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Dynamic Safety Stock can be used to determine the Safety Stock level

The Dynamic Safety Stock is calculated by the formula

Dynamic Safety Stock = Average Daily Requirement * Range Of Coverage

The Range of Coverage Profile consists of the parameters which are maintained to calculate the Dynamic Safety Stock. The parameters maintained are based on the number of days for which the material availability is required. Here the number of days is taken in the range of coverage for which the material must be available. Subsequently based on this coverage profile system calculates requirements in MRP Evaluations & creates the order proposals

1. Maintain the Range of coverage profile (T:code: OMIA)

   Same coverage profile maintained in material master MRP2 view

  • Period Indicator: M (Month), Calendar Period to calculate the average requirement,

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  • Number of Period: 3 ( 3 Period of  Monthly requirement)
  • Type of Per Length  = 3 (Standard Days), In this case you enter the the no of days per period, Here no of days per Period is 20,

        Type of Per length   =1 (Workdays) consider the factory calendar

                                        =2 (Calendar Days) Consider Total calendar days

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  • No of period 3, and monthly requirement and divide by standard period of 20 days to derive the average daily requirement

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  • Range of Coverage profile with no of period 3 with target safety stock to cover 3 days.

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  • Second Range of coverage profile target safety stock to cover 5 days, and this period consider as long as till end of the demandcp-5.JPG
  • PIR created in system with help of the MD61

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  • MD04 screen view before run MRP

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  • MD04 screen view after run MRP

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  • Dynamic safety stock Calculation

1.    Requirement of three month, (Oct,Nov,Dec), Here system consider three month because of Period maintained in coverage profile is “3”

       (40+100+120)/ (3 (Period) X 20 (Standard Days of each period)) = 4.33 Requirement/day

       4.33 x 3 (Target days of first range of coverage profile) = 13 Qty (Period 1)

       For first month requirement is 40+13 =53 Qty, system generate the Planned order for same qty

2.   Now, for month(Nov, Dec, and Jan)

     (100+120+60)/3X20 = 4.7 Requirement/day

      4.7 X 3=15 (Period 2 )


3.   Now for month (Dec, Jan and Feb)

       (120+60+80)/3X20 = 4.3 Requirement/day

        4.3X3= 13 (Period 3)

Note:  Target days 3 consider three times because of no of period 3 maintained in first range of coverage profile. After 3 period systems consider target days 5


4.    Now for Month (Jan, Feb)

        (60+80)/3×20 = 2.33 Requirement/day

         2.33*5 (Target days of second range of coverage profile) = 12 (Period 4)


5.   Now for month (Feb)

       80/3×20 = 1.33 Requirement/day

       1.33*5 = 7 (Period 5)

Please refer below snap for detail information

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I hope this document helpful to you understand the basic of Dynamic safety stock calculation

Request to expert  review and suggest if any thing wrong and missing in this document

Regards

Umesh Mali

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21 Comments

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  1. Ravindra Kulkarni

    Nice document Umesh!

    thanks for sharing..

    Even I tried sharing the same after my issue got resolved, but dont know why it got rejected.. 🙂

    Regards

    Ravindra Kulkarni

    (0) 
  2. Aleem Daya

    Hi Umesh – great document.  Is the Range of coverage profile only relevant for MRP type = PD?  Is it relevant for Reorder point planning?

    (0) 

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