How Safety Stock Is Calculated in Oracle Replenishment Planning

You affect how safety stock is calculated during replenishment planning through selections in the policy assignment set for your replenishment plan.

How Safety Stock Is Calculated

How safety stock for an item-location combination is calculated depends on whether you selected Days of cover or Service level-based in the Safety Stock Calculation field on the Policy Parameters subtab for the policy assignment set.

If you selected Days of cover, the following calculation is done: Safety Stock = Average Daily Demand * Days of Cover

The days of cover are taken from the Safety Stock Days of Cover field on the Policy Parameters subtab.

For example, the average daily demand is 30, and the days of cover is 3. The safety stock is 90, which is 30 * 3.
If you selected Service-level based, and the demand isn't intermittent, a normal distribution formula is used.

These inputs affect the formula's result:
- Target service level percentage. If this value isn't present in the Service Level Percentage column of the Items table, it's taken from the Target Service Level Percentage field on the Policy Parameters subtab.
- Mean average percentage error (MAPE), which is taken from the demand plan, replenishment plan, or external demand schedule that's used as the demand schedule for the replenishment plan
- Average daily demand
- Replenishment lead time, which is calculated as follows:
  - For a buy order, the lead time is the total of the preprocessing, processing, and postprocessing lead times and the transit time.
  - For a transfer order, the lead time is the total of the preprocessing and postprocessing lead times and the transit time.
If you selected Service level-based, and the demand is intermittent, a Poisson distribution formula is used.

These inputs affect the formula's result:
- Number of demands during the replenishment lead time
- Target service level percentage. If this value isn't present in the Service Level Percentage column of the Items table, it's taken from the Target Service Level Percentage field on the Policy Parameters subtab.