Microsoft Dynamics 365 SCM | Safety Stock

Hello Everyone, 

Ramadan Kareem!

In this blog post, I would like to discuss yet another business case regarding Safety Stock. Way back in 2014-15, I was involved as a solution lead for Supply Chain and Logistics Project. It is one of the legal entities for the Majid Al Futtaim Entertainment business named "LEGO". It was a newly established business and they decided to implement Microsoft Dynamics AX2012.

Business Case

The business process owner looking forward to implementing the Safety stock level for their items. LEGO opened its first store in Abu Dhabi and business process owners would like to maintain the minimum level of inventory for their fast-moving items at store level. They prepared one list of items with a minimum stock level for the back store. The back store will replenish the items to the storefront based on daily sales.  

Proposed Solution 

The safety stock is the standard feature available in D365. The solution is to maintain the safety stock at the store level and the system will generate the planned purchase order whenever the stock falls below the specified minimum quantity. 

• The minimum stock level will be maintained for the back store.
• The back store will replenish the stock to front stock based on daily sales. 
• Business process owners can maintain the minimum and maximum levels for an item. Once the item inventory falls below the min quantity the master planning will propose the planned purchase order, the quantity of planned purchase order will be up to max inventory level defined for the item.   

What is Safety Stock?

Safety stock indicates an additional quantity of an item held in the inventory in order to reduce the risk that the item will be out of stock. Safety stock is used as a buffer stock in case sales orders come in and the supplier is unable to deliver the additional items to meet the customer's requested ship date. When safety stock is used to fulfill a sales order, the safety stock will be reduced. You can use Master planning to automatically bring the inventory back to the safety level.

Step by Step Process

Storage Dimensions

I have activated the "Coverage plan by dimension" only for the site and warehouse. Since we need to maintain the safety stock of an item at the warehouse(Store) level. 

However, if it's required to maintain the Safety stock at the location level, make sure to activate the "Coverage plan by dimension" for the location as well. This will be useful when you are maintaining the advanced warehouse management feature.

Below is the screenshot for "Storage dimension group" 

Purchase Lead Time

In the "Default order setting" form make sure to enter the purchase lead time for the item. 

Setup Safety Stock Level For An Item

Create one item in the released product form and define the item coverage in the "Plan" tab. 

Path: Released products > Plan > Coverage.

Item Coverage Form

In the item coverage form enter the minimum quantity which you need to maintain for the item in warehouse 11. 

Minimum: In this field enter the minimum quantity or safety stock level which you would like to maintain for this item.

What if inventory falls below the minimum? If the inventory level falls below this point(min level) the master planning will generate the planned orders.  

In this blog, I will discuss two scenarios based on fulfilling minimum parameters. The first scenario is for the "Today's date" and the other one will be for "Today's date + Procurement Time"

Fulfill Minimum: In this parameter select "Today's date". 

SCENARIO 1 - Today's Date

Today's Date: The specified minimum quantity is met on the date when master planning is run. The system tries to fulfill the safety stock limit as soon as possible, even though it can be unrealistic due to the lead time.

Run master plan

Once you define the prerequisite set up for the item, go to the master planning module, and run the master plan for the specified item. 

Planned PO

The master plan has generated the planned purchase order. 

SCENARIO 1 Planned Purchase Order Created

The planned purchase order is created for the default vendor specified for the item in the released product form. 

Since we have defined the "Purchase lead time for the item" in the default order setting form 10 days that's why in the "Delays" fast tab, the system is showing the delay status as "Delayed" for 10 days. 

SCENARIO 2 - Today's date + Procurement time

In scenario 2, I have selected the option "Today's date + Procurement time" and as per the definition now the specified minimum quantity is met on the date when master planning is run, plus the purchase or production lead time.

This time includes any safety margins. If the item carries a trade agreement, and the Find trade agreements checkbox is selected on the Master planning parameters page, the delivery lead time from the trade agreement is not considered. Lead times are taken from the item's coverage settings or from the item. This fulfillment mode will create plans with fewer delays and fewer planned orders regardless of the coverage group set up on the item. 

SCENARIO 2 Planned Purchase Order Created

In scenario 2, the system will respect the lead time specified for the vendor. 

In the below screenshot, the "Delays" fast tab is not showing any delay as the system is considering and respecting the lead time defined for the vendor. 

Conclusion & Recommendations 

• Safety stock level quantity is always expressed in the inventory unit. In our case, it's "Pcs".
• For retail stores inventory is usually maintained at the warehouse level. I have activated the "Coverage plan by dimension" only for the site and warehouse. 
• Safety stock will be treated as demand, it's better to use the "Net requirements form" to analyze the status of all the demands and supplies. 
• If you are producing and running production for the finished good item, it's better to go for Scenario 1 "Today's date". However, for purchased items, select the Scenario 2 "Today's date + Procurement time". 

If you have feedback feel free to share.

Regards,

Ali Danish

Microsoft Dynamics 365 Solution Architect