Safety Stock & Spare Parts: Key to Success in Inventory Management - Essay Sample

Introduction

Safety stock and spare parts are essential in the success of an organization. They are a vital organization's means of mitigating unforeseen stock-outs resulting from seasonal variations, unexpected excess demand, or failures to deliver from the suppliers' endpoint. Inventory management control assesses the desired spare parts of the safety stock level of an organization based on the average demands and the frequency of supplies. Safety factors considered in the establishment of the level of safety stock and spare parts are critically vital in logistics and procurements. Some of the importance of safety considerations include determination of optimal safety stock, reducing chances of obsoleteness of components, increase the ability of the business to meet unexpected demands, protect the company's resources and decide on when or what products to maintain safety stock on.

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Safety factors in terms of the quality of storage and handling systems in an organization, and the nature of the product, among other factors, help an organization to determine the minimum and maximum level of stock or spare parts that it can accommodate at any given time (Bahroun, & Belgacem, 2019). The sensitivity of the needs of customers highly depends on the quality and nature of the stock. Therefore, an organization stands to benefit is it is in a position to determine and optimize the safety stock. That means that it will be in a position to meet the unexpected upsurge in demand of the product while at the same time maintain the high quality of its deliveries. On the contrary, an organization that fails to consider safety factors of the safety stock or spare parts may end up stocking in excess. As a result, the condition of the safety stock may deteriorate, translating to low-quality products, and eventually, poor customer deliveries. Such cases always result in a negative impact on the business. Therefore, safety factors in the maintenance and management of safety stock or spare parts lead to increased customer satisfaction and market shares, which is the ultimate goal of any organization (Bahroun, & Belgacem, 2019).

The business environment and customer needs and demands are ever-changing. Technological advancement can render a stock obsolete in the shortest period. Therefore, organizations need to be extremely cautious about the safety factors in the event of the occurrence of technological changes or a change in the market taste that may affect the demands on the stock. The digital migration from the use of analog gadgets to the use of a digital device is an example of how technological changes may affect the safety stock in an organization. Companies that, for example, stock too much of the spare parts for analog gadgets, may suffer a massive blow if such devices fall out of the market. The business has to consider and put in place safety mechanisms that can act as a fallback plan when such worst-case scenarios occur. For instance, organizations might consider the possibilities of reselling the excess safety stock in learning institutions or recycling centers and salvage and recover at least a portion of investments on the capital.

The primary reason for a standby safety stock or spare parts is to allow an organization to meet an unexpected increase in demand. The logistics department, at this point, anticipates the rise in demand or suppliers' prices. However, the opposite might occur where the market for the products of spares falls along with the suppliers' prices. Therefore, businesses that will not have had excess stock stands to benefit as they will be in a position to offer the same products or spare parts at much lower prices. An organization thus should consider the safety factor in terms of storage facilities and the durability of the products before investing in the excess safety stock. A business that believes such a safety factor will be in a position to continue keeping the stock and buy new stocks at the current prices and embark on the sale of the excess stock when the cycle of high rates comes again. An entity that does not consider safety factors, in this case, may end up selling at higher prices, lose clients in the process and end up with dead stocks.

The security of the organization's premises is a critical factor in deciding on the level of safety stocks or spare parts. Safety stock in an organization may prove hard to track as a result of internal mismanagement or embezzlement (Bounou, El Barkany, & El Biyaali, 2017). Before a company decides on maintaining a certain level of safety stock, it has to consider and review security and management protocols in the organization. The review of the organization's security system is essential as it helps in the identification of any loophole that may lead to theft within the organization. Protection of the safety stock from external burglary or robbery is also a vital consideration as it helps organizations to install security measures that will provide security for the products. Analyzing security measures protecting safety stocks or spare parts from external hazards is essential as it helps in the determination of the storing and maintenance cost. For example, an analysis revealing that maintaining a certain level of safety stocks requires high-level security that is expensive for the organization may lead to the abolition of the safety stock desires and seeking for ways that can meet urgent demands (Bounou, El Barkany, & El Biyaali, 2017).

The cost of the product in the safety stock or spare part is a critical element of consideration when determining the quantities to procure. Expensive products in safety stock can be undesirable for the business as this may attract external and internal robbery and theft. On the other hand, low costs product are easy to handle, requires fewer security measures, and pose an insignificant danger to the organization is in terms of losses. Therefore, before deciding on the level of safety stock and spare parts, an organization has to consider its costs, whether it can induce greedy desires on the employees or attract robbers to the organization. In addition to that, safety stock can reduce the rate of turnover in an organization if the company invests heavily on expensive spare parts or products. Examining the costs of the safety stock or spare parts is vital to reduce the chances of low turnovers, theft, and mismanagement, as well as increase productivity in the organization (Sarkar, Guchhait, Sarkar, Pareek, & Kim, 2019).

In general, the desired level of protection for the safety stock or spare parts when determining the optimal amount of procurements is vital in an organization. It helps a company to carry out activities such as planning, inventory control, staffing, determination of lead times, and understanding the future needs of the organization through forecasting. Considering security issues is beneficial as it can open ways through which an organization can assess and determine the bottleneck of activities within the organization that may have been contributing to consistent losses and failures in the company. It also helps in sharing responsibilities in terms of protecting resources within the organization. The security task of the company's resources will not be the responsibility of the security department alone but a collective responsibility of everyone in the organization.

Conclusion

In conclusion, safety factors are a vital consideration in an organization when determining the procurement of safety stock or spare parts. They provide an organization with critical information that can help the company forecast, assess, and determine the effect of the safety stock or spare parts in the organization. The safety factors are beneficial to a company as they help in determining the optimal amount of safety stock at any given time based on the storage capacity and material handling equipment. It also helps in reducing the chances of obsoleteness of components as a result of poor planning in an organization. In addition to that, the organization can assess the suitability of maintaining a safety stock based on the security of the organization and the nature of the product. The safety factors help in making significant decisions that affect the profitability index of the organization.

References

Bahroun, Z., & Belgacem, N. (2019). Determination of dynamic safety stocks for cyclic production schedules. Operations Management Research, 12(1-2), 62-93.

Bounou, O., El Barkany, A., & El Biyaali, A. (2017). Inventory models for spare parts management: A review. In International Journal of Engineering Research in Africa (Vol. 28, pp. 182-198). Trans Tech Publications.

Sarkar, B., Guchhait, R., Sarkar, M., Pareek, S., & Kim, N. (2019). Impact of safety factors and setup time reduction in a two-echelon supply chain management. Robotics and Computer-Integrated Manufacturing, 55, 250-258.