Formula for Calculating the Safety Stock
The safety stock depends on the service level that you specified in the MRP II view of the material master record and on the accuracy of the forecast. The more accurate the forecast, the smaller your safety stock can be.
The following figure shows that, without safety stock, customer demand can be satisfied by 50%. It also shows that it is almost impossible to satisfy customer demand 100% of the time. Factor R describes the relationship between forecast accuracy and service level (SL).
If replenishment lead time is greater than the forecast period by factor W, then the mean absolute deviation (MAD) is recalculated for this period (formula 17). The MAD is a parameter of forecast accuracy. Otherwise, see formula 18.
Safety Stock (SS) Formulas
If the material is produced in-house, the delivery time is: opening period + in-house production time + goods receipt processing time. It is expressed in workdays. The forecast period is taken from the material master record and is also expressed in workdays.
If the material is procured externally, the delivery time is: goods receipt processing time + planned delivery time + goods receipt processing time. It is expressed in calendar days. The forecast period is taken from the material master record and is also expressed in calendar days.
The safety stock calculation may lead to rounding effects.