Dynamic Safety Stock profiles within SAP material masters is an ideal methodology for handling high-volume, low-complexity products. Planners, along with inventory specialists, have the responsibility for interpreting critical fields dealing with coverage profile configurations and screens inside the Dynamic Safety Stock system. However, one of the significant bottlenecks with this solution is the obscurity in dealing with Stock Requirements List (MD04) results. Understanding the MD04 screen is crucial for matching item-level inventory management practices and the goals of the enterprise.
The Dynamic Safety Stock Calculation
Calculating the amount of stock a business needs to have in reserve to match current and future demand is the core of the concept of dynamic safety stock. Within SAP, the implementation requires a handful of calculations to be done beforehand. Among these are:
- Average Daily Demand (ADD) = Demand Over 5 Periods / Num. of Days per Period
- Coverage = ADD (see above) * Target Range of Coverage
- Minimum Required Product (MRP) Proposal = Coverage + Demand – Balance
After we’ve figured out how we’re going to calculate our MRP proposals, we head to SAP to implement it within the software’s interface.
Configuring the SAP MRP – Range of Coverage Profile
First, we’ll run transaction OMIA. This command should open the “Range of coverage profile” window. We will start filling out the window as follows:
- Average Daily Demand will be the same as calculated in the previous section
- The number of periods will cover the duration for our total calculation
- The period indicator defines the period we’re operating within (weeks, months, etc.)
- The period length is the amount of those periods we want to calculate within
From here, we’ll let SAP work on our Dynamic Safety Stock. Within SAP, the Dynamic Safety Stock is the product of ADD and the Range of Coverage (in days). The Target (Tgt.) will tell SAP how much coverage we want in days. It will then suggest an MRP based on the number of days we want to cover our stock for, offering the minimum amount of product we need always to have inventory on-hand.
Setting Up Dynamic Safety Stock within MRP
Dynamic Safety Stock setup in MRP starts with running transaction code MM02 and opening the MRP2 tab. Within this tab, if we’re using the days of coverage profiles as set up, the Safety Stock part of the form should remain blank, as the coverage profiles will automatically calculate those values for us. To understand how MD04 deals with planned orders, we must look at the MRP level as affected by average demand.
Clicking on the Sigma icon will switch MD04 into Period Totals view. Immediately we will notice a few of the column headers that would make it more accessible as a planner to spot important information. The Average Daily Requirement would be equivalent to our ADD, and the target stock level is the amount we want to maintain in stock at all times. The Stock Requirements list in MD04 gives even more information to helping us monitor item-level inventory to avoid stockouts. The columns Available Quantity and Actual Coverage offers insight into how long the current inventory stock should last, given current average demand. The data provided by these tables can be broken down for more intuitive consumption at board meetings and presentations, enabling those unfamiliar with item-level inventory management to make decisions based on the data generated by SAP.
By aligning the inventory management with the goals of the business, inventory management can develop coverage profiles to deal with the most common scenarios that a business might encounter while in operation. Developing SAP inventory policies offers the company automated dynamic calculations on safety stock to reduce (or prevent) the incidence of stockouts. SAP’s solution for item-level inventory management isn’t just for larger businesses, however. Small and medium-sized companies can benefit from safety stock profiles within SAP as well since the application can be adapted for any low complexity, high volume product.