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Apr 29, 2020 at 07:10 AM

IBP Inventory Optimization Calculations

933 Views Last edit May 06, 2020 at 08:29 AM 5 rev

Hello Experts,

For IBP IO, the Recommended safety stock is calculated based on Forecast Error CV, Lead time, PBR, Target Service level, Lot size, Holding costs. Do we have the formulas that the system uses to determine the final Inventory position?

For example: If a Product P1 is serviced to Customer C1, through DC1 which gets the stock from DC2. i.e the supply flow for P1 is DC2 -> DC1 -> C1, If the inventory holding cost rate in DC1 = 1 and in DC2 = 4, then the system will try to put more inventory in DC1 rather than DC2. How will the system calculate the quantity to be transferred?

Similarly, for Target service level, PBR, Lead time etc - what are the calculations?