Describe how each impacts safety stock 1. Demand Forecast 2. MapP 3. Lead time Forecast 4....

Describe how each impacts safety stock

1. Demand Forecast

2. MapP

3. Lead time Forecast

4. Lead Time Variance

5. Service level Goal

Expert Solution

1. Demand Forecast.

The amount of safety stock is directly related to demand forecast accuracy. With 100% accuracy in demand forecasting, we can reduce the safety stock to zero. As the demand accuracy reduce, the amount of safety stock increased.

2. MaPp

Safety Stock is a multiple of Mean Absolute Deviation in the Demand. So higher the MapP higher the safety stock

3. Lead time forecast

Safety Stock is directly related to lead time variation. Higher the lead time variaton, higher the safety stock. So Accurate lead time forecast leads to decrease in safety stock.

4. Lead Time Variance:

The amount of safety stock is directly related to lead time variance. Higher the variance, higher the safety stock.

5. Service Level Goal

The amount of safety stock is higher for the higher service level goal. For example: to achieve 99% service level we need higher safety stock compared to achieve 95% service level.

keosha answered 3 months ago

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