This page shows the values specified by the Input to Safety Stock parameter, where Z Value is variable based on the service level.
Use the right-hand context selector dropdown to select a product and location combination.
Pie Chart – Cycle & Safety Stock
The graphical representation of the Average Cycle Stock (R) and the Safety Stock (R). If the safety stock is higher than the cycle stock, the volatility of the demand is higher.
Pie Chart – With In Transit
The graphical representation of the In-Transit Stock (R), Average Cycle Stock (R) and the Safety Stock (R).
Notes:
- Designed for inventory investment analysis only.
- Inventory policies and lead times are based on the parameter settings and applied to all products and locations, regardless of system master data.
Parameters
Edit Parameters
| Parameters | Values |
| SIM Service Level Type | Determines the nature of the service level. That is, if the service level is 95%, then setting this to Fill Rate then the service level means 95% of the demand will be met; if this parameter is set to Cycle Service Level, then the service level means 95% probability of not stocking out in the period. |
| SIM Target Service Level | The desired service level, in % terms, and defined by the Service Level Type parameter. |
| SIM Default Lead Time | The lead-time, in number of periods. |
| SIM Default Review Frequency | The frequency, in periods, with which inventory is reviewed/ordered. This will determine the cycle stock. |
| SIM Input to Safety Stock | The measure of variability, which the safety stock needs to protect against.
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| SIM Plan For Safety Stock Calculation | You can choose between the type of plan that's used for safety stock calculation. |
| Base History | The values are derived from actual shipment for calculating safety stock. |
| Demand Plan | The values are derived from the demand plan for calculating safety stock. |
| Commercial Plan | The values are derived from the commercial plan for calculating safety stock. |
| Consensus Plan | The values are derived from the consensus plan for calculating safety stocks. |
| Stat Forecast | The values are derived from the Statistical Forecast for calculating safety stocks. |
Effective Parameters
| Parameters | Values |
| Effective Service Level Type | The desired service level type. |
| Effective Target Service Level | The desired service level, in % terms, and defined by the Service Level Type parameter. |
| Protection Period | Sum of the lead time and the review periods. |
| In Transit Stock (U) | Inventory which has been shipped (from supplier, plant or other location) recognized in the time period that it’s expected due date falls in. If the expected due date is prior to the first forecast month, then it will be shown in that month. |
| In-Transit Stock (R) | The dollar value of the in transit is determined by the volume of the in transit and standard cost of the product. |
| Average Cycle Stock (U) | Demand for the ‘X’ number of review periods. Number of review periods is set in ‘SIM Default Review Frequency’ parameter. |
| Average Cycle Stock (R) | The dollar value of the average cycle stock is determined by the volume of the cycle stock and standard cost of the product. |
| Safety Stock (U) | Safety is determined by the formula Demand Standard Deviation x Z Value x Square Root of Protection Period, where Protection Period = Lead Time + Review Period. |
| Safety Stock (R) | The dollar value of the safety stock is determined by the volume of the safety stock and standard cost of the product. |
Additional information
Safety Stock Simulation
- Safety Stock = Demand Standard Deviation * Z Value * Square Root of Protection Period, where Protection Period = Lead Time + Review Period.
- Demand Standard Deviation is specified by the “Input to Safety Stock” parameter.
- Z Value is based upon the service level, for instance, a cycle service level of 95% needs a safety stock of 1.65 x demand standard deviations. 1.65 is the Z Value. When a fill rate service level is used, and additional set of factors are used to convert the fill rate service level into an approximated cycle service level.
- Protection Period = Lead Time + Review Cycle Time.
- Average Cycle Stock = (Review Cycle x Average Monthly Demand) / 2.
- Average On-Order (or In-Transit) Stock = Lead x Average Monthly Demand.
Note: Consider a product with these characteristics and parameters.
- Average Monthly Demand = 100
- Demand Standard Deviation = 25
- Service Level = 99%; Z Value = 2.33
- Lead Time = 2 Periods
- Review Cycle Time = 4 Periods
- Safety Stock = 25 x 2.33 x (4 + 2) = 142
- Average Cycle Stock = (4 x 100) / 2 = 200
- Average On-Order (or In-Transit) Stock = 2 x 100 = 200
