Method for achieving better customer service, lower costs, and less instability in master production schedules
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Safety stock is generally considered a useful tool for dealing with forecast error in a make-to-stock environment. Production decisions in a make-to-stock firm must be made prior to customer commitment, and safety stock provides a buffer against the uncertainties involved in forecasting customer demand-although at the cost of holding more inventory. The examples in this article suggest that safety stock can play an important role in simultaneously increasing service levels and reducing system nervousness while keeping costs low.
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