During our last monthly Enterprise Inventory and Service Level Optimization (EIS) run, we noticed that we had some Backlog Safety Stock values that were higher than the highest Unshifted Safety Stock value. Our understanding is that Backlog Safety Stock is the portion of Safety Stock that represents the supply variability so this result does not seem right.
Answer: "Backlog Safety Stock" is the "IOU" from the upstream node in that period, let's say period 1, representing supply uncertainty in that period. The expected safety stock AVAILABLE in period is represented by the "safety stock" value in period 1. This value is always equal to or higher than Backlog Safety Stock in that same period. This can also be referred to as "shifted safety stock". This safety stock covers both the backlog and possibly some downstream demand uncertainty.
"UNSHIFTED Safety Stock" is a planned safety stock for a FUTURE period, taking into account Lead Time. UNSHIFTED safety stock should be ordered in period 1 so it's available Lead Time later, where it will appear as "shifted safety stock", or "Safety Stock". In other words, we should compare "Backlog Safety Stock" in a period to the "Safety Stock" (NOT Unshifted Safety Stock) value in the same period. The "Backlog Safety Stock" is a part of safety stock which is always less than or equal to safety stock value and is to hedge against the upstream service variability and supply variability only, while safety stock covers all sources of variability. This should apply for all supply chains. |
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In EIS, Why are Backlog Safety Stock values higher than the highest Unshifted Safety Stock value?
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