The Safety stock panel on the item inquiry screen reflects the inputs used to calculate the ideal Safety stock for this item in this location.
Safety stock aims to protect the item against stocking out by acting as a buffer against the sources of risk. These include under-forecasting demand and/or suppliers under-delivering or delivering late.
The following are inputs into the safety stock calculation:
Target fill - This indicates the level of product availability that we are targeting for this item.
Replenishment cycle - The Replenishment cycle indicates how much inventory of this item you want to purchase at a time.
Should there be a Minimum order quantity (MOQ) that results in orders greater than this desired Replenishment cycle, the label will change to Effective RC and the impact of this MOQ will be reflected here. For example: if you had a RC of 45 days and the MOQ forced you to buy 65 days worth, then the Effective RC would be 65 days.
NOTE: Both Target fill rate and Replenishment cycle are configured either in the Policy defaults or Policy overrides screen using this item’s position in the Classification matrix.
Lead time - This is the lead time from the supplier. It includes time taken to place the order, supplier shipping time and time taken to receipt the item into the warehouse. It is the total time taken for an item to be available for sale.
Supply risk - A measure of supplier performance. Late deliveries and/or short quantities lead to higher risk. To see more about the data used for this, refer to the Supplier performance tab.
Forecast risk - A measure of how forecastable the item is. Under-forecasting (forecasting lower than actual sales) leads to a higher risk. To see more about the forecasts used, refer to the Forecast history tab.
Risk % - This is the first component of Supply risk and Forecast risk. It is an indication of the variability. The higher the variability, the bigger the risk %, the more consistent, the lower the risk %.
Offset days - This is the second component of Supply risk and Forecast risk. It is an indication of the bias of the measured versus planning Lead time (Supply risk) or the historic forecasts versus actual sales history (Forecast risk), where:
A bias towards late deliveries/short quantities or under-forecasting results in a positive offset days value, which adds days to Safety stock.
A bias towards early deliveries or over-forecasting results in a negative offset days value, which subtracts days from Safety stock.
The final Safety stock days number is a result of all these inputs. The Safety stock for an item is dynamic and will change as the risks change. The App calculates the ideal Safety stock for the item daily.
The Safety stock level is also the item's minimum level. The App will always recommend orders that, in an ideal world, will arrive as the stock level reaches the Safety stock level.