Global Pag Base Stock: How Supply Chain Disruptions Are Impacting Inventory Management
The Covid-19 pandemic has caused unprecedented supply chain disruptions globally which has forced companies across industries to rethink their inventory management strategies.
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What is Pag Base Stock?
An increasingly popular inventory management strategy is called pag base stock or target inventory. Under a pag base stock model, companies set a target inventory level for each product or stock keeping unit (SKU) at each location or distribution point in the supply chain network. The target inventory level is called the pag base.
Inventory is replenished up to the pag base as items are sold or used. The goal is to maintain inventory levels between a minimum and maximum range. When inventory drops below the pag minimum, a replenishment order is triggered to bring the level back up to the pag base. This helps ensure availability while avoiding excess stock above the base.
Benefits of Pag Base Stock
Compared to traditional replenishment methods like order point/order quantity that focus on economic order quantities, pag base stock has several key advantages:
- It balances inventory availability with efficiency. By maintaining consistent stock levels close to customer demand, items are readily available while excess inventory is avoided.
- Network responsiveness is improved. With targets set at multiple points, the system can quickly respond to changes in demand or disruptions anywhere in the network.
- Forecasting is less important. Pag base levels act as buffers so minor forecasting errors don't cause stockouts or excess stock. Replenishment is triggered simply based on inventory deviation from targets.
- It's simple to understand and manage. Setting target inventory levels for each location is intuitive for supply chain teams versus complex formulas in traditional models.
- Adaptability to disruptions. Pag base targets can easily be adjusted up or down based on external factors like demand shifts, supplier issues, or other changes.
Global PAG Base Stock Faces Supply Chain Challenges - https://www.coherentmi.com/blog/global-pag-base-stock-how-supply-chain-disruptions-are-impacting-inventory-management-16
