Knowledge quiz

It's time to put what you've learned to the test, get 8 right to pass this unit.

What happens to the backlog when the internal service level goes up?

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The backlog will go up as well.

The backlog will be reduced.

What is an exposure period?

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The exposure of within the standard deviation is equal to the lead time plus the periods between replenishment.

A period where we are protected against changes.

Why is it important to consider time-varying targets?

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Time refines the following calculations: safety stock and target inventory position. That is, time-varying safety stock is equal to the multiplication factor corresponding to the service level target, multiplied by the square root of the sum of each forecast error to the second power, until the exposure period is addressed. While time-varying inventory position is defined as the meet exposure forecast, plus the time-varying safety stock.

Time does not change anything within the calculations.

Time is only important if we are working with time-dependent key figures

Does the forecast error calculation within SAP IBP for inventory support real scenarios?

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No.

Maybe.

Forecast error calculation through the propagation considers all complexities of real worlds supply chains without simplifying assumptions.

With fixed internal service level, what happens to backlog when exposure goes up?

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The backlog will increase.

The backlog will be reduced.

How does the forecast error can be modeled?

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Chi function

Through an asymmetric or a symmetric gamma function; if symmetric, a normal distribution can be used

What two important variables construct the foundation for the safety stock calculation?

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1) Forecast Error; and, 2) Target Service Level

1) Normal distribution, 2) Fill rate

How can the coefficient of variation be calculated?

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Through the integration of third-party solutions and application of Excel formulas.

The CV calculation operator reads the forecast and sales signals, typically in weeks. However, SAP IBP for inventory is very flexible, and allows any bucket length including lead time. A multistage inventory optimization operator reads the standard deviation and the forecast in weeks to calculate the standard deviation as the multiplication of CV by the forecast.

We cannot calculate the coefficient of variation.

What is the bullwhip effect according to the last lesson?

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Small changes in actual customer demand can result in amplified, whip-like effects on upstream estimation of customer demand.

Big changes in actual customer demand can result in simplified, whip-like effects on downstream estimation of supply.

10.

How can we calculate the safety stock on single-stage scenarios?

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Via Excel formulas that everyone can invent.

Safety stock can be calculated as the multiplication of a factor, corresponding to service level, by the forecast error, by the square root of the exposure period (lead time plus periods between replenishment).