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Safety Stock
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This lesson throws light on safety stock.

Harshit Aggarwal
Cleared UPSC ESE twice with Rank 63 and 90 in mechanical engg. Got 99 percentile in GATE. Cracked ONGC, BHEL,ISRO, SAIL, GAIL successfully

Unacademy user
quit India movement was held on 8th August 1942 not on 9th August
Akhilesh Yadav
5 months ago
right Abhishek
  1. COURSE: INDUSTRIAL ENGINEERING LESSON: SAFETY STOCK


  2. ABOUT ME Graduated from NIT Nagpur in 2008 Cleared Engineering Services Examination (ESE-UPSC) Exam & Got the offer letter from most of the Maharatna and Navratna Companies * Cleared GATE Exam Rate, Review, Recommend, Share Follow me on Unacademy at: https://unacademy.in/user/harsh.t aggarwal


  3. SAFETY STOCK WHEN STOCK OUT COST ARE NOT KNOWN Safety stock reverse to a lower level of stock intended to be maintained all the time as a safety against stock out. The amount of safety stock is to be kept in accordance with the level of service the management aim to achieve. Service Level S = No. of units supplied without delay / Total number of units demanded S 0-1 S % 0-100%


  4. SAFETY STOCK WHEN STOCK OUT COST ARE NOT KNOWN 95 % service level to the customer would mean that 95% of the customer orders on an average are filed out of inventory and 5% of units demanded shall be refused because of stock outs during lead time. When the demand during lead time (DDLT) may be approximated by a normal distribution curve with a certain mean X or ( ) and standard deviation ( ). Then re-order level Where X is average demand during lead time and Z is the standard normal variate whose value depends on the level of service. 0.84 1.28 1.645 2.33 Service Level % 80% 90% 95% 99%


  5. SAFETY STOCK WHEN STOCK OUT COST ARE NOT KNOWN Sesvice Level If Leadt ie s given ken ceviaion


  6. QUESTION For a production system annual consumption 20,000 units. Cost of one unit Rs 4- Ordering Cost Rs 60 / order Inventory Carrying Cost Rs 0.6/ unit/ year Past lead times are 15, 20, 18, 12, 22, 27 day If there are 330 working days in a year Find I. EOQ 2. Safety Stock 3. ROL 4. Average stock in inventory


  7. SOLUTION 2DC 330 163 units 4) Av. Stock = EOQ + SS 2. 33a


  8. THANK YOU