Analyzing the business process and drawing a chart can help analysts understand how the business works, help analysts find the unreasonable flow direction in the business process, and then make an optimization plan and improve the existing process.
Business Process Diagram Inventory Warning-Safety Inventory
Safety stock, also known as insurance stock, is a buffer stock prepared to prevent uncertain factors (such as sudden large orders or delayed delivery by suppliers) from affecting order demand, and is used to meet lead time demand.
Safety stock is based on the theory of mathematical statistics. First of all, suppose that the inventory changes around the average consumption rate, the probability of greater than the average demand and less than the average demand is 50%, and the probability of shortage is 50%.
The greater the safety stock, the less likely it is to be out of stock; However, the larger the inventory, the more surplus inventory will appear. We should keep the shortage at an appropriate level and allow a certain degree of shortage according to the use of different goods and the requirements of customers.