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Question

Auto Update Safety Stock - Formula

  • February 18, 2025
  • 1 reply
  • 40 views

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Hi ,

Can someone please explain exactly how the formula works for auto update safety stock functionality ?

Help document doesn’t elaborate the details enough to understand the logic behind it. 

My understanding is that there are 3 parameters which drive the calculation and it uses the Wilson formula ;

Safety stock (pieces) = Safety factor  * standard deviation for demand (pieces/period) * square root of part lead time (period)

I understand how the safety factor is calculated using the service rate, my questions are on;

  1. How exactly “ standard deviation for demand” calculated? Is it looking at the ‘No of issues’ in On Hand Development per Period?  and doing the excel calculation of STDEV for No of Issues in that said statistical period you are entering in ‘Calculate Planning Data’ ? ( If the period is 6 , does IFS looks at the 6 records of No of issues corresponding to the past 6 periods and calculate the STDEV?)

 

  1. How is ‘Square Root of Part Lead time (period)’ being calculated ? Is it simply the Square root of ‘Purchase Lead time’ in Inventory Part? or is the square root of the lead time being divided by the no of periods? 

     

I did run excel calculations trying to make sense of how IFS works for different combinations , but failed to understand the exact formula

I am keen to know what I am missing 

Appreciate if someone can shed some light into how this works. 

 

Kind Regards

Yashodha 

 

1 reply

Piyal Perera
Hero (Employee)
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  • Hero (Employee)
  • 244 replies
  • February 25, 2025

Hi ​@MuzYashoN 

    I didn’t go through your extact test plan due to time constraint, but would like to share a note that I have in possession.

The safety stock is calculated for all planning methods.

Safety stock (pieces) = Safety factor [-] * standard deviation for demand (pieces/period) * square root of part lead time (period)

  • The lead time is retrieved from the inventory part record, purchase or manufacturing lead time depending on part type.
  • The safety factor is retrieved from the service rate connected to the inventory part. Here the normal standard distribution is used to define the service rate and the safety factor. The service rate is considered as the probability and the safety factor is considered as the standard score of normal standard distribution. It is also possible to retrieve the safety factor for a given service rate by using the standard Excel function NORMSINV(Probability).

Note: The safety stock will not be updated if the predicted yearly demand is used, as standard deviation is zero because of constant demand. Also note that if lead time is zero, the safety stock will be zero.

If you select the checkbox ‘Plan Safety Stock Receipt on MRP run date’", MRP will generate supply for safety stock value on run date if there is no enough supplies to cover the safety stock.

If the check box is cleared, safety stock receipts will be planned in conjunction with the first event for the part.

example, if the ss=10 and there is no any event(demand/supply) in the system for this site, if you still need to generate supplies for SS, you need to select the above checkbox. MRP will create a supply for ss on run date. This can be used to generate supplies for ss only.

if the ss=10 and  there are some events(demand/supply), first event on date xxxx , then you can run MRP without selecting this check box, MRP will generate supply for the SS on first event date xxxx.

You can still run MRP by selecting this check box, then MRP generate supply for SS on run date , not on first event date.

The Calculate Planning Data dialog box can be used to automatically calculate and update the planning parameters for selected parts, if the safety stock check box is selected.

If not safety stock value can be manually updated. MRP will consider this value when generating supplies for ss depending on the selection of the check box in the Perform site MRP.

 MRP will not calculate safety stock, instead it generate supplies according to the value given in the safety stock field.

If a user needs to maintain the Safety stock from MRP run date, user can enable the ‘Plan Safety Stock Receipt on MRP run date’ check in Perform MRP dialog. 

 

This would basically check the safety stock you have set for your parts and consider it when creating supplies for the demands. However, It's not possible to execute MRP for only safety stock. You can set up the safety stock for a part in Inventory Part > Planning Data tab > General sub tab> Safety stock field.

since Safety Stock is a user defined value, MRP will only consider the value for inventory replenishment based on the demands that are available.

 

regards,

Piyal


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