Tag Archives: Safety Stock

Experiences With the Use of Extended or Dynamic Safety Stock

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What This Article Covers

  • What is dynamic safety stock? 
  • How often is it used in SAP accounts? 
  • What are some of the surprising results from the use of SAP’s dynamic safety stock? 

Background

Extended safety stock SAP’s name for dynamic safety stock. This is a functionality which allows the safety stock to vary depending upon supply and demand variability. These values are entered into the Lot Size tab of the Product Location Master, as can be seen in the screen shot below.

I have often wondered why no client that I have worked with has ever configured this functionality. I had often attributed it to the problem in maintaining this master data. It should be understood that this is the absolutely standard dynamic safety stock method that is taught in textbooks. This is in no way SAP intellectual property. However, while interviewing for a contract position, I discussed this functionality with someone who had tested it. Interestingly, she stated that the safety stock it came up with was high (this is of course relative, as it actually calculates the  correct safety stock.) However, another comment was that it was not very adjustable, and that adjustability was a requirement for them. However, I question if these are the real reasons that the functionality not be used. Again the safety stock value calculated by the dynamic method is correct (as long as it is in fact calculating correctly, which she said it did), however, I do not agree that safety stock should be changed frequently. In fact, planners fall into a habit of adjusting the safety stock when it should be auto adjusted. Therefore I understand that the dynamic safety stock did not meet this client’s business requirement, but I supposed I question the validity of the business requirement. More specifically, I question if the requirement will lead to good planning outcomes.

The Issue With the SM Safety Stock Method and the Optimizer in APO

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Background

The safety stock method controls how the safety stock is derived. One of the selling points of SNP over SAP ERP is that is has more ways to derive safety stock from multiple values. For instance, the Safety Stock Method SM has SNP look to either the higher of the value that is entered into the Location Product Master or the calculated Days of Supply, which is based upon the number days entered into the Safety Stock in the Material Master, which then flows to the Location Product Master is a stable value. The Days of Supply value changes the actual safety stock depending upon the requirements. This is one of the advantages of safety stock in SNP versus ERP. ERP allows you to combine the “hard-coded” safety stock or the Days of Supply (which does not make much sense incidentally), however, by allowing the system to take the higher of the two values, this allows the safety stock to normally flex upward during times of high demand, but then not flex too far downward when demand decreases. These will flow over to the Location Product Master. The settings are unusual with respect to the safety stock, because the Safety Stock Method is completely dependent upon which values are populated in ERP. This is described in this post:

http://www.scmfocus.com/sapplanning/2011/07/16/the-safety-stock-method-in-apo/

The SM Safety Stock Method and the Optimizer

Unfortunately, and I was not able to find this problem documented on the internet or on SAP’s SDN site, the optimizer does not recognize safety stock if SM is used. This is another thing I had to learn from a project, and while I have not established if it is related to SCM 7.0 versus 5.1, it may be a new problem in SCM 7.0. SAP has no pro-active mechanism for communicating all the things that are broken in the system. They wait for the client to find issues, and then tell them that its broken, and that they are working on it.

Conclusion and Next Steps

The SM Safety Stock Method does not work with the optimizer. This means that currently companies that use the optimizer must understand that they must use either the Safety Stock that is hard-coded into the Material Master or the Safety time/act.cov, but the system will not use either of the two. The way to approach this is to set only the Safety Stock quantity or the Days of Supply. If only the Safety Stock quantity is entered into the Material Master then the Safety Stock Method will change to SB, while if only the Days of Supply is used then the Safety Stock Method in APO becomes SZ. This would mean using the mass maintenance transaction to change every Location Product combination in ERP to hold only a Safety Stock Quantity or a Days Supply. However, there is more to this then simply the master data change. When analyzing this for one project it was working on, it was brought up that the current Safety Stock Quantities had been setup on the low side because they were designed really only to protect the lower end of the range, and essentially the Safety Stock Quantities were developed to work with the Days of Supply, or designed to work with the SM Safety Stock Method. Once Days of Supply is taken out of the equation for certain Location Products, that the Safety Stock Quantity would have to be increased. This of course requires that the business go through and increase these Safety Stock Quantities to the appropriate levels if the Days of Supply is never used.


