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Calculating Dynamic Safety Stock

Process Flow
1. During every planning run, the system checks for every MRP element (requirements, planned orders and so on) whether the available quantity is below the minimum stock level. 2. If stock falls below the minimum stock level due to a requirement, the system creates a procurement proposal and thus calculates the procurement quantity, so that the available quantity is replenished up to thetarget stock level, that is, the dynamic safety stock. 3. If the maximum stock level is exceeded, the system adjusts the quantities for procurement proposals that are not firmed correspondingly. If the procurement proposal is firmed, the system displays an exception message. Example The system determines an average daily requirement of 15 pieces. You have defined a minimum range of coverage of 3 days, a maximum range of coverage of 7 days and a target range of coverage of 5 days. The system calculates the following: Minimum stock level = 3 x 15 pieces = 45 pieces Maximum stock level = 7 x 15 pieces = 105 pieces Target stock level = 5 x 15 pieces = 75 pieces The available quantity is 40 pieces and is therefore less than the minimum stock level. Therefore, the system creates a procurement proposal for 35 pieces (= target stock level 75 pieces actual quantity of 40 pieces) during the planning run.

Example for Calculating the Dynamic Safety Stock

Requirements of 1st period: Requirements of 2nd period: Calendar period: Period length: Number of periods: 1000 2000 Week Standard days (5 days) 2

a) Calculation of the average daily requirements: (1000 + 2000)/(2*5) = 3000/10 = 300

b) Determining the range of coverage Range of coverage for period 1: 2 Days Period 1: 2 Weeks Range of coverage for period 2: 4 Days Period 2: 3 Weeks c) Calculation of dynamic safety stock: Average requirements * range of coverage in period 1: Average requirement * range of coverage 2 300 * 4 = 1200 Result: For the first two weeks starting from the MRP date, a safety stock level of 600 pieces is planned. For the following three weeks, a safety stock level of 1200 pieces is planned.

SAP Mapping
In SAP, Dynamic Safety Stock can be used to determine the Safety Stock level if the option of Define Range of Coverage Profile (Dynamic Safety Stock) is set in IMG. Dynamic Safety Stock takes into account

Range of Coverage Profile 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. The plan also takes into consideration the fluctuations in the requirements. 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. The quantity value can further be limited by defining the overage

Coverage Profile (Dynamic Safety Stock). The settings maintained here are at Plant level. The Dynamic Safety Stock is calculated by the formula DSS = Average Daily Requirement * Range Of Coverage Average daily requirements Average Daily Requirement is calculated by the formula (Requirements in the specified periods) / (Number of days in the total period length). For the calculation of the average daily requirements following parameters must be maintained 1. Period indicator - This indicator to used to determine the calendar period for which average daily requirements needs to be carried out. Following values can be maintained weeks (W)

2. Type of period length -this indicator is used to determine the length of the individual periods in detail. Following values can be maintained:

- if standard days is selected as a period length, the number of days determined per period must be maintained in the field, No. standard days 3.Number of periods - here, the number of periods are defined which are used to calculate the average daily requirements.

Determining the range of coverage

The range of coverage can be defined for a maximum of three periods and different coverage for each period can be maintained. To do this, ranges of coverage and the periods in the screen section entitled, Determine range of coverage. The range of coverage in each of the three periods can be limited by entering a minimum and a maximum range of coverage. The system checks whether the actual range of coverage (available quantity / average daily requirements) lies below the minimum range of coverage or above the maximum range of coverage. If this is the case, the dynamic safety stock level is recalculated using the information for the target range of coverage. Define Range of coverage profile:

Calculation: Period Month 1st Month 1000 2nd Month 2000 3 Month 3000 As per Coverage profile calculates the daily requirements = (Total Requirements)/No.periods*Period per days = (1000+2000+3000)/3*20 = 100 Now as per the Coverage profile Minimum stock , target stock and Maximum stock defined as per days mentioned. 1 Period (1000+2000+3000)/3*20 = 100, Planned order will be 1000 only
st rd

2 Period (2000+3000)/3*20 = 83.333, Target stock will be 5*83.333 = 417, Now planned order will be = 2417 According to this 417 stock available for next period 3 Period 3000/50 = 50, Target stock will be = 5*50 = 250 Total requirement will be = 3000+250=3250, but sock available is 417, so Planned order will be generated for = 3250-417 = 2833