Fine-Tune Your Safety Stock Calculations

  • by Wolfgang Eddigehausen
  • August 1, 2005
Minor daily fluctuations in safety stock requirements, while they may be accurate reflections of forecast demand and other factors, have no practical significance and may create extra work and confusion in production planning. Learn how to use macros to smooth out the unnecessary bumps in your safety stock calculations.
Key Concept
Companies keep safety stock as a reserve to call upon in times of unexpected high demand or late delivery from their suppliers. How much safety stock to keep on hand is calculated by SAP's Advanced Planning and Optimization (APO), using one of three types of methods: quantity-based methods (SB and MB), demand-based methods (SZ, SM, MZ, and MM), and statistical methods that incorporate forecast error and demand (AS, AT, BS, and BT).
The safety stock calculations standard in all releases of Advanced Planner and Optimizer (APO) are, in most cases, sufficient to cover most business requirements. In specific scenarios, however, these methods should be refined to increase user satisfaction. I'll look at specific requirements for companies that use safety days' supply definitions or one of the extended safety stock methods for their safety stock calculations.

Wolfgang Eddigehausen

Wolfgang Eddigehausen is a highly experienced expert in the areas of business process design, re-engineering, and user adaption, as well as process realization in complex SAP-centric environments. He has experience in solution and enterprise architecture and project management (PRINCE2 certified) domains defining enterprise capabilities with a focus on delivering effective and efficient solutions to organizations. Wolfgang's industry knowledge includes public sector, utilities, mining, distribution, general manufacturing, process and steel industries, and consumer goods.

In most roles his task is not only to architect a solution but also to evaluate and define strategic options with a focus on end-to-end solutions rather than systems. This also includes strong emphasis on the user acceptance through an innovative user experience and mobility enablement.

His career includes successful participation and management of projects in Australia, Europe, India, Japan, Singapore, South Africa, Taiwan, and the US. These projects required interaction with all levels of an organization, from the shop floor or office through to the CxO level. Throughout his career, Wolfgang has put emphasis on a holistic approach bringing together people, processes, information, and systems in project management, architecture, and implementation roles.

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