Effect of the Safety Stock on the Probability of Occurrence of the Stock Shortage

The objective of the logistics management is to guarantee the stock level required for the adequate handling of production at the lowest possible level of costs and risks. By using the economic order quantity model, we can define the optimal order quantity, along which our stock management can be guaranteed by the most favourable cost level. The theoretical approach of the model assumes a deterministic operational environment. In practice, however, there are several unpredictable factors influencing the operation of the production company. The aim of our analyses is to present the relations between the stock level and the risk of shortages. As a result of the research, the introduction of the safety stock is the solution to cover the effects of the uncertain factors in the supply chain. The avoidance of stock shortages would be possible only with the management of an infinite stock level due to the stochastic factors, but it is not feasible in practice. We need to quantify a service level, which determines the accepted probability of the shortage occurrence.