Safety Stock
Safety Stock is the buffer inventory kept to protect against uncertainties in demand or supply. It’s not meant to be sold immediately but to cover unexpected spikes in demand or delays in replenishment.
- It prevents stockouts during supplier delays or demand surges
- Maintains customer satisfaction and service levels
In NetSuite, you can define safety stock per item and per location. You can also set a default safety stock in days, which NetSuite uses to auto-calculate reorder quantities if no specific value is entered.
Example:
Let’s say Item A has:
- Average daily demand: 10 units
- Lead time: 5 days
- Safety stock: 3 days
Safety Stock Quantity = 10 × 3 = 30 units
This means NetSuite will recommend keeping at least 30 units of Item A in stock as a buffer.
Preferred Stock Level
Preferred Stock Level is the ideal quantity of inventory you want to maintain to meet regular demand. It’s not just a buffer—it’s your target inventory level.
- It helps maintain consistent availability
- Supports demand planning and replenishment
- Reduces carrying costs by avoiding excess inventory
You can manually set the preferred stock level or let NetSuite auto-calculate it based on the number of days of inventory you want to maintain. It uses historical demand and lead time to determine this.
Example
Let’s say Item B has:
- Average daily demand: 20 units
- Preferred stock level: 7 days
Preferred Stock Quantity = 20 × 7 = 140 units
NetSuite will aim to keep 140 units of Item B in stock to meet expected demand.