IBP Inventory Optimization Calculations

[abasu07]

Hello Experts,

For IBP IO, the Recommended safety stock is calculated based on Forecast Error CV, Lead time, PBR, Target Service level, Lot size, Holding costs. Do we have the formulas that the system uses to determine the final Inventory position?

For example: If a Product P1 is serviced to Customer C1, through DC1 which gets the stock from DC2. i.e the supply flow for P1 is DC2 -> DC1 -> C1, If the inventory holding cost rate in DC1 = 1 and in DC2 = 4, then the system will try to put more inventory in DC1 rather than DC2. How will the system calculate the quantity to be transferred?

Similarly, for Target service level, PBR, Lead time etc - what are the calculations?

Regards,

A.Basu

[lingaiahvanam · Accepted solution]

Hi,

Please refer to the following SAP documentation for a basic understanding of inventory calculations and error troubleshooting.

Troubleshooting Inventory Optimization

But it will not give you a clear calculation logic for recommended safety stock.

Best Regards,

Lingaiah

[abasu07 · Accepted solution]

Thanks Lingaiah for the response. The Troubleshooting gives an idea, but as rightly said not exact calculations