Boss thank you. This is bestest video I have ever gone through. And it's practical. Thanks a ton as I have utilised this method and got the results that I required.
Hi, if you know your safety stock levels for your end products, then you can deduct the safety stock of your raw materials through Bill of Materials or something similar
Hello Eduardo, thank you so much for this amazing video. Could you please explain why the calculations in methods 3,4,5 and 6 for the reorder point is calculated in days, while the safety stock is calculated in month?
Hi Aya, you're welcome! Reorder Point is not a time value. It is the quantity limit that triggers an order. In my example, Reorder Point is 1345 pcs for method 3
Hi, if the demand sill have clear demand patterns, you can still use regular forecasting methods. If the demand is really intermittent, unpredictable with lots of "0" then you may want to try croston's method. Safety stock is always relevant regardless of the demand pattern because it's about preparing for uncertainties
Hi Eduardo, thanks for this amazing video, I learnt so much! May I know what lead time is this related to? Is it lead time of the materials from suppliers or lead time of the production of finished goods?
Thank you so much for your video Eduardo, very impressive and easy to understand. I am familiar with six sigma and normal distribution, so this is an excellent example of its application in inventory control. Just one comment, considering your example, could you kindly explain why is the reorder point so big (1,345)? Should it be a complement for the annual (12,000) or monthly demands (1,000) or the EOQ value? Thanks for your great work!
Hi Tomas, thank you very much for your positive feedback. The Reorder point is "big" because the lead time is "big" too. You need to cover the average demand, which is 1000/month. The lead time is 35 days or 1.15 months. 1000*1.15=1,150. Which is the minimum value you need without safety stock. With safety stock, it is 1,345
Thank you sir for your amazing video, it's so helpful and well-explained! My question is: The factory I work at uses a weekly production plan, so can I use the unit 'sales/month' unit? if not, then how can I calculate safety stock for sales/week unit? thank you
Hi! well if you use a week period instead of a month period, then it is fine. At the end you just need to use an average/day (which can be an average over a week period)
If I’m in Manufacturing and want to apply EOQ variation to decide how much to produce. What LT should I use? The cycle of production? (If I run X stock once a week for instance)
Great video. Thank you from Mongolia :) I have one question by saying "low volumes" and "high volumes" when talking about normal distribution. What is the demand quantity range for low volumes?
Hi Munkh-Ochir, I would say that when your demand is getting a more intermittent pattern, with long periods of time of 0 quantities. It can happen with "low demand" profiles but of course everything is relative
I love the Method 3, but i have a question about a HIGH Level of Demand Standard Deviation Or when my consume "Sales" have some period without it cause of some factors like Stock Break, change of another product, Etc
Thank you for the feedback. If you have high level of demand standard deviation, then the formula remains the same, you will just have higher safety stock. If you have stockouts as you say, you may want to clean your past sales (get rid of the 0, =stockout correction) before calculating your safety stock, to capture unconstrained demand
What a fantastic tutorial! Thank you so much! What if demand per day is not quite stable (internal equipment ordering), so we review stock based every 3rd week. Should i still use AVG daily demand in the method3 or it can be safely replaced by an AVG 3-week demand? I appreciate your advice!
Thank you, its great video. I would like to ask more details about Method 5 and 6. In method 5, what is the meaning of sqrt after Z score? Why it need to be sqrt of (L x Variance 1 + Mean × Variance) but not L × Std Dev 1 + Mean x Std Dev 2? Thank in advance, Hai
Hi Hai, thank you for your feedback! About the calculation details, you can find all the details here: abcsupplychain.com/safety-stock-formula-calculation/
Hello thanks for video. Question: the safety stock should be on top of the average consumption correct? Meaniny if we place an order the order quantity should be average consumption + safety stock ? Thanks😊
Brilliant information. Thankyou for your videos, i've been very helpful with this video. But, i really wanna ask where can i read the jurnal or books that showed and explain estimating safety stock with other safety stock methods such as binomial dist, etc? Thankyou
Thank you Daniel. Great question. Then you order more frequently the EOQ, you don't wait for your stock to reach the SS level. If you already reached the SS level or you have a stockout, You need to make one big order to reach again the ROP, and then you can order the EOQ frequently. I talk about those subjects in my Inventory Management course: abcsupplychain.com/inventory-management-course/
Thanks for the great video! Question, at the end you say that if we don't have data on lead time, we should use method 3... but on method 3 you use average lead time... what value should we use there if we have no lead time data?
Hi Alain. It is impossible to calculate the safety stock without lead time. Just ask your supplier what the lead time is ;). I was talking about historical data of lead time, if you don't have it then you cannot estimate the lead time uncertainty, so you can only use method 3 (uncertainty only about demand).
