Summary guide on how to implement dynamic safety stock method in material planning process through Oracle / ERP and in inventory planning cycles for your Supply Chain Organization.

1. DYNAMIC SAFETY
STOCK
Implementing ERP based
Dynamic Safety Stock –
Planning Process
- Vijay S Arun

2. SAFETY STOCK ~
GENERAL VIEW
MasterSupply Planning Process:- Mostly in different
industry verticals, what we see even today is user
defined, static safety stocks based on past experience
or different statistical calculations & logics.
It’s a high time for different manufacturing plants,
business units who still run individual supply planning
processes on any ERP, to go for a Methodological,
System oriented, Dynamic safety stock planning
 Supply Chain Requirements:- Safety
Stock should not be a static number,
Should cover 100% demand variation live
with planning cycle, Should be dynamic
number at SKU or part level ~
accommodating every change in demand,
Should not require any manual activities
to upgrade, update or changes to
MDS/MPS/MRP run process.

3. GLIMPSE OF DESIGN ~
DYNAMIC SAFETY STOCK = Y = F(XN)
 Y = f(xi) = f(x1, x2, x3……xn) = f = SKU/Part in 9 classes, Average supplier lead time
factored, Part proliferation for exclusivity,
Local/Outstation, SOB, Supplier reliability
Planned % of Gross
Requirement in MRP run 
Parameter for ERP
 As illustrated in sample
calculation above, With the
combination of three classes,
Arrive at 9 Class matrix for
SKUs/Items
Formulatedcalculationsforeachitem

4. Selected the most
adequate method
based on FMEA
and Comparative
analysis
IMPLEMENTATION
Explore Safety Stock Methods
in ERP and select the
adequate one for your business
type.
Formulate calculations for each
item, based on the design
parameters data.
Arrive at required ERP
parameters to be fed into
system…
PARAMETERS OF
DESIGNFollowing different parameters can be
considered at each Item number level to
come out with Matrix design for safety stock
 Item Unit Price Class
 Price Family Class
 Peak Consumption Value Class
 Share of Business
 Service Level- Exclusivity
 Supplier Reliability
 Quality inspection time and rejection
level
 Qty level delivery performance
 Supplier Average Lead time
 Local / Outstation
 Part Proliferation
 Common part / Exclusive part
 Peak Demand Scenario
 Seasonality
 Order type – Forecast vs Tenders
Example ~ benefits

5. LONG TERM BENEFITS
No more manual / static safety stock
Inventory optimization every fortnight with MRP run
No safety stock for Non moving / slow moving
Reduced E&O inventory in long term
Improved warehousing
100% demand variation covered in planning cycle
No manual activities required to upgrade, update or changed to MDS/MRP run

6. LONG TERM BENEFITS
No more manual / static safety stock
Inventory optimization every fortnight with MRP run
No safety stock for Non moving / slow moving
Reduced E&O inventory in long term
Improved warehousing
100% demand variation covered in planning cycle
No manual activities required to upgrade, update or changed to MDS/MRP run