Safety Stocks in JIT Environments

Abstract

In a Just‐in‐Time (JIT) environment, ideally there would be no need for safety stocks. However, in practice, supply‐side and demandside uncertainties cannot be completely eliminated. Safety stocks would still be needed – particularly during the transition to JIT. Reviews the various methods for computing safety stocks. For each method, examines the relationship between safety stocks and lot sizes. The analysis indicates that the commonly used methods do not take into account the reduction in lot sizes that is characteristic of JIT. Such methods, therefore, are inappropriate for use in the JIT context.

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