safety-stock-review

Topics in the source

• Safety Stock Review
• Required data
• Workflow
• Pitfalls to check explicitly
• Output format

The textbook formula assumes roughly normal demand. Real portfolios contain SKUs where that assumption fails badly - the skill's job is to compute the number AND say where it can be trusted. Per-SKU demand history (sku, period, qty, 12+ periods), lead time (with variability if available), and the service target. Clarify early which service the target means: cycle service (probability of no stockout per cycle) or fill rate (share of units served) - contracts usually mean fill rate, formulas usually compute cycle service. 1. Classify first. Compute CV and zero-period share per SKU. For CV >= 1.0 or intermittent demand, state up front that the normal-formula result will be optimistic. 2. Compute the formula result: SS = z sigmad sqrt(LT), ROP = mud LT + SS (demand-period units consistent with LT). If lead time varies, use the extended form with the sigmaLT term - ignoring lead-time variance is the most common silent understatement. 3. Stress-test empirically. Set stock at mu + SS and replay the actual history: report both achieved cycle service (share of periods fully covered) and achieved fill rate (units served / units demanded). Zero-demand periods pass cycle service for free - fil

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