Getting safety stock just right

Safety stock is among the most critical elements in the pharmaceutical supply chain. Yet safety stock has also proven very difficult to manage and optimize, even as it locks down working capital and drives up inventory costs. Pharmaceutical companies typically maintain high levels of safety stock to achieve better service levels that maximize revenue of high-margin products and drive customer satisfaction. Also called buffer stock, it provides a safety net against variability such as unanticipated delays in raw materials or transportation, or unusually high demand. Stockouts that result from inadequate safety stock could be highly damaging to the business, with millions in lost revenue and potential brand damage if vital medicines are unavailable.