Safety Stock and shortage detection
Classical organization
In a typical organization, this is when you need a product that you discover that it is missing!
Majority of failures are discovered by the person in charge of the production feeding at the picking of the material from its storage location. The standard recovery time starts at the discover of the shortage. The alert is in the best cases immediately given. When the scheduler is informed, he contacts the supplier. After negotiations and an agreement about the usage of exceptional means by the supplier, the material missing will be available when this standard recovery time will be elapsed. If the supplier is in EXW, we will have to add the transportation time (which may be reduced if an express transportation is used).
In this case, the safety stock has to compensate the standard recovery time and the express transportation: it can have a consequent value.
Advanced Shipment Notice (ASN)
This case happens when suppliers and customers communicate via EDI. A message (ASN) is sent by the supplier at the time of shipment. This message contains the list of products shipped and delivered quantities.
In most of the cases, this message is taken into account by the customer the next day at the earliest. This is the time for ERP programs to analyze the message and establish correspondence with deliveries schedules sent to the supplier. This time may be longer when the supplier is in a "repetitive mode" and when its open orders are sent with time buckets which may contain more than one delivery per period (for example: weekly quantities for daily deliveries).
Detection can take place before the product consumption and allows a reduction of the safety stock.
VRO Promise
In the process VRO, detection occurs at the receipt of the suppliers Promise. Treatment of the anomaly (deployment of action plans including the set-up of a express transportations if necessary) is triggered when the supplier calls the customer at the time of the promise (standard reaction if there is a discrepancy ). If its does not call, it will be contacted by the scheduler just after the next discrepancies review meeting. This reaction has to take place before the product shipment and allows a drastic reduction or elimination of the safety stock.
By a smart design of your timing, the time between the detection and the consumption can be long enough to avoid any safety stock.
With VRO you transform your costly safety stock in a virtual safety stock by using of a correct timing.
You can run without safety stock!
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