Safety Stock Optimisation

Safety stock was set 3 years ago. Demand has changed. Lead times have changed. The parameters have not.

Safety stock parameters in the ERP were set during implementation or the last planning review — typically 3–5 years ago for most operations. Since then, demand variability has changed, supplier performance has shifted, and production schedules have become more complex. The safety stock levels in the ERP reflect the conditions of the past, not the risks of today.

The consequences run in both directions. Under-stocked materials cause production stoppages that a higher safety stock would have prevented. Over-stocked materials tie up working capital in inventory that is not earning its keep. Both problems exist simultaneously in most operations — some materials constantly running short, others consistently overstocked — because the safety stock calculation has not been refreshed against actual data.

Live workflow view

The step-by-step sequence

1. 1

   Actual demand variability calculated per material

   HublerX reads the actual consumption of each raw material from work order completions in the ERP — by week, by month, and by quarter. The standard deviation of demand is calculated from this actual consumption data, not from forecast assumptions.

   Continuous · updated weekly
2. 2

   Actual supplier lead time performance read

   HublerX reads actual supplier lead times from GRN records in the ERP — the time from PO placement to goods receipt, by supplier and by material. The average and standard deviation of actual lead times are calculated from this data, reflecting current supplier performance rather than the standard lead time in the vendor master.

   Continuous · updated on every GRN
3. 3

   Safety stock recalculated using service level model

   HublerX calculates the recommended safety stock for each material using the service level formula — Z-score for the configured service level target, demand standard deviation, and lead time standard deviation. Materials are categorised by criticality to apply different service level targets — critical materials at 99%, standard materials at 95%.

   Weekly · on data refresh
4. 4

   Recommended changes surfaced to planner

   HublerX surfaces materials where the recommended safety stock differs from the current ERP parameter by more than a configured tolerance — increases where the material is understocked given current variability, and decreases where it is overstocked. The planner sees the current level, the recommended level, the reason, and the impact on working capital.

   On weekly review
5. 5

   Planner reviews and approves changes

   The planner reviews the recommended changes — by material, by supplier, and by working capital impact. Recommendations can be approved individually or in bulk. Where a recommendation conflicts with a known business reason — seasonal demand pattern, pending supplier change — the planner can override with a note.

   On planner review
6. 6

   Approved safety stock levels updated in ERP

   Approved safety stock changes are written back to the ERP material master automatically — updating the MRP safety stock parameter without a manual ERP update by the planner. The change history is recorded in HublerX with the date, the previous value, the new value, and the approving planner.

   On planner approval

Results are directional. Working capital release and shortage reduction depend on the accuracy of ERP demand and GRN data, and the planner's responsiveness to recommendations.