How the System Calculates Line Point Safety Days

The system calculates safety days for each product's line point, based on lead time and the following equations:

• Using the sum of lead time days plus order cycle days to determine base line point safety days.

• Modifying base line point safety days using the hits related safety coefficient (HRSC) factor.

How the System Calculates Base Line Point Safety Days

The system first applies an inverse relationship to the sum of the lead time and the order cycle and the number of safety days. That is, for shorter the lead time and order cycle, the more safety stock the system recommends. For longer lead times and order cycles, the system recommends less safety stock to protect against the carrying costs of the extra inventory.

For base Line Point Safety Days, three equations apply.

How the System Adjusts Line Point Safety Days by the HRSC Factor

The system next adjusts the base line point 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. The system uses this to compensate for the relative unreliability of demand forecasting for slow-moving items compared to fast-moving items.

For example, an item that sells an average of once a day for a month is a fast-moving item. An item that sells an average of once a month for a year is a slow-moving item.

The HRSC is 4 divided by the total number of hits in the last 365 days, plus 0.6. Products with less than 4 hits in the past year use 4 as the number of hits in the calculation. The highest HRSC is 1.6 while the lowest HRSC approaches 0.6. The HRSC value displays in the Hits Adjusted SF field on the Product Order Points/Line Points screen.

You can change the HRSC by changing the value of the Safety Factor (SF) field on the Product Order Points/Line Points screen.

See Also:

Order Points and Line Points Overview

How the System Calculates Order Point Safety Days

How the System Calculates Lead Time