You Might Have A Bad Warehouse If... You Use A "Double Protection" Safety Stock Strategy
This bad warehouse comes from Steve Symmes who regularly does warehouse assessments for Supply Chain Visions. During one of his assessments he revealed something we have never seen before – a “double protection” strategy for managing safety stock.
The company had an algorithm in their Microsoft Excel spreadsheet where they would calculate multiple safety stock layers each week for each Stock Keeping Unit. The first layer of protection was their "safety stock” level and the second level of protection was their “reserve safety stock” level. I asked Steve if the person who had come up with this “double protection” strategy had been watching a feminine hygiene commercial when they came up with their approach!
If I had my way, I would permanently ban the term safety stock from the vocabulary of today’s warehouse professionals. The reason? All too often some inventory analysts believe the more piles of inventory they have stashed away as safety stock the “safer” they feel. For all you inventory folks out there – please take this time to ensure your safety stock strategy has a purpose. Perhaps warehousing professionals might make better decisions if we called it “risk stock” and the focus would be on mitigating the underlying risks in a proactive manner.
For those wanting to learn more on setting safety stocks, I suggest the following resources:
- Start by reviewing the section on “Inventory Strategy” under “Storage and Inventory Control” in the Warehousing and Fulfillment Process Benchmark & Best Practices Guide, available from the Warehousing Education and Research Council's Online Store.
- For a good review of setting safety stock levels read “Optimizing Safety Stocks” by Dave Piasecki of Inventory Operations Consulting. Just remember to focus your attention on the element of risk as described by Steve in the “Snow Stock” example above.
- Consider reading “6 Steps to Managing Risk” in Supply Chain Management Review, it is an excellent guide to understanding and preparing for supply chain disruptions.
- I would also suggest reading ”don’t look back” an article from DC Velocity’s Measuring Up column. The column focuses on looking forward rather than to history when planning your “Risk Stock” levels. The application of “leading indicators” will require greater insight into your marketplace, but the dividends will pay off in better balanced inventory levels.
I really love your feedback - and love your contributions to share those bad warehouse stories to help educate the profession on what NOT to do, and perhaps what to do if you’re not doing it.
If you've got an example of a bad warehouse practice, send me your story and photo(s) to [email protected].
If I feature your example in one of my blogs, WERC will send you a free copy of the WERC Warehousing & Fulfillment Process Benchmark & Best Practices Guide (a $160 value).
Your submission can be anonymous if you like so you don't get your boss or company in trouble! I'll be collecting examples all year and the winner will receive a free warehouse assessment by Supply Chain Visions, a $10,000 value. The runner up will win a free conference registration to the WERC conference (a $1,375 value).