Hi Jose, I think you can't use this method when your demand is getting a more intermittent pattern, with long periods of time of 0 quantities. It can happen with "low demand" profiles (not only) but of course everything is relative
Great job man! simple and clear. just a question, what if for example I have historical sales data for 5 years (20 Quarters) (I use Quarters) , can I calculate my safety stock based on it? Or it has to be one year ?
Thank you Mohammed! Of course, 5 years of historical data is good enough. Calculate your safety stock as shown in the video, with the average daily sales using the two most recent quarters.
? - what if you have a forecast that is ~70% accurate form your sales team and they run promotions that create this volatility and your historical demand data is impacted by stock outs, reducing sales. Would you take your historical sales plus the cases cut to provide a more accurate sales # for the historical data? also - factoring in that with these promotions, but forecast on an item might swing from 4000 units sold to 1000 sold month to month but the forecast was 3000 and 2000 respective?
Dear Mr Eduard thanks for the tutorials, but i rlly wanna ask, on ur example u hv 10delivery and im confuse to apply that on my data. so what if i just have data like, actual sales/month and 120days LT (4month). how can i calculate that based on ur excel (normal distribution method sheet)? please help me, thanks
Very nice video but I have one question. If you have an online shop with hundreds of SKU's how it can be possible to fill for each one the sales/month and lead time in order to use the Normal Distribution Method? I mean it is possible but it will take months.
Would you be able to give me the sources of the formulas chosen in this video? Or explain how you got to them. I want to use them for my graduation research in Logistics, but I need verification that the formulas are from studies.
Please, i need you to reply to this asap, im about to do something important with your help tomorrow, So on 15:25, why do you use sales datas on demand standard deviation, arent they different? If thats not okay to consider that as a same, is the formula for method number 5 will be different? Or we can still use it cause its okay to cosider that as the same for safety stock formula
I would like to be mentored and trained in Inventory analysis using excel using your platform. kindly advise how I ca go about registering. Can you be my trainer? I admire your guru knowledge in Excel inventory analysis and I want to be like you. Advice
Wonderful content! A question: how is the coeff service calculated? I added the NORMSINV formula to my table but got an error. Is this specific to each item or a general table? Thanks in advance.
It is calculated with the service level you choose, as shown in the file. You can not choose a service level higher than 100% otherwise you will get an error.
Hii Dear, Can you guide me on how to set up a multichannel infrastructure, So that I can manage all reports in real-time and also want to save data in for future prediction?? #Help
Boss thank you. This is bestest video I have ever gone through. And it's practical. Thanks a ton as I have utilised this method and got the results that I required.
I am gald it helped Sourav, thank you very much for your feedback!
I have an interview tomorrow for a new job and your videos are on point :)
Good Timing!
Thanks for sharing comprehensive video.
My pleasure!
Very informative. I plan to get formal education for managing inventory
Great initiative!
@@abcsc
I have related material, can you explain them in your channel i will send them by email. Please send me your email sir.
Good education video. Its help me a lot
Glad it helped!
Thank you, really great! short, informative and precise as always.
Thank you very much for your feedback Albina 🙌 I try to keep it simple while sharing my experience ;)
Merci Beaucoup pour vos vidéos les concepts sont plus clairs pour moi. Merci !
Avec plaisir Elliot!
Great video very helpful thank you
Very welcome!
Hi, if you know your safety stock levels for your end products, then you can deduct the safety stock of your raw materials through Bill of Materials or something similar
I love your scm videos!
Glad you liked them!
Hi Eduardo, thanks a lot for your video. Amazing & make me learn safety stock level in simple way. Thanks
very useful & explained well ... Learning
Hello Eduardo, thank you so much for this amazing video. Could you please explain why the calculations in methods 3,4,5 and 6 for the reorder point is calculated in days, while the safety stock is calculated in month?
Hi Aya, you're welcome! Reorder Point is not a time value. It is the quantity limit that triggers an order. In my example, Reorder Point is 1345 pcs for method 3
Brilliant tutorials. Congrats on the content, very useful and very valuable
Hey man, great content!
What would be the best method for intermittent demand like spare parts?
Hi, if the demand sill have clear demand patterns, you can still use regular forecasting methods. If the demand is really intermittent, unpredictable with lots of "0" then you may want to try croston's method. Safety stock is always relevant regardless of the demand pattern because it's about preparing for uncertainties
Hi Eduardo great stuff loved your presentation / tutorial.
Hi Eduardo, thank you so much for the great knowledge
Hi Eduardo, thanks for this amazing video, I learnt so much! May I know what lead time is this related to? Is it lead time of the materials from suppliers or lead time of the production of finished goods?
