What action can be taken to control stockout risks when demand is not uniform and constant?

Adding safety stock is an effective strategy for controlling stockout risks in situations where demand is unpredictable and varies over time. Safety stock acts as a buffer inventory, allowing companies to respond to fluctuations in demand without running out of stock. When demand is not uniform and can fluctuate significantly, having additional inventory on hand ensures that there is sufficient product available to meet customer needs during spikes in demand or delays in supply.

This practice mitigates the risk of stockouts, as it takes into account potential variations and uncertainties in both demand and supply chain performance. It allows for a smoother operation by ensuring that businesses can fulfill orders even when unexpected situations arise.

In contrast, reducing order quantities could lead to more frequent stockouts by not keeping enough inventory on hand to meet unexpected demand increases. Increasing supplier response time would likely exacerbate stockout issues, as delays in obtaining products would leave the company with insufficient stock to meet demand. Implementing a just-in-time system could lead to greater efficiency, but it also increases the risk of stockouts if demand is unpredictable, as it relies on having precise inventory levels closely matched to demand. Thus, adding safety stock is the most practical approach to managing stockout risks effectively in this context.