Safety Stock Optimization: Basic

Service Definition

Defines which service definition is used for safety stock considerations:

• Type 1 (Probability of not stocking out) – This is the probability that there will not be a stock out in a given risk period. When setting this value in a scenario, select the “Service Definition” Inventory Optimization Options field and select "Type 1 (Probability of not stocking out)".
• Type 2 (Quantity Fill Rate) – This is the fraction of demand quantity that is satisfied from stock on time. Coupa recommends that you set the Replenishment Frequency when using Type 2 (Quantity Fill Rate). When setting this value in a scenario, select the “Service Definition” Inventory Optimization Options field and select "Type 2 (Quantity Fill Rate)".
• Type 2 (Undershoot) – This service type considers undershoot, or the amount by which the inventory on hand is below the reorder point, in the Safety Stock calculation. It assumes that when the replenishment lead time starts, the inventory on hand is below reorder point by the undershoot value. The effect of undershoot on safety stock is related to the demand mean variability. When setting this value in a scenario, select the “Service Definition” Inventory Optimization Options field and select "Type 2 (Undershoot)".
• Type 3 (Ready Rate) – This is the probability of no stockout in any given aggregation level; that is the fraction of time with positive stock on-hand. When setting this value in a scenario, select the “Service Definition” Inventory Optimization Options field and select "Type 3 (Ready Rate)".

Safety Stock Rule

Enables you to select the approach to be used for determining safety stock:

• Multi-Echelon – Safety Stock Optimization considers the safety stock at all tiers (echelons) at one time. Service time is a decision variable in multi-echelon safety stock optimization. If the service time is zero in all cases, multi-echelon is equivalent to single-echelon. When setting this value in a scenario, select the “Safety Stock Rule” Inventory Optimization Options field and select "MultiEchelon".
• Single-Echelon – Safety Stock Optimization assumes each location is independent and does not consider service time. When setting this value in a scenario, select the “Safety Stock Rule” Inventory Optimization Options field and select "SingleEchelon".

Auto Run Infeasibility Diagnosis for SSO

When running Safety Stock Optimization, if an infeasibility is detected, Infeasibility Diagnosis for Safety Stock Optimization is automatically run. To set this value in a scenario, select “Inventory Optimization Options” as the table, “Auto Run Infeasibility Diagnosis for SSO” as the field and select "Yes" as the value.