Research On The Improvement Of T Company's Safety Stock Management

For the manufacturing enterprises,inventory is very important.It not only plays a very key role in the normal production and operation of enterprises,but also contributes to the development of the market and the improvement of customer satisfaction.Too high inventory increases the holding cost of inventory,occupy a large number of cycle fund and increases the risk of inventory losses which is resulting in waste of resources in the future.Too low inventory increases the risk of shortage,affects the normal production,increases the number of purchases and batches,increases the purchasing cost,affect the level of customer service and the reputation of enterprises,and losses of the sales opportunities.T Company is a manufacturing enterprise and the produces is custom power supply,which is characterized by high quantity and small quality and most production sell to the oversea market.Most equipment and materials are specific due to the main customized production.Once customers cancel the order,the purchase for special materials have to be scrapped accordingly,which will have a great impact on the operation of T Company.On the other hand,because of its custom characteristics,some major materials are requested by the customer to purchase from the specify agents or vendors.There is no much space for the company to do the purchasing choice.From the information of past several years,the stock inventory held by the company is always on the high level,and it has become the biggest problem in the management of the company.After the further analysis for the inventory management in T Company,it is good for the company in management of finished goods.But for the raw materials,the value of total inventory value is more than 70%,and the total value of the sales is always at high level too.The most important,more than 80% value for special inventory on hand is resulted in the difficult of sales and the risk of scrapped once the order is cancelled in the future.Therefore,it is very important and urgent issues for T Company to keep a reasonable level of inventory.In order to solve the problem of high level of raw materials,we set up a suitable safety stock for some key raw materials,which not only guarantees low inventory but also ensures smooth production.This article uses the statistical principle and is based on the assumption that the demand is matching with the premise of the normal distribution.We collect the production demand for past one year and then we get the information by weekly demand(total 52 weeks).Based on that,we get the formation: average of weekly demand,the standard deviation of weekly demand,average of lead time of purchase,the standard deviation of lead time of purchase,and finally calculate the safety stock based on the principle.After that,we compare the calculated safety leave and the actual inventory level and verify whether the safety stock is reasonable and matching with actual situation.From the practical application,the calculated safety stock has a certain guiding and can be used as a reference for the company.But market and production are always changing,we should catch up with the actual situation so that we make sure the safety stock is matching with the actual production as what we are expecting.