Thanks for the video, very helpful
great videos , very interesting
Absolutely great! Right to the point.
Great to hear!
Thank you so much for your video Eduardo, very impressive and easy to understand. I am familiar with six sigma and normal distribution, so this is an excellent example of its application in inventory control. Just one comment, considering your example, could you kindly explain why is the reorder point so big (1,345)? Should it be a complement for the annual (12,000) or monthly demands (1,000) or the EOQ value? Thanks for your great work!
Hi Tomas, thank you very much for your positive feedback. The Reorder point is "big" because the lead time is "big" too. You need to cover the average demand, which is 1000/month. The lead time is 35 days or 1.15 months. 1000*1.15=1,150. Which is the minimum value you need without safety stock. With safety stock, it is 1,345
Thank you sir for your amazing video, it's so helpful and well-explained!
My question is:
The factory I work at uses a weekly production plan, so can I use the unit 'sales/month' unit? if not, then how can I calculate safety stock for sales/week unit? thank you
Hi! well if you use a week period instead of a month period, then it is fine. At the end you just need to use an average/day (which can be an average over a week period)
thank you for very helpful lecture. I would like to know how can I use demand forecast accuracy instead of deviation
Yes it is even better!
I am very glad you enjoyed it!
As Usual very interesting and informative videos
Keep it up Eduardo.
Thanks
Many thanks! 🙏
Very nice tutorial buddy
Thank you for sharing. By the way how do you determine Safety Day?
Arbitrarily ;)
Thank You so much!
Great video, so professional!
Thank you for sharing your knowledge, please continue your sharing, I´m trying to download the excel file but unable to receive it in the mail.
Thank you for your feedback! You can send a mail to contact@abcsupplychain.com
If I’m in Manufacturing and want to apply EOQ variation to decide how much to produce. What LT should I use? The cycle of production? (If I run X stock once a week for instance)
It’s great, thank you so much!
wonderful
Thank you! Cheers!
Great video. Thank you from Mongolia :) I have one question by saying "low volumes" and "high volumes" when talking about normal distribution. What is the demand quantity range for low volumes?
Hi Munkh-Ochir, I would say that when your demand is getting a more intermittent pattern, with long periods of time of 0 quantities. It can happen with "low demand" profiles but of course everything is relative
great work bro !! nicely done
Cool, thank you
I love the Method 3, but i have a question about a HIGH Level of Demand Standard Deviation
Or when my consume "Sales" have some period without it cause of some factors like Stock Break, change of another product, Etc
Thank you for the feedback. If you have high level of demand standard deviation, then the formula remains the same, you will just have higher safety stock. If you have stockouts as you say, you may want to clean your past sales (get rid of the 0, =stockout correction) before calculating your safety stock, to capture unconstrained demand
Great content. Good work!
Thank you!
What a fantastic tutorial! Thank you so much!
What if demand per day is not quite stable (internal equipment ordering), so we review stock based every 3rd week. Should i still use AVG daily demand in the method3 or it can be safely replaced by an AVG 3-week demand? I appreciate your advice!
great content. What about skewed right distributions? is there a formula or an approach for SS? thanks
Hi Daniel, glad you liked it! If you're good at statistics, you can try gamma distributions for that 😉
Hi, brilliant tutorial. Unfortunately I didn't receive the download link to my email
Thank you, its great video.
I would like to ask more details about Method 5 and 6. In method 5, what is the meaning of sqrt after Z score? Why it need to be sqrt of (L x Variance 1 + Mean × Variance) but not L × Std Dev 1 + Mean x Std Dev 2?
Thank in advance,
Hai
Hi Hai, thank you for your feedback! About the calculation details, you can find all the details here: abcsupplychain.com/safety-stock-formula-calculation/
Of Course John, all our course here: abcsupplychain.com/courses-supply-chain-logistics/
Hello thanks for video.
Question: the safety stock should be on top of the average consumption correct? Meaniny if we place an order the order quantity should be average consumption + safety stock ? Thanks😊
Brilliant information. Thankyou for your videos, i've been very helpful with this video. But, i really wanna ask where can i read the jurnal or books that showed and explain estimating safety stock with other safety stock methods such as binomial dist, etc? Thankyou
Hi.. How to arrive safety stock for rawmaterial ? Can u plz guide me.
Hi Raja, if you know the SS for the end product, then you can guess the SS of your raw material using the bill of materials or something similar
Great video I was looking for a more robust calculation. Question: What happens if my SS + EOQ is less than my ROP?
Thank you Daniel. Great question. Then you order more frequently the EOQ, you don't wait for your stock to reach the SS level.
