to question its validity.  By the way, my knee is much better, thank you.  But I have no idea which cream or pill was the one that really helped…

Alain Vix is Account Director at Supply Chain Planning specialist Hughenden Consulting