The Safety Stock Method in APO

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Background

The safety stock method is one of the important functionalities in SNP. The safety stock methods available in SNP are not particularly more sophisticated that what is available in ERP (after all safety stock has not change in some time), however, there are more methods available. For some reason this is confused by clients as being more sophisticated, and this is of course a belief that SAP itself encourages. SAP has a strong tendency to take the most mundane capabilities that every other vendor in an area either does better or mastered years before SAP included it in their system, and make it seem as if they not only invented the mathematics for it, but their implementation of it is the best in the world.

How the Safety Stock Method is Set

Unlike most other similar settings which are openly declared the Safety Stock Method in SNP is actually dependent, not on a declared setting in either APO or in ECC, but based upon the values that are set. One of the methods that clients like to leverage is the ability of SNP to look at multiple safety stock settings. In this article I will go over three popular ways of setting safety stock in APO:

  • SZ = Uses only the days of supply
  • SB = Uses only the safety stock field entered
  • SM = Uses either the safety stock field or the days of supply

The method used simply follows from the data which is populated. Two fields control whether the previously listed three methods are used.

If the Safety Stock field and the MRP 2 Tab and the Safety time/act. cov are filled in, then the Safety Stock Method used in APO is SM. If only the Safety Stock field is populated, the Safety Stock Method is SB. If only the Safety time/act. cov is filled in, then the Safety Stock Method is SZ. Both the Safety Stock field and the Safety time/act. cov are shown below.

After the fields are entered in ERP, the safety stock will be automatically updated in SCM/APO.

How the Safety Stock Method is Set

Unlike most other similar settings which are openly declared the Safety Stock Method in SNP is actually dependent, not on a declared setting in either APO or in ECC, but based upon the values that are set. If you populate one value, say the Safety Stock quantity in the material master, APO will just use this field. You are then using the SB safety stock method. If enter quantities into both the Safety Stock Quantity and the Days Supply, then SM will default into the Safety Stock Method in

Conclusion

SAP’s method of setting safety stock in APO is somewhat counterintuitive, because the controls are actually in ERP, while the Safety Stock Method is in APO, but simply changes based upon the values entered in ERP. Clients like SM because it provides the ability to use either Safety Days Supply or the Safety Stock field entry. This allows companies to set a low point for safety stock, which is the Safety Stock field, and then allow Safety Days of Supply to set the high point. SM will simply take the higher of the two values.

Major Functionality in SPP

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Hot Topics

Of the functionality in SPP, these areas seem to be some of the most requested:

  • DRP
  • Deployment
  • Inventory Balancing
  • Buy and Repair

We address each of these areas of SPP in this blog. For those looking for the latests improvements in SPP 7.0, they are listed here:

http://www.scmfocus.com/servicepartsplanning/2009/04/02/how-is-sap-spp-developing-as-of-70/

DRP

Determines the new demands of all locations in the BOD, rounds them and aggregates them along the BOD to the entry location.

http://www.scmfocus.com/sapplanning/2009/04/23/spp-drp-stability-rules-and-the-frozen-horizon/

http://www.scmfocus.com/sapplanning/2009/04/19/spp-drp-special-cases-and-consolidation/

http://www.scmfocus.com/sapplanning/2009/04/23/sppdrp-approval/

DRP is controlled in the Make General Settings for DRP configuration.

Deployment

Deployment is not unique to SPP. SNP also has deployment, which is described here.

http://www.scmfocus.com/sapplanning/2008/10/11/snp-deployment-and-fair-share/

Deployment is the normal or “standard” way of running SPP. SPP has the same concepts of distribution such as Fair Share and Push methods.