If you already reached the SS level or you have a stockout, You need to make one big order to reach again the ROP, and then you can order the EOQ frequently.
I talk about those subjects in my Inventory Management course: abcsupplychain.com/inventory-management-course/
Thanks for the great video! Question, at the end you say that if we don't have data on lead time, we should use method 3... but on method 3 you use average lead time... what value should we use there if we have no lead time data?
Hi Alain. It is impossible to calculate the safety stock without lead time. Just ask your supplier what the lead time is ;). I was talking about historical data of lead time, if you don't have it then you cannot estimate the lead time uncertainty, so you can only use method 3 (uncertainty only about demand).
Great videos! Question, for the normal distribution method you explained it does not work with very low demand. How much is very low demand?
Hi Jose, I think you can't use this method when your demand is getting a more intermittent pattern, with long periods of time of 0 quantities. It can happen with "low demand" profiles (not only) but of course everything is relative
How did you find the lead time standard deviation in method 4 ?
Great job man! simple and clear.
just a question, what if for example I have historical sales data for 5 years (20 Quarters) (I use Quarters) , can I calculate my safety stock based on it?
Or it has to be one year ?
Thank you Mohammed! Of course, 5 years of historical data is good enough. Calculate your safety stock as shown in the video, with the average daily sales using the two most recent quarters.
How and which method should I use for long list of Items and I can apply the formula in tabular format to all the items on the list (600 Items)
Hi! You can pick the formula you want, knowing the pros and cons of each one. I advocate for 3 and 5
? - what if you have a forecast that is ~70% accurate form your sales team and they run promotions that create this volatility and your historical demand data is impacted by stock outs, reducing sales. Would you take your historical sales plus the cases cut to provide a more accurate sales # for the historical data? also - factoring in that with these promotions, but forecast on an item might swing from 4000 units sold to 1000 sold month to month but the forecast was 3000 and 2000 respective?
which is the reason to apply the sqrt in the lead time ? (for method 3)
Hi if demand is not normal how to calculate SS?
Great work and thanks for sharing. Can you help me? I´m trying to download the excel file but the website didn´t send me it.
Hi Guilherme, thank you! Make sure it is not in your spam folder. If you still didn't receive it, send an email to contact@abcsupplychain.com
@@abcsc got it! thank.
Dear Mr Eduard thanks for the tutorials, but i rlly wanna ask, on ur example u hv 10delivery and im confuse to apply that on my data. so what if i just have data like, actual sales/month and 120days LT (4month). how can i calculate that based on ur excel (normal distribution method sheet)? please help me, thanks
Very nice video but I have one question. If you have an online shop with hundreds of SKU's how it can be possible to fill for each one the sales/month and lead time in order to use the Normal Distribution Method? I mean it is possible but it will take months.
Would you be able to give me the sources of the formulas chosen in this video? Or explain how you got to them. I want to use them for my graduation research in Logistics, but I need verification that the formulas are from studies.
Those formulas are well known, many papers discuss them as it is a stochastic problem. I let you do your research 😉
@@abcsc I already found them, thank you for the response :)
Please, i need you to reply to this asap, im about to do something important with your help tomorrow,
So on 15:25, why do you use sales datas on demand standard deviation, arent they different? If thats not okay to consider that as a same, is the formula for method number 5 will be different? Or we can still use it cause its okay to cosider that as the same for safety stock formula
I would like to be mentored and trained in Inventory analysis using excel using your platform. kindly advise how I ca go about registering. Can you be my trainer? I admire your guru knowledge in Excel inventory analysis and I want to be like you. Advice
I have a quizz need help to solve: which formulas would be applied when: 1/ Production Process is Stable and 2/ Quality of material is stable
Not sure to understand your question, could you rephrase?
Is it the production lead time in days used in your sheet
Hi! It is the total lead time, more about lead time here: ua-cam.com/video/4HNKDTOvqWU/v-deo.html
Wonderful content! A question: how is the coeff service calculated? I added the NORMSINV formula to my table but got an error. Is this specific to each item or a general table? Thanks in advance.
It is calculated with the service level you choose, as shown in the file. You can not choose a service level higher than 100% otherwise you will get an error.
How do you know your order size?
You can use the EOQ: ua-cam.com/video/kDU3kOZuJJw/v-deo.html
Hi Pranav! It is the total lead time
Hii Dear, Can you guide me on how to set up a multichannel infrastructure, So that I can manage all reports in real-time and also want to save data in for future prediction?? #Help
Maybe my Inventory Management Expert program can help: abcsupplychain.com/inventory-management-course/
Brilliant tutorials. Congrats on the content, very useful and very well explained.