The optimum
safety stock is that quanti that results in the smallest total cost ofstockouts plus safety
stock carrying cost. This carrying cost is calculated in the same way as for EOQ. The
annual cost of Stockuts depends on the frequency of their occurrence and the cost of
each stockout.
If the action taken กn the event of a stockout is to stop the job for which there is a
materials shortage and start up a new job, the stockout cost equals the setup cost required