Safety Stock Management add-on for Dynamics 365 BC from Netstock

Visit Website View Our Posts

Safety stock is the extra product businesses keep on hand to avoid running out of vital inventory at critical times.  The additional stock is used as a buffer to mitigate risks like supplier delays, sudden increases in consumer demand, or inaccurate inventory forecasting. While extremely useful, safety stock can tie up resources, so it’s important to get it right. This two-part post will discuss the practical ways Netstock and Microsoft Dynamics 365 BC help companies maintain their optimal safety stock levels.

Optimal safety stock levels will vary from business to business and even from season to season. They may also vary based on your inventory policies. Netstock is designed by inventory and supply chain experts who understand the daily challenges of maintaining an optimal inventory. Netstock frees up time and money so you can focus on managing the proper inventory to balance supply and demand and grow your business.

An extract from a RIS online article cites, “Even before the pandemic, out-of-stocks were a staggering $1 trillion problem and nearly three-quarters (71%) of retailers named “lack of real-time inventory visibility” as a top obstacle to overcome.”

Safety stock’s vital role

Safety stock performs a vital role in a company’s supply chain. It helps businesses avoid stock-outs and meet customer demand. But how much safety stock do you need to prevent over-investing and still have that safety buffer in place?

Inventory planners must determine the optimal stock levels needed to fulfill future demand. However, figuring out the most advantageous inventory levels can be challenging because of erratic demand patterns or supply chain interruptions. Too much inventory ties up cash in working capital. Not enough inventory leads to stock-outs, back orders, and dissatisfied customers.

If you sell more stock than anticipated or if your suppliers fail to deliver as expected, you risk being unable to supply your customers. Your business cannot afford to run out of items significantly impacting your sales. You’ll either lose a sale, a customer, or both. Safety stock is the insurance policy you need to keep your business moving forward.

Your insurance policy - safety stock 

 

Why your business needs an inventory management add-on for Dynamics 365

Inventory safety stock acts as a buffer when you reach the end of your replenishment cycle. You won’t need safety stock for every item; the challenge is knowing how to calculate the correct safety stock levels required for the necessary items.

Safety stock ensures you have on hand the items customers want. To calculate the amount of safety stock you need, consider two variables. First, customer demand for certain items will either be predictable or unpredictable. Items that are difficult to forecast accurately will require more safety stock. More predictable items will be easier to predict and won’t require as much safety stock. Second, if your items tend to arrive late, you will need more safety stock than if they are delivered as expected or earlier.

Maintaining the proper levels of safety stock will help your company:

  • Mitigate the risk of stock-outs.
  • Maintain ongoing customer loyalty.
  • Improve sales.

Safety stock can safeguard your business from two significant inventory risks:

Forecast risk: You won’t always know what your customers will need, so you can’t guarantee your forecasts will be 100% accurate.

Supply risk: Your suppliers also experience disruptions that prevent them from delivering on time and in full.

What happens when you experience stock-outs?

In today’s fast-paced, competitive economy, consumers want instant fulfillment and consistent communication regarding their orders. If you have experienced high demand or failed to factor in the right amount of safety stock needed for that specific product, buyers are likely to search elsewhere.

Stock-outs also affect your internal processes. Your team may spend additional hours establishing why you are stocking out on certain products. When stock-outs happen, you will probably have to:

  • Place emergency orders with suppliers.
  • Select a faster, less cost-effective delivery option.
  • To keep the customer happy, buy the product from a competitor – even if it means selling it at a loss!

To minimize stock-outs, you need visibility into your inventory. Netstock's inventory management solution provides a dashboard that measures your inventory KPIs. For example, identifying the items that will run out before the next delivery arrives will allow you to take action quickly to meet demand at minimum cost.

At Netstock, we realize you can’t look at every item daily, so our solution allows you to focus on the most essential items. The dashboard gives you a high-level view of total stock holding, excess stock, and potential stock-outs. You can quickly identify the pain points and what action to take.

How will your customers react to stock-outs?

When you experience a stock-out, your customers may:

  • Look for another supplier that has the item on hand.
  • Consider switching brands entirely.
  • Look at an alternative model, size, color, etc.
  • Wait until the item is available.
  • Become frustrated and cancel the order.
  • An online customer may abandon their shopping cart and all the other items they intended to purchase.

The impact of having too much safety stock

If you order too much safety stock, your warehouse may be full of excess items. Excess stock is costly to your company as it increases overall inventory costs. You’ll tie up cash and resources holding that excess stock. You may require additional storage space, insurance, and labor and risk the potential loss of products due to damage or theft.

You need the best available inventory management tools for Dynamics 365. 

As buyer preferences and supply chain variances continue to fluctuate, using spreadsheets for your planning and replenishment requirements puts your business at risk. Calculating safety stock requires several inputs; are you confident you can meet demand, avoid stock-outs, and continue to make more sales?

Investing in Netstock’s demand planning solution for Microsoft Dynamics 365 Business Central will give you the visibility for accurate forecasts, order recommendations, and the correct safety stock requirements needed for your business. Safety stock is calculated based on each item’s classification. If your supplier becomes unreliable, the supply risk will escalate, and Netstock will automatically increase the safety stock level you need for that item. It’s simple and accurate.

Let Netstock accurately measure the right safety stock you need.

In Part 2 of this post, published soon, we’ll consider:

  1. What inputs should you consider when selecting safety stock levels?
  2. Your inventory policy and safety stock.
  3. What factors should you consider when identifying safety stock?

We’ll also look at a snapshot of how the Netstock app automatically calculates safety stock.

Unlock your inventory data with Netstock and Microsoft Dynamics. Netstock extracts and analyzes the data in your Microsoft Dynamics ERP, enabling you to place orders quicker, reduce excess, and minimize stock-outs.

Netstock Overview

Learn more information about our inventory solution

Learn More

For more information about our inventory solution, contact our experts at Netstock.

By Netstock, netstock.com

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Show Buttons
Hide Buttons