Safety stock is inventory that a company carries beyond what is needed for basic demand. The purpose of safety stock is to compensate for forecast error. Unlike other statistics, safety stock is only reported in the forecast table of Executive Report. Safety stocks can be set using several methods:
- Judgment: Additional units of stock are added based on a manager's intuition
- Coverage: The sum of X periods of forecasted demand
- Statistical: The most sophisticated method, incorporating information about forecast error, lead time, and desired customer service level
- From the Statistics tab, click on the Change Settings link in the Safety Stock area.
The Safety Stock Settings window displays.
- Select either Input parameters or Input Value, Slowing Moving Output will be automatically selected when the Slow Moving Demand Forecast method is used. The table below details the options available.
Include Stat Fcst Indicate whether to include the Statistic Forecast in the calculation of the Safety Stock. When set to Yes this will make your Safety Stock a Stocking Level. Lead Time Specify the lead time of the Safety Stock. Lead Time is the period that the safety stock covers. Service Level Specify the service level that the Safety Stock meets. Safety Stock
Select this option to calculate the Safety Stock. This field is used when you need to set your Safety Stock to a default value for all your series or use a DRP parameter.
As Stocking Level
Enable this option if you wish to make your Safety Stock a Stocking Level. This option is useful for DRP reports because it will make your Recommended orders include the Safety Stock.
- Click OK when finished.