F&R Features

influencing Safety Amount Calculation

Dr. Markus Gärtner SAP (Schweiz) AG
13.10.2021

CONFIDENTIAL
Agenda

1. Which features can be used to influence the safety amount?

2. How is this done in time (i.e. usage of weekly patterns or weighting profiles)

3. How DIF schemata influence safety amount calculation?

4. Impact of minimum target range of coverage

5. Optional: Usage of RP type 14 where fill-up to shelf capacity is requested.

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1. Which features can be used to influence the
safety amount?
 Forecasting DIF Calibration Safety amount Demand Optimization

Dynamic Safety Amount

The real consumption values will vary below and above the mean forecast.
How much safety amount do we need for each specific item in order to go not out of stock?
The statistically determined dynamic safety amount is the answer
 we only apply a confidence level (i.e. CL 93%)

Large variance Small variance

Item A Item B
500 500
CL 93%
450 450

400 400
CL 93%
350 350
Sales in pieces

300 300

250 250

200 200 Driving elements of dynamic safety amount calculation:

150 150
 F&R Parameter - Confidence Level
 Demand variability (estimated forecast error)
100 100

50 50

0 0

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 Forecasting DIF Calibration Safety amount Demand Optimization

Dynamic Safety Amount

Shipments / Sales Forecast Model Mean Forecast Max Forecast

A) Plain forecast model B) Automated season detection and DIF model activated

rror nt
od el e amou
w m f ety
Lo ow sa
L
rror →
odel e mount
er m ety a
High igh saf
h
→

Model fit – Higher model error Model fit – Low model error
99%

99%

50% 50%

Confidence Level Confidence Level

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 Forecasting DIF Calibration Safety amount Demand Optimization

Dynamic Safety Amount

Mean Forecast
Max Forecast
Forecast Model fit

Confidence Level 99%

Sales in pieces

€1,39
€1,29 €1,19 €1,29

Labour Day
Labour Day

Christmas
Christmas

Easter

Easter
Easter

Year n-2 Year n-1 Year n Year n+1

Weeks

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 Forecasting DIF Calibration Safety amount Demand Optimization

Dynamic Safety Amount

Item Exampel Mean Forecast
Class Confidence level
Max Forecast
A 99.5% Forecast Model fit

B 97.0%
C 92.0%
Confidence Level 92%
D 87.5%
Sales in pieces

Stock value

€1,39
€1,29 €1,19 €1,29

Labour Day
Labour Day

Christmas
Christmas

Easter

Easter
Easter

Year n-2 Year n-1 Year n Year n+1

Weeks

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2. How is this done in time (i.e. usage of
weekly patterns or weighting profiles)
Day Forecast (Dynamic Day-Weights)
Week to Day
Forecasting from week to days individual for each item
(on a location/product level)

Item A with a forecast in weeks Item A with forecasts in days for CW 8

Forecast
X
X X
X X
X X X
X X X
X X X

CW3 CW4 CW5 CW6 CW CW8 CW9 Mo Tu We Th Fr Sa Su

Used day-weights as a default

1. Dynamic day-weights on an item level
2. Dynamic day weights on a store level
3. Customized day-weights on a store level as a fallback
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Day Forecast (Dynamic Day-Weights)
Week to Day – Weighting Profiles
Using predefined day-weights for particular Time periods e.g. promotion periods, calendar events …

Weighting profiles (DIF)

1. Distribution profile
2. Static day-weights on a weekly base
Note
Weighting profiles can be assigned
to the following DIF types:
 Weighting factor
 Boolean Calendar events
 Promotions
 Variable season
 Correctional DIF`s.

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3. How DIF schemata influence safety amount
calculation?
DIF Schema influences safety amount because ….

1. of Separation of periods (regimes) where variance calculation is applied.

Therefore, even same service levels lead to different safety amounts!
2. different service levels can be applied.

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Demand Influencing Factor
DIF Schema

Service Level for promotion periods as well for

periods without promotions are different

Service Level 90%

Service Level 60%

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Demand Influencing Factor
DIF Schema – High Season

Service Level = 90%

Service Level =
60%

Service Level for seasonal peaks are higher

and will be detected by the system
automatically

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4. Impact of minimum target range of coverage
Minimum & Maximum Target Range of Coverage – an overview
=> demand with optimization (max TROC)

=> demand with optimization (min TROC)

=> demand without optimization

Minimum & maximum target range
of coverage are only applied in
Minimum Target ROC case F&R calculates an initial
Stock
period requirement in demand period 1.
Maximum Target ROC

Days

Stock Demand Demand Demand Demand

period period 1 period 2 period 3 period 4

Optimization horizon

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5. Usage of RP type 14 where fill-up to shelf
capacity is requested.
Reorder Point and Target Stock

Using F&R there are three options triggered by Replenishment

Type to apply a reorder point and a target stock:

1. RP Type 09: Automatic Repl. with Manual Target Stock

and Manual Reorder Point

2. RP Type 10: Automatic Repl. with Manual Target Stock

and Dynamic Reorder Point

3. RP Type 14: Automatic Repl. with Manual Target Stock

and first Demand Period and Dynamic Reorder Point

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 NEW
(Feb
RP Type 14: Description 17) 20

Automatic Replenishment with Manual Target Stock + first Demand Period +

Dynamic Reorder Point

 Target stock is maintained for article site in ECC master data or is aggregated per day
based on all maintained target stocks in layout modules assigned to article site.

 Reorder point is determined automatically using forecast (for DC on consumption history as

configured in Requirements Calculation profile, e.g. DC goods issues).

 Order is triggered the same way like for RP type 10.

 Demand is calculated the same way like for RP type 10, except that the given target stock is
considered as minimum target stock. In case given target stock is too small to cover the
demand calculated for 1st demand period, target stock internally is increased to cover
demand of 1st demand period: Potential out-of-stock situation will be avoided.
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Thank you.
Contact information:

 
Dr. Markus Gärtner
Managing Consultant Retail Processes  |  CoE Retail Data Science  |  Intelligent Delivery Group
SAP (Schweiz) AG, Tägerwilen, Bahnstrasse 1, 8274 Tägerwilen, Switzerland

T +41 58 871-5535, M +41 79 924-4637, E markus.gaertner@sap.com

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