The system calculates safety days for each product's order point, based on lead time and the following equations:
Using lead time days to determine base lead time safety days.
Applying the hits related safety coefficient (HRSC) factor to base lead time safety days to calculate order point safety days.
The system first applies an inverse relationship to the length of the lead time and the number of safety days. That is, for shorter lead times, the system recommends more safety stock to protect customer service levels. For longer lead times, the system recommends less safety stock to protect against carrying costs on the extra inventory.
For base Lead Time Safety Days, three equations apply:
|
If the Lead Time is... |
the base Lead Time Safety Days is... |
The formula is... |
|
less than 15 |
the lead time plus seven days. |
If LT < 15 Then LTSD = LT + 7. |
|
greater than 15 but less than 60 days |
one half the lead time plus 15 days. |
If LT > 15 and < 60, Then LTSD = (LT/2) + 15. |
|
greater than 60 |
the lead time divided by 4 plus 30 days. |
If LT > 60, Then LTSD = (LT/4) + 30. |
The system next adjusts the base lead time safety days to consider whether the item is a fast-moving, high demand item or a slow-moving, low demand item using the Hits Related Safety Coefficient (HRSC) factor. This adjustment enables the system to compensate for the relative unreliability of demand forecasting for slow-moving items compared to fast-moving items.
The system uses the following equation:
( ( 4 / Total Hits on Product in Last 365 Days) + 0.6 ) * Safety Factor
The result of this equation displays in the Hits Adjusted SF field on the Product Order Points/Line Points screen. You can change the HRSC by changing the Safety Factor (SF) field on the Product Order Points/Line Points screen. The default value is 1.0.
See Also:
How the System Calculates Line Point Safety Days