  • Fair Share use used when there is a shortage of material (can be allocated a number of different ways – including based upon target stock level and quota arrangements)
  • Push is used when there is an overage of material (push deployment is very similar to Supply Distribution in SNP) (also push can be allocated based upon demand in the system, quota arrangement, and safety stock)

Deployment uses the DRP matrix and decouples DRP planning from deployment planning. http://www.scmfocus.com/sapplanning/2009/04/23/spp-deployment-and-fair-share/

Deployment is triggered by a goods receipt at a parent location (push deployment) or by current demand at the child location (pull deployment)

Deployment is controlled by the SPP Deployment tab on the product location master. Feilds include:

  1. Deployment indicator
  2. Review time
  3. Time Btw. Depl Runs

Deployment can be simulated as well.

Inventory Balancing

Inventory balancing repositions inventory to locations where it has a higherlikelihoodof consumption. This capability is also necessary for finished goods, but SNP has no functionality designedspecificallyfor this. However, it is absolutely critical for service parts because of their low volume. At one client we evaluated the use of SPP Inventory Balancing for finished goods simply because it is only functionality in SCM specifically designed for this task.

Stock transfers are the result.

http://www.scmfocus.com/sapplanning/2009/04/23/inventory-balancing-in-spp/

The formula looks like this:

If inventory savings + warehouse space savings + service benefit – the move cost is greater than a threshold, then a movement is scheduled.

Deployment can be run using the heuristic or the optimizer. However, the output of deployment creates stock transfers.

Buy and Repair

This is something that MCA SPO does very well – making decisions regarding repairing vs. procuring new items.

http://www.scmfocus.com/sapplanning/2009/04/22/spp-operating-parameters-and-repair-vs-buy/


SPP DRP Consolidation and Forecast Profile Maintenance

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Combined Procurement

All products of some product families need to be procured at the same time regardless of whether there is immediate demand for each product or not. In this case, the system should look at future demand of all productsin the product-family and order an appropriate quantity of each product. We will discuss how the system uses VCLO in the planning process.

DRP

DRP determines the new demands of all locations in your BOD, rounds them and aggregates them along the BOD to the entry location. On the basis of this DRP creates scheduling agreement delivery schedule lines and purchase orders.

  • Consolidated ordering is allowed by VLCO. If you want to consider a location product in VLCO, you can specify this in the location product master on the SPP DRP tab.
  • DRP considers supplier shutdowns such as vacation time, during planning. Before DRP creates a replenishment plan, it checks whether you have stored supplier shutdowns for the location product.

Processses in DRP

DRP in SPP goes through a number of processes that range from calculating the unrounded net demand to performing backwards scheduling to creating stock transport requisitions, scheduling agreements and purchase reqs.

Screen Shots of DRP Setup

The screen shot below is the forecast profile.

/N/SAPAPO/SPPFCSTPRF


We simply want to make sure we have a seasonal forecast strategy applied. After we have verified this, we want to check our DRP service profile to be sure the indicator is set for using Pre-Season Safety Stock Shift

/N/SAPAPO/SAP76000366

We will select he GLOBAL_DEFAULT and make sure the Pre-Season Safety Stock Shift indicator is selected.


We have a desire to adjust the supply chain fulfillment for a temporary supplier shutdown. In anticipation of this we will want to display the parameters for safety stock shift in configuration. How many periods will the safety stock shift for products whose costs is less than 100?

Lets goto define parameters for pre season safety stock shifts.


Let’s enter a value.


Now we want to check the product master for T-SPF105 at location SPCW to be sure the “No SFT” Shift indicator is not set.


Now we want to prepare for the fact that we have a supplier shutdown. We want 60% of our demand during the shutdown to be delivered 2 weeks prior to the shutdown. and 40% delivered the week prior. We will use the following transaction.

/N/SAPAPO/SPP_SSD

Here we will create our two delivery periods.


This will make the necessary adjustments to the supply plan. After we know the supplier shutdown is planned to change, we can remove this configuration.


Then we want to assign the showdown to the product location.


Now we want to goto the PSM and run DRP.


That is it. This will now change the output of the DRP run based on our adjustment.