Dynamic Safety Stock calculation

[Chuck Crowton]

Hello,

We are wanting to use the Safety Stock minimum Period of Coverage instead of a fixed SS. We typically do not hold SS at the finished goods level, only at the sub and raw material levels. We have noticed that if we remove all forecast at the top level, the calculation quickly goes to zero for all items including dependent items at the lower levels (sub-assemblies and raw materials) even though there's still demand generated from open sales orders (we have a large backlog so we have turned the forecast flag to false for most items).

So the questions are;

• Does the solver for Period Of Coverage use only forecasts for items that are set as "true" for forecast?
• Since we are using our open order book to drive demand instead of the forecast, are we unable to use the dynamic safety stock feature?
• Is the solver calculating the SS at the lead time or using average demand through lead time to generate the SS levels?

Any help would be appreciated,

Thanks,

[Hicham Lahlou]

Hi Chuck,

 

The theory is the following:

Any item-location, whether it is raw material, semi-finished or finished product can have a safety stock calculated by frePPLe.

The demand used to calculate the period of cover consumption is the sum of the sales orders and the net forecast.

For raw material and semi-finished products, the bill of material of finished products is broken down to calculate how much of these raw material and semi-finished products will be consumed based on planned sales orders and forecasts.

So removing the forecast will have an impact but that shouldn’t bring the safety stock to 0 if there are still sales orders.

The solver is calculating the total demand over a 180-day period (based on the value of parameter inventoryplanning.average_window_duration), then divides that value by 180 to get an average daily demand rate and uses that value for the period of cover (e.g: period of cover of 14 days is 14 times average daily demand rate). This is to avoid too much variability in the safety stocks from a week/month to another one.

 

In practice, I noticed that, in a situation where the problem is very constrained (with overdue sales orders or sales orders due in a near future only), the system doesn’t compute correctly safety stocks when the user chooses the “period of cover” option. I think this is the problem you are facing.

 

We will probably issue a fix regarding this sometime in August, I will keep you updated.

 

Regards,

 

Hicham

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