For any warehouse that has a lot of product turnover, such as retail or ecommerce, many warehouse managers consider carrying safety stock. But is it right for you?

Safety stock, also known as buffer stock, is a term used to describe a level of extra stock kept on hand for certain items to prevent stockouts due to an increase in demand over a certain period of time. However, a lot of warehouses tend to leap right into carrying safety stock without considering the impact it may have on your business and your ability to carry and supply other items – after all, what’s the point of safety stock if you never sell it and it takes space away from other items?

If your facility is considering safety stock for certain items, here’s a few things to consider first:

Does Your Business Have A Lot Of Fluctuation In Demand?

The biggest reason for safety stock is to keep up with fluctuations in demand across a number of different products. This is different from an item that’s constantly being ordered – if you have products that move a lot more often, you’d be better off ordering a consistent number of them every time. Safety stock works best for items that experience a lot of ups and downs in demand, such as seasonal products or items that you had a big rush on previously but haven’t in a little while. If your warehouse doesn’t stock anything that really meets that description, safety stock might not be the best solution.

Do You Have The Extra Room?

Space is already at a premium in most retail warehouses, and safety stock will just make that worse in the long run if you don’t find yourself needing it or moving it as fast as you expected. If you have the space, time, and money, bringing in some more wire shelving or warehouse storage will give you the room you need for safety stock if your warehouse truly needs it.

Does Your Forecast Call For It?

One of the simplest ways to determine if your business needs safety stock is if your forecast for the next period (year, quarter, etc) projects increased sales of a given item, or if your forecast has historically been inaccurate on a given item in the past. This will not only let you know what items have been generally under-ordered in the past, it will let you know if the predictions look like you’re going to need more than you generally keep in stock.

The need for safety stock will differ depending on the individual needs of each warehouse and facility, but these tips should hopefully shine some light on if it’s a good idea for your business. Sure, it’s good to mitigate risk, but sometimes you can play it too safe.