Supply Simulation, Process Optimization, Lean Design
 S e r v i c e s





Safety Stock, Lead Times & Forecast Accuracy in Simulations


Before running the OpStat simulation models, proprietary equations are used to develop estimates.  These safety stock equations take into account:
  • Forecast accuracy

  • Demand variability

  • Supply lead time & variability.

The simulation models then apply the statistical patterns to model the real world scenarios.

View a 45 second video clip of a safety stock & replenishment simulation. 
Daily Demand, No Forecast       PRODUCT 



(Note:  All days are in business days)     Units
MD Average Monthly Demand in units based on history   2280
Smd Std Dev of Monthly Demand from history (use if no forecast) 983
Sdd Std Dev of daily demand (from history) in units   165.33
LT Expected Lead Time (from history) in days     15
Slt Std Dev of lead time (from history) days     12
P days per period (which is a month)      30.4
Slt Service level desired (prob of not having a stockout) 0.98
  Number of Days per Year       240
  Number of deliveries per year       22
  Average daily demand in units based on history   123.6
  Total Yearly Demand (from History)     27441
    Safety Stock Calculations      
Sqrt term without Forecast (size of one std deviation) in units 1503
Inverse Normal of desired service level (no. of std devs needed for SS) 2.054
Safety Stock without a Forecast (in units)     3088
    Cycle Stock Calculations      
Typical time between deliveries in days     10.9
Typical demand between replenishments in units   1348
Average cycle stock (halfway between high point & low point) units 674
    Total Inventory Calculations    
Total Inventory without a forecast in units      
  Average Cycle stock       674
  Required Safety Stock        3088
  Average Total Inventory       3762
  Typical Turns with Forecast (per year)   7.3
  Typical Days on Hand (business days)   30.4



In this example no forecasts or forecast errors were used.

Copyright 2005 OpStat Group Inc. All rights reserved.  Last modified: 06/21/2011