# Property Safety Stock Policy for Correlated Commodities Based on Probability Inequality

## TL;DR

This paper introduces a deterministic method using probability inequalities to determine safety stock levels for correlated commodities, improving inventory management by accounting for demand correlations.

## Contribution

It proposes a novel approach that incorporates demand correlation into safety stock calculation using probability inequalities, which was not addressed in traditional methods.

## Key findings

- Derived analytical relation between safety stock and stockout rate.
- Validated the proposed method through numerical experiments.
- Demonstrated improved safety stock estimation for correlated demands.

## Abstract

Deriving the optimal safety stock quantity with which to meet customer satisfaction is one of the most important topics in stock management. However, it is difficult to control the stock management of correlated marketable merchandise when using an inventory control method that was developed under the assumption that the demands are not correlated. For this, we propose a deterministic approach that uses a probability inequality to derive a reasonable safety stock for the case in which we know the correlation between various commodities. Moreover, over a given lead time, the relation between the appropriate safety stock and the allowable stockout rate is analytically derived, and the potential of our proposed procedure is validated by numerical experiments.