Improve Safety Stock Accuracy with APO's Extended Method

  • by Wolfgang Eddigehausen
  • October 1, 2003
Do your safety stock levels always seem too high or too low? It's possible that you have not chosen the right APO method or have set it up in a less-than-optimal manner. We explain the considerations, drivers, and settings for using APO's extended safety stock method and show you why it might be more accurate than APO's basic method.

In the September issue of SCM Expert, I showed why it is important to align your APO safety stock methods with your supply planning methodologies available in APO's Supply Network Planning (SNP) application. This alignment depends on making the right choices when setting up your safety stock methods.

The previous article covered the APO's basic safety stock methods, which require that you define either a safety stock quantity or a safety days' supply. The latter, in turn, is transferred to a quantity figure based on the expected demand. As a consequence, the safety stock is based on subjective decisions made by the planner. Also, the data maintenance can become time-consuming when using the basic safety stock methods, especially when time-dependent methods are used. As a result, safety stock definitions are not likely to be monitored with the care they require and are often too low or too high.

The extended safety stock methods overcome these problems and provide tools to determine the required safety stock levels more accurately. I'll explain all the options available to you for the extended safety stock methods. By the time you finish reading this article, you will have a clear idea of how you can set them up to achieve optimal safety stock levels.

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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