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Safety Stock Settings

DemandCaster has numerous safety stock settings applicable at the item/location level.

As documented in the Order Point Calc Analysis the Safety Stock component calculation is atomic. Atomic operations are program operations that run independently of any other processes. This means that the safety stock calculation can be triggered via the following methods:

  • Manually via the Order Point Calc Analysis UI
  • Automatically from the Item option tab when clicking yes to calculate safety stock to generate a new requirement plan when the S&OP module is not enabled
  • Clicking yes to calculate safety stock in the Supply Plan options when the S&OP module is enabled.

Since there is no readily accepted safety stock calculation method, DemandCaster offers numerous methods for our users. The method you choose will be based on your companies unique operating needs. It is important to note that the safety stock is tied to an items stocking as well as lead time settings. For example, items that are make or purchase to order do not have safety stocks calculated. Users must ensure the settings are correct in DemandCaster otherwise the calculations will be wrong.

The logic of the safety stock calculation is not to duplicate safety stocks from finished goods to component when the finished good is carrying safety stock. This logic also applied to source to destination when the destination location is carrying the safety stock. This is because safety stock is primarily a cushion for variable demand. To compensate for this, we recommend adding a safety time value at the component level.

Safety Stock Options

The following options are located in the items planning detail options tab. They are also found in system settings and via the multi-edit settings.

  1. Enable classification based service levels?: If checked, assigns the service level desired for each business importance class (A-B-C-D and not assigned) for each item. The classification is recalculated with each new data upload as an option. As items move up or down in class they will adopt the new service level unless an item is assigned a specific class at the item level. This is done when an item is sold to an important customer that does not want to experience a stock out regardless of an items business importance. This setting works with Standard Deviation and Root Mean Squared Error Safety Stock options only.
  2. Service Level: This is the base service level applied to all stocked items unless "Use System Calculated Service Levels" is checked. This setting works with Standard Deviation and Root Mean Squared Error Safety Stock options only.
  3. Safety stock historical time frame: Length of history to use to calculate the standard deviation used in the safety stock calculation.
  4. Safety Stock Type: Click to open to select and apply a global safety stock setting.
    1. ERP: Uses the safety stock loaded in the ERP.
    2. Std. Dev.: Uses the weekly standard deviation of demand as the basis of the safety stock calculation.
    3. RMSE: Root Mean Squared Error Safety Stock with the actual to fitted forecast error as the basis for the safety stock calculation.
    4. Customer Minimum: Uses the safety stock as provided by the a customer as a minimum level of inventory. This is applied when vendor managed inventory is implemented.
    5. User Defined: Uses a user defined safety stock value.
    6. Days: Uses a safety stock value calculated as a desired number of days of safety stock to be carried. The days are user defined and the level of safety stock is based on either a historical average or the forward forecasted or total demand value over time span defined. If the forecast or total demand approach is chosen, the safety stock value varies over time.
    7. Lead Time: Same as Days Safety Stock except the value is based on a percent of lead time i.e. 50% of lead time.
  5. Critical Safety Stock Level: % to allow an items projected on hand to move into the safety stock quantity before triggering a request to expedite an open order. It is also used to communicate the "Review" status in planner action.
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