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You Might Have A Bad Warehouse If... You Use A "Double Protection" Safety Stock Strategy

By Kate Vitasek | 02/01/2010 | 3:56 AM

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 the4D Safety Stock Double Protection Strategy-image-1 person who had come up with this “double protection” strategy had been watching a feminine hygiene commercial when they came up with their approach!

So what is the right approach for managing safety stock? It is important to assess the risk of disruption and actively manage the levels of safety stock. One company we worked with in Colorado would increase the level of stock for packing materials each winter, holding “snow stock” in case a snow storm closed the roads between their suppliers and the warehouse disrupting the twice daily replenishment of packing materials. Each spring they would lower the level of safety stock because the risk, due to snow closures, was gone. They appropriately and aggressively managed the safety stock level to the risk.

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:

  • 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).

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The opinions expressed herein are those solely of the participants, and do not necessarily represent the views of Agile Business Media, LLC., its properties or its employees.

About Kate Vitasek

Kate Vitasek

Kate Vitasek is a nationally recognized innovator in the practice of supply chain management. Vitasek is founder of Supply Chain Visions—a boutique consulting firm specializing in supply chain management. She is also a faculty member at the University of Tennessee's Center for Executive Education. A prolific writer, Vitasek has authored the Council of Supply Chain Management Professionals' best-selling mini-book series, Supply Chain Process Standards, and has contributed to other management books as well. Along with Karl Manrodt of Georgia Southern University, she co-leads WERC's popular annual benchmarking study.

About Steve Murray

Steve Murray

Steve Murray is a Principal Consultant and Chief of Research for Supply Chain Visions, a boutique consulting firm specializing in supply chain management. Prior to joining Supply Chain Visions he held a variety of functional and management roles in the distribution and manufacturing sectors, including 15 year managing an IT consulting firm. Steve has been instrumental in development of the Council of Supply Chain Management Professional's "Supply Chain Management Process Standards", the Warehousing Education and Research Council's Warehousing & Fulfillment Process Benchmarking & Best Practice Guide" and the WERC "Warehouse Certification Program". He is lead auditor for the WERC's Certification Program.


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