Is your inventory costing you money—when it should be making you money? If it’s not being surfaced as inventory that your customer can purchase, then you’re losing profits. Plus, it’s incurring inventory carrying costs. Why is this happening? The reason might surprise you: your safety stock buffers. Also known in the industry as “buffer stock” or simply “safety stock”, the terms all mean the same thing. In this article, we’ll stick with “safety stock buffers”.
So what is a safety stock buffer? This is the number you set against your inventory to hold back as “extras” to prevent overselling. But why are you worried about overselling? Probably due to lack of real-time inventory data. Plus, to account for damaged goods and other various reasons.
Safety stock buffers are a necessary, and important, tool in your selling strategy. But there are ways to leverage them to ultimately sell more and increase profits. Let’s explore two common issues and how you can solve them.
1. Safety stock buffers set at a blanket SKU-level
You need to set the safety stock buffers for your products—but your system isn’t flexible enough to handle that level of detail. So you set the buffer at the same level, across all regions, locations and channels. The problem with this approach? It’s likely too high a level for most products, which results in underselling—and money left on the table.
Make sure your platform allows you to set safety stock buffers down to the SKU-Location level. This means you can adjust that number for SKUs that say, move faster in one location, or slower in another. When you can manage your safety stock buffer levels by category, location, SKU and SKU-location, you can open up more inventory to sell. Let’s look at a basic example:
Now let’s adjust the safety stock buffers down to the SKU-Location level:
By making those adjustments, you can easily surface more inventory for your customer. Which means the number of salable items increases from 16 to 25 books. A win for customers, and a win for your bottom line.
2. Safety stock buffers set too high
Even if you can set safety stock buffer levels by region, location or channel, you still might be setting it too high. Why? Without an accurate, real-time view of your inventory across all your locations, regions and channels—including physical and digital—it’s hard to truly know how much you have to sell.
And while you want to avoid underselling, you also want to avoid overselling and disappointing customers. To avoid overselling, you set your number at one that feels “safe” to make sure this doesn’t happen. But this hurts your business. When numbers are set too high because you can’t see what is in stock, you lose out on sales, customers, and ultimately, profits.
With a real-time, accurate view of all of your inventory, you can make better decisions in order to get the most out of your stock on hand.
The fix? A modern Order Management System
You want to fix these issues, and fast. Which means you need accurate, real-time inventory visibility and full control of your safety stock buffer levels. Enter: a distributed order management system (OMS). Your OMS should consume inventory position updates from all your systems in near real-time to provide a unified, cross-system view of all your inventory data. So you know what you really have to sell, in any place, at any time. And your OMS should also give you full control over your safety stock levels.
Summary
Even when markets are in flux, you can maximize your current inventory with strategically set safety stock buffers. Sell more of the stock you have on hand. And increase profits.
The right order management system, like Fluent Order Management, will allow you full control and visibility of your inventory. So you can see what you have available to sell across all channels, whether physical or digital. Provide you with the ability to set safety stock buffer levels down to the SKU-Location level. And easily adjust these levels as often as you need—and fast.
Give your business the agility and control to stay ahead of what’s next. To learn how Fluent Order Management can support your business’ needs, contact us today and go live in as little as 8 weeks.
