Study On Safety Stock Of Company A Under The Random Demand

As a buffer stock,safety stock can effectively solve the shortage problem,especially in the global supply chains under uncertain demand environment,safety stock is even more important.Each company must consider the question that how to set up safety stock,when to set up safety stocks,and how many safety socks a manager should set up.This paper take A company,which produce and sale lighting,as the research background.Firstly,we introduce the research purpose and significance of this paper.Then we put forward the concept and the basic formula of safety stock,also we review the related research about safety stock at home and abroad.After that,we mainly introduce the inventory of A company,deeply analyze the reason of shortage and the dull of sale.The shortage will cause a loss to client and bring bad influence to A company's service level.Besides,the inventory capital will be occupied when the dull of sale happen.Whether the inventory inadequate or be overstocked,is harmful to the company and need to be solved.For this purpose,the company can consider to set up a certain amount of safety stock so that the loss of company will reduce.However,the amount of safety stock should be reasonable,otherwise it will increase inventory occupation of funds and cause unnecessary waste when the safety stock set too high.Next,we develop safety stock model,which can solve the cost and order quantity,in uncertain demand situation.We analyze the nature of the model and the situation that the cost and order quantity vary with the change of parameters in safety stock.Finally,we take the actual type of lighting as an example,simulate the model and verify the validity of the model.By solving and analysis of the model,this paper obtained the optimal safety stock in the case of demand uncertainty,as well as the optimal order quantity and minimum cost based on the safety stock we calculated.Meanwhile,through the example simulation,we verify the validity of the model,which means the cost and order quantity vary with the change of parameters in safety stock indeed.