IBP Inventory Safety Stock

[OliverA41]

Hello,

I have a generall question. How can I checked, that the recommanded saftey stock (the result of the multiechon algorithm) is a "good" result.

For example I have a forecast of 72 and the recommanded saftey stock is 63. How can I say, that this value is good enough.

Give it a calculation or rules for this ?

How calculate a planner the adjusts recommanded safte stock ?

Regards

Oliver

[Former Member · Accepted solution]

Recommended safety stock = Forecast Error * z(Service Level)

Target Inventory Position = Recommended safety stock + forecast * (Periods between replenishment/PBR + Transportation Lead Time/LT)

Forecast error is the difference between the forecasted value and actual sales over a period of time (PBR+LT) and can be found out using Forecast error operator

Service Level might be 95% which means 95 out of 100 orders at that location is serviced on time in full or in order words it is the non-stockout probability and z is the gamma distribution at that service level. Like for Service level of 95% the z(95%) = 1.64

Periods between replenishment might be 3 weeks which means every 3 weeks on an average inventory is being replenished

[OliverA41]

Hi Subhojit,

thanks for your answer.

But how can I rate this recmmoneded Saftey Stock. Is there a way to say, this result is a "good" result and with this we can plan further into the response & supply part ?

Regards

Oliver