Executive Summary

  • The standard dynamic safety stock calculation does not work, yet it has been placed in most ERP systems.
  • We cover a far superior safety stock calculation in the Brightwork Explorer.

Are you losing your mind with safety stock calculation? You don’t have to. You can now use our online tool with a better dynamic safety stock calculation that simplifies and systematizes the calculation and management. 

Introduction

Safety stock is designed to buffer variability on the demand side and the supply side and is to be consistent with the company’s service level targets.

The Problem with Safety Stock Calculation

What was laid out above is the principle, but the standard safety stock formula is unusable? No studies demonstrate that the dynamic safety stock formula is used in companies — even though it continues to be taught and is frequently discussed. Yet, safety stock cannot rationally be calculated in isolation from other factors in the supply chain.

How is it nearly always calculated (when it is calculated at all)? That is right, in isolation for each product location. 

Our Solution

Having found the problems with safety stock management consistent over decades of reviewing supply planning systems, we developed a modification to the standard safety stock formula that works much better. However, calculating a safety stock for a product location in isolation of all the other product locations makes no sense.

Getting the Overview of Safety Stock as Integrated with Other Factors

Safety stock should not be calculated in a vacuum because companies cannot carry any level of stock. There are limits in the inventory that can be carried but in the storage space, among other factors. Without accounting for these limits in the calculation, the values will need to adjust to align with the constraints manually.

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Conclusion

All of this is why with the Brightwork MRP & S&OP Explorer, the calculation of safety stock values can be checked against the summed totals of the inventory constraints, all while being consistent with the service levels set for the various product groupings.

This is safety stock calculation in the most integrated way possible.