What influences the recommended safety-stock levels generated by single-echelon approaches?

The recommended safety-stock levels generated by single-echelon approaches are influenced primarily by the variability of historical demands and lead times. This is because safety stock is designed to buffer against uncertainties in both demand and supply.

When demand is variable, having enough safety stock can help ensure that customer orders are fulfilled even during unexpected spikes in demand. Similarly, variability in lead times – the time taken from ordering inventory to receiving it – can also impact how much safety stock is necessary. If lead times are unpredictable, safety stock must be increased to cover the risk of stockouts.

This approach emphasizes the statistical analysis of past data, allowing companies to establish safety stock levels that align with their specific operational realities and supply chain dynamics. In contrast, considerations such as historical monetary data, current market trends, or supplier performance metrics do not directly influence the calculation of safety stock within a single-echelon model, although they may play roles in broader inventory management strategies.