Buffer stock without the guesswork

A supplier offering to "hold stock for you" is offering to take on your forecasting risk. That is a real service when it is set up properly, and an expensive disappointment when it is not — usually because nobody agreed what happens when the forecast is wrong.

What has to be agreed first

• The forecast horizon and how often it is revised
• The replenishment point and the reorder quantity
• Who owns the stock, and from what moment
• What happens to slow-moving items after an agreed period
• How consumption is reported, and how often

The fourth point is the one most often skipped and the one that causes the argument. Obsolete stock has to belong to someone; deciding that at the start costs a conversation, and deciding it afterwards costs a relationship.

We would rather start a stocking programme narrow — a handful of lines with clear consumption — and widen it once the numbers are real, than commit to a warehouse full of assumptions.