Determining the appropriate size of a buffer can be challenging. It requires a careful balance between being overly cautious and under-prepared. Here are some factors to consider:
Historical Data: Analyzing past data can provide insights into the variability and risks associated with demand, supply, and financial performance. Industry Standards: Understanding the typical buffer sizes used in your industry can serve as a useful benchmark. Risk Assessment: Conducting a thorough risk assessment helps identify areas where buffers are most needed. Cost-Benefit Analysis: Weighing the costs of maintaining various buffers against the potential benefits can help in making informed decisions.