Dynamic Safety Stock Calculation

[Former Member]

Dear All,

We have set Dynamic Safety stock for finish good.

Below is the screen snap for Coverage profile for your reference,

After MRP we have get results as shown in below screen,

Also find Monthly results for the same in below screen,

Can anybody who has worked or Dynamic Safety stock please explain the calculation in detail for this scenario.

Thanks,

Narresh

[marianoc · Accepted solution]

Hi Narresh,

Setup:

In the session:  "Determine average requirements" you specify how the average demand will be calculated. In your case you said that you want to consider 3 months (Number of periods = 3) and you said that each month has 30 days (Type of per.length = 3 and No of Days per Period = 30).
Then in the session "Range of coverage in the first period" you said that you want to cover 30 days of daily sales with your safety stock.

Calculation:

The 1st thing that the system will calculate is your daily demand, based on your setup. In your example, the system will get the total requirement that you have in the next 3 months (30 days per month) and will divide this by 90 days (3 month of 30 days per month).

Total Requirements of the following 90 days:

- 3000 (PIR of Aug 1st)

- 3000 (PIR of Sep 1st)

- 4000 (PIR of Oct 1st)

Total = 10000 CS

Daily Requirements = 10000 CS / 90 days = 111.11 CS per day

The 2nd thing that the system does is to calculate how many cases you need to produce to get a coverage of 30 days:

Total Coverage = 30 days x 111.11 CS per day = 3333.33 CS.

So if you see the on Aug you will produce 6333.33 CS (3000 CS for your forecast and 3333.33 CS to build your Safety Stock).

Thanks and Regards,

Mariano

[marianoc · Accepted solution]

Hi Narresh,

Do you have any further question? If not please, could you please close the thread by indicating the correct answer or resolution. It could be helpful to others in futures searches on SCN.

Thanks a lot.
Mariano

[Former Member · Accepted solution]

Hi,

Thanks a lot for your explanation. It helped me to understand the calculation.

Thanks,

Narresh

[former_member226240]

Hi Naresh,

Tip: In Range of Coverage profile, it is always better to put the description as in your case

"1 month coverage over 3 months average". So, we are calculating average daily requirement based on 90 months future requirements. After calculating average daily requirement, we would be able to calculate the target stock level as explaineda above by Caetano & Mariano.

Thanks,

Rahul

[Caetano]

Hello Naresh

Regarding the coverage profile calculation, I'd like to ask you to go through the following notes, which explain the range of coverage usage in MRP in detail:

217144  - Range of covrage calc. w/ range of coverage profile

217080  - Documentation: range of coverage in MRP

Let me explain to you in more detail the range of coverage calculation during the MRP run.

Calculating the range of coverage serves to determine a dynamic safety stock level based on current requirements. Statistical, in this context, means it is not the actual requirements that are taken into account, but the average daily requirements within a defined period that are calculated by the system.

MRP will execute the following procedure:

1. The system calculates the average daily requirements using theparameters defined in the range of coverage profile
2. The system reads the defined ranges of coverage in the range of coverage profile and calculates the minimum, maximum and target range of  coverage (see Calculating the Minimum, Maximum and Target Stock Level and Values of the Statistical Range of Coverage Calculation). Thetarget  stock level represents the safety stock level.
3. System checks for every MRP element whether the available quantity is below the minimum stock level. If stock falls below the minimum stock level due to a requirement, the system creates a procurement proposal and thus calculates the procurement quantity, so that the available quantity is replenished up to the target stock level.

BR

